A new no-frills, low-cost, white-label custodial platform launched today. Built quietly over the last four years by a small team, the TradingFront platform sits atop, and is deeply integrated with, the Interactive Brokers RIA custodial platform. Interactive Brokers is also an investor in the firm.
“Three key components: onboarding, rebalancing and reporting,” said Yang Xu, co-founder and CEO of TradingFront.
His firm’s turnkey platform is meant to appeal to small to mid-sized independent RIAs and break-aways, though it remains to be seen whether there is yet great demand for another such platform.
In addition to the three key components above, the platform provides a very basic CRM system, customizable questionnaires, rebalancing, compliance features, account aggregation through Plaid, advisor and client portals, and modern mobile application. Client account aggregation is performed within the TradingFront client portal.
“We just selected the typical tech that a small or medium RIA most needs to build their business,” he said. There are currently 35 firms on the platform with live accounts, many of them having been using the platform for several months he said.
“Those are firms using the system in production, not just having opened client accounts really in name only,” Xu said, referring to what he said is an all too common practice when new platforms or applications are announced with users onboard.
The relationship with IB, both from a business and technology standpoint, is straightforward, he said.
“We are using a very reputable, established custodian, one that has built a lot of advanced features, for example that is able to support complex options or futures strategies,” he said, “ but those are not generally needed by the typical small or midsize RIA, or especially, an advisor just getting started.”
TradingFront takes advantage of IB’s trading infrastructure, execution quality and custodial capabilities, while layering on its own simplified features for smaller RIAs in need of a modern, attractive advisor and client interface that looks and feels competitive to the interfaces of the Betterments and Wealthfronts of the world.
“Secondly, coming from an asset management background, the execution quality matters, nothing is really free, even when it says it is free,” Xu said.
In terms of business model: “We are not competing with IB, all our trades go to IB directly. There is no order flow to the market makers and IB shares flow revenue back to us,” he said.
“It’s about how can we do the best integration with IB and do revenue sharing with them, that is our business model,” Xu said.
The cost for advisors will be $100 a month for 100 accounts.
“We think that’s a pretty good deal for advisors,” Xu said, especially given the consolidation going on in the industry and the uncertainty that goes with it.
The firm is also not going the route of providing a model portfolio marketplace.
“Our trading process allows you to customize your own model portfolio; right now we are an advisor platform and we don’t provide model portfolios or sell anyone else’s model portfolio—they [advisors] can brand their own model portfolios and we don’t force them to sub-advise any of their portfolios to us,” Xu said.
Xu began his career in financial services and asset management a decade ago while earning his masters degree in finance at Drexel University, where he dissected academic research and put it to practical use.
TradingFront began as a white-label robo solution, and was acquired by China-based Tiger Brokers in 2018. It is now is a wholly owned subsidiary of that firm.
“It looked like a robo when we started it but in the end it was our model portfolio, the result of the advisor community really being a small community—other advisors saw our platform and asked us ‘why can’t we use your platform, we are getting pressure from Wealthfront and Betterment,” Xu said. “So ours became a white label offering for advisors.”