Speaker 1: Hello, and welcome to the Odd Lots Podcast. I'm Joe
Speaker 1: Wasn't and I'm Tracy Halloway. Tracy, do you know how
Speaker 1: I got interested in markets and stuff? Um? I have
Speaker 1: a sort of vague memory that you started trading I
Speaker 1: want to say, tech stocks in the nine nineties. I'm
Speaker 1: sure we've spoken about this before. You're right, I think
Speaker 1: we have, and I think you basically have it right.
Speaker 1: One summer, I think it was summer. I made two
Speaker 1: thousand dollars over the course of a summer from my
Speaker 1: summer job. And then I and then in what was
Speaker 1: your summer job? I don't really remember what I did,
Speaker 1: to be honest, I think I had all that. You
Speaker 1: only remember. You don't remember the normal job, remember the
Speaker 1: normal stuff. But I remember having two thousand dollars from
Speaker 1: a summer job, you know, the late nineties, and everyone
Speaker 1: was super interested in stocks and markets because there was
Speaker 1: a bubble going on. And I invested that money and
Speaker 1: tried to trade, and I grew a tenfold, so I
Speaker 1: grew it to twenty dollars and I've been hooked on
Speaker 1: markets ever since. Okay, so that's a total humble brag.
Speaker 1: But let me just ask you before I start asking
Speaker 1: about your training strategy. How did you even know to
Speaker 1: start trading stocks? I don't remember. It was just what
Speaker 1: people were doing, Like that was the thing. I think
Speaker 1: that like people don't necessarily remember. They look back at
Speaker 1: the bubble of the late nineties and they know that
Speaker 1: the stocks went up, but I don't think they remember
Speaker 1: like how pervasive it was as part of the culture.
Speaker 1: And it was just like what people were doing was
Speaker 1: what people were talking about, very similar to say, like
Speaker 1: people talking about cryptocurrencies in anden. It just became like
Speaker 1: this cultural phenomenon. So here's my other question, how did
Speaker 1: you actually trade? And you know, full disclosure in I
Speaker 1: would have been in middle school, but I would have
Speaker 1: had no idea exactly how to get started. Well, I
Speaker 1: had a good friend he worked for his father's investment company.
Speaker 1: But I remember there were just ads on TV for
Speaker 1: all these online brokerages and there was this one I
Speaker 1: actually used, this website called short Trade. I'm not really
Speaker 1: sure what happened to it, but I think they had
Speaker 1: these ads on TV for seven dollars a trade, and
Speaker 1: I just signed up and filled out some paperwork and
Speaker 1: stuff like that, and next thing, you know, there you
Speaker 1: there you went. You can just buy and sell stock.
Speaker 1: Next thing you know, you have twenty exactly. That's pretty good.
Speaker 1: I got really lucky because I studied abroad my sophomore
Speaker 1: year in college, and so I didn't lose all my
Speaker 1: money because I stopped trading. Otherwise I definitely would have
Speaker 1: gone to zero because I would have just been like
Speaker 1: everyone else. So I did. I did end up slightly
Speaker 1: positive for the bubble. And you weren't tempted to start
Speaker 1: currency trading while you were abroad. I didn't anyway. The
Speaker 1: reason I bring this up is not just to brag,
Speaker 1: but because day we are going to be talking about
Speaker 1: the online brokerage business, which was a huge part of
Speaker 1: what made that period so special. Was this idea, as
Speaker 1: you put it, that you didn't really need to know anything.
Speaker 1: You could just go to a website and start trading.
Speaker 1: It was much simpler and cheaper than it had ever
Speaker 1: been before. And that business obviously is still around and grown.
Speaker 1: But that really is like when it's sort of got going. Yeah,
Speaker 1: and this still crops up nowadays. You know, you see
Speaker 1: people pointing to certain advertisements coming out of various of
Speaker 1: the big internet brokerage his and people say, oh, well,
Speaker 1: this is evidence that the stock market rally has gone
Speaker 1: too far. You know, people are just coming in to
Speaker 1: make some easy money now, So brokerage is still play
Speaker 1: an important part when it comes to measuring sentiment around
Speaker 1: the stock market. Yeah, and what's interesting to me and
Speaker 1: what I want to get into on today's episode is
Speaker 1: back then, in the late nineties, there was this sort
Speaker 1: of like obsession with individual stocks and the internet stocks
Speaker 1: and Yahoo and eBay and Amazon and all these stocks
Speaker 1: that are making people of fortune. These days, there's such
Speaker 1: a mantra around don't try to beat the market, just
Speaker 1: focus on reducing fees. Passive is best. And so the
Speaker 1: message that people at home are being sent in terms
Speaker 1: of how they should think about investing UH is very,
Speaker 1: very different than it was two decades ago. Nonetheless, people
Speaker 1: do still trade, and they trade through these retail brokerages
Speaker 1: and online at home. So I'm very interested in sort
Speaker 1: of learning about how that world has changed since then. Yeah,
Speaker 1: so am I. And as you put it, it is
Speaker 1: a really interesting flip. Like if you go online nowadays
Speaker 1: to personal finance message boards, no one's saying by this
Speaker 1: particular stock because it's going to make you rich, they're saying,
Speaker 1: put all your money in a passive index fund and
Speaker 1: just right that all the way up. Yeah, exactly right.
Speaker 1: All right, Well, with us to discuss the evolution of
Speaker 1: the online trading business is a a veteran of the
Speaker 1: space we have with us today on aud Chris Larkin.
Speaker 1: He's the senior vice president of trading at the Trade,
Speaker 1: one of the long time stalwarts of the industry, and
Speaker 1: he's been in the space for a long time, and
Speaker 1: so we'll learn about all this stuff and get some
Speaker 1: perspective about how things are the same and how things
Speaker 1: have changed. Chris, thank you very much for joining us,
Speaker 1: Thanks for having me, and thanks for making me feel
Speaker 1: very old as you guys tell your stories and I
Speaker 1: kind of go farther back and I'm thinking myself, Okay,
Speaker 1: I try to feel young, but today I feel old
Speaker 1: with the two you talking. When I said is like, oh,
Speaker 1: that's been two decades since then. It hit me really
Speaker 1: hard even when I said that. But why don't you
Speaker 1: tell us how you got your start of the space
Speaker 1: and what you you're sort of your career path in
Speaker 1: the world of online trading. Yeah, my my first job
Speaker 1: at a college was with a firm called Waterhouse Securities.
Speaker 1: It was a small discount brokerage firm which offered you know,
Speaker 1: self directed clients to call in and place trades for
Speaker 1: individual stocks, mutual funds in those products. At the time,
Speaker 1: ETFs weren't really around, so they were sort of new
Speaker 1: and Charles Schwab and Waterhouse was sort of the bigger
Speaker 1: firms that were out there at the time, and we
Speaker 1: were just at the when you thought about the technology
Speaker 1: at that given point in time, was the Internet was
Speaker 1: just starting to come to light, so it was still
Speaker 1: a little bit early. At that point in time. Everything
Speaker 1: was very manual. So just think about how a client
Speaker 1: had no information they had a calls for a quote
Speaker 1: on I b M. There's no other way to get
Speaker 1: one unless you just saw the paper the next day
Speaker 1: they had called the place orders they had to get.
Speaker 1: Everything was done manually and what year was this, So
Speaker 1: you know, the period between nineties six it was very manual.
Speaker 1: Then things really took off when technologies started to come together.
Speaker 1: So how much did the sort of development of online
Speaker 1: trading platforms and brokerage is how much does that owe
Speaker 1: to the big tech bubble that we saw in the
Speaker 1: late ninet nineties and the excitement around stock trading that
Speaker 1: Joe was describing. Yeah, I think I think it's an accessibility.
Speaker 1: I think, you know, in terms of the ability that
Speaker 1: the information was now starting to come to light. So,
Speaker 1: like I said before, if you wanted to get a
Speaker 1: quote on a stock, you had to call someone up
Speaker 1: to get that quote. In the sort of the nineties,
Speaker 1: you started to get the ability, you know, via computer
Speaker 1: that you could get real time quotes, whether you get
Speaker 1: it through the website or they're starting to get some
Speaker 1: more applications where you can get streaming quotes from as well.
Speaker 1: These were things that would be unheard of and only
Speaker 1: available to institutional investors that started coming too retail clients.
Speaker 1: So there was just the ability to get the information
Speaker 1: was much different than it ever was before. I remember,
Speaker 1: like even the idea of real time quotes versus fifteen
Speaker 1: minute delayed quotes was this huge thing back then. And
Speaker 1: you know, having access to an online brokerage versus just
Speaker 1: sort of like a normal like public facing website like
Speaker 1: Yahoo Finance was pretty big at the time. It was
Speaker 1: a really exciting thing about being at some sort of
Speaker 1: paid service. Just the ability to not have something to
Speaker 1: be to by twenty minutes. Yeah, I mean, I think
Speaker 1: that's that was the big thing. I think the thing
Speaker 1: that was missing at that point in time. So even
Speaker 1: when you were entering and place in your first trade,
Speaker 1: that really all you had was real time quotes. Uh.
Speaker 1: You didn't have research or news or access to a
Speaker 1: lot of things that eventually came over time as more
Speaker 1: and more people signed up and people started to enrich
Speaker 1: their offerings. Uh, they started to add more of the
Speaker 1: tools and services, which is you know again played a
Speaker 1: very big part in the evolution of the particular you know,
Speaker 1: online investing industry. Was there any resistance to the availability
Speaker 1: of internet trading or people sort of distrustful of the
Speaker 1: notion that they could buy and sell stocks online. Did
Speaker 1: they think, oh I should be doing this through you know,
Speaker 1: an actual person in the old fashioned traditional way. Yeah,
Speaker 1: I think there's I think it really in two ways.
Speaker 1: One is that I think, you know, technology is starting
Speaker 1: to come together at that point in time, and people
Speaker 1: weren't quite sure was it secure like I made my
Speaker 1: money somewhere, Like was it secure if I go online
Speaker 1: in place a trade? So there were some people that
Speaker 1: were concerned, but again there was a lot of things
Speaker 1: that we put in place to make sure that the
Speaker 1: security was very solid at that point in time. The
Speaker 1: other thing was that he also had the you know,
Speaker 1: the full service industry at that point in time. I
Speaker 1: think they spent a lot of They spend a lot
Speaker 1: of effort in terms of saying that you can't do
Speaker 1: it on your own. You need us, this is a
Speaker 1: this is Wall Street. You need a professional to help
Speaker 1: you with your money. Going out there and doing your
Speaker 1: own you can never be successful. So I think, you know,
Speaker 1: they saw the threat. There's a lot of you know,
Speaker 1: the instues growing, there's a threat to their business. So
Speaker 1: you saw a lot of people trying to say that
Speaker 1: there's no way someone could do this on their own.
Speaker 1: Tell us a little bit more about your career. You
Speaker 1: mentioned you're at Waterhouse in the very early in nineties.
Speaker 1: When did you get into what we now recognize as
Speaker 1: the online trading business. Yeah, I think so at that
Speaker 1: point time when I when I left Waterhouse, I went
Speaker 1: to the institutional side of the business, and I was
Speaker 1: working for IG Bearings, which was a full service firm
Speaker 1: for on the institutional side of the business as a
Speaker 1: sales trader. We went through some tough times during the
Speaker 1: Asian crisis, and when I was trading, what I saw
Speaker 1: was there was firms like Bloomberg and instant It were
Speaker 1: stored the forefront of technology from an execution standpoint for
Speaker 1: buying and selling stocks for institutional investors UH. At that
Speaker 1: point in time, I thought, I need to get in
Speaker 1: front of this, so I did join. I joined Bloomberg
Speaker 1: at that point in time to be part of a
Speaker 1: very successful UH firm. But then when things really started
Speaker 1: heating up. You know, someone who was a the number
Speaker 1: two over Waterhouse had become the CEO at Daytech Online,
Speaker 1: which was a very small but very fast growing firm.
Speaker 1: What happened to them? I remember day Tech and that
Speaker 1: was like a big name at the time. Where did
Speaker 1: they go? I don't They ended up getting acquired by
Speaker 1: a merritor trade in two thousand and two three in
Speaker 1: that area. But they were truly a disruptor and industry
Speaker 1: at that point in time. You know, online trading was available,
Speaker 1: but there was beyond just the idea of being able
Speaker 1: to you know, buy and sell stocks online. There wasn't
Speaker 1: a true disruption, but they took was a true innovator
Speaker 1: and disruptor in the in the business and so, uh,
Speaker 1: they were growing at a massive rate at that point
Speaker 1: in time, like others as well. So how did execution
Speaker 1: on those platforms work At the time, We're orders being
Speaker 1: sent basically through you know, the traditional market makers. Well,
Speaker 1: if you go, I'll just go back in time just
Speaker 1: for just a quick thing to give you just you know,
Speaker 1: an idea is that when someone called up and they
Speaker 1: were at Waterhouse Securities and you wanted to go by
Speaker 1: you know, hundred shares of IBM, you call up and
Speaker 1: you put in a market order, you would hang up
Speaker 1: the phone and we would call you back. At some
Speaker 1: point in time we got an execution that could be
Speaker 1: an hour or two later, so you would eventually get
Speaker 1: it back. By the time it was execute got down,
Speaker 1: their executed came back, we had to call you back.
Speaker 1: It was pretty rare to get the execution on the phone.
Speaker 1: At date Tech, we were the ability to to route
Speaker 1: orders to other destinations beyond the exchange was starting to
Speaker 1: become available. We owned an e c N called Island
Speaker 1: d c N UH and that that was again an
Speaker 1: innovation and you know a differentiator for us. What did
Speaker 1: e c N stand for? It's electronic communications network, right,
Speaker 1: and you know at that point time we're going to
Speaker 1: utilize that in order to get very fast executions back.
Speaker 1: But when I say fast executions, uh, we had to
Speaker 1: guarantee a trading guarantee. So we guarantee your market or
Speaker 1: would be executed in less than sixty seconds. So nobody
Speaker 1: in the industry could match that. Nobody, so we had
Speaker 1: a pure advantage over other people when it came down
Speaker 1: to executions in the speed of our executions. We would
Speaker 1: execute in the sixty seconds or your traders are free. Uh.
Speaker 1: Today you get micro seconds before your order is executed,
Speaker 1: so it's less than a second if you put in
Speaker 1: a market order, it's less than a second if you
Speaker 1: get executed. You can't even refresh your screen fast enough
Speaker 1: by the time that order is executed. So you could
Speaker 1: just see how technology has become, you know, a game changer,
Speaker 1: I guess when it comes down to executing orders. So
Speaker 1: just to be clear, what was it that day Tech
Speaker 1: had structurally that allowed it to may be able to
Speaker 1: make such a promise The c N, I think the
Speaker 1: differentiate was easier and so we could route orders directly
Speaker 1: to the c c N and match a buyer and
Speaker 1: seller and get a report back immediately. And so when
Speaker 1: you were going to the exchanges, we were you know,
Speaker 1: we were pushing them. But if you take an idea
Speaker 1: like say the et F. Let's say at that point
Speaker 1: in time the q q q s were were available.
Speaker 1: If you put a more market for q c s
Speaker 1: and sent it down to the American Stock Exchange, you
Speaker 1: might wait two minutes for an execution back three minutes,
Speaker 1: four minutes. We started moving our orders onto the UH
Speaker 1: the Island d c N and you'd have an instantaneous execution.
Speaker 1: So people are very frustrated. They were not you know,
Speaker 1: technology was starting to really accelerate and it was becoming
Speaker 1: unacceptable to get an execution in you know, three or
Speaker 1: four minutes. People wanted to get a very good execution,
Speaker 1: and they wanted it quickly. Okay, So customers are now
Speaker 1: executing trades at sixty seconds or less on the online platforms.
Speaker 1: Other people are doing it in two or three minutes,
Speaker 1: versus you know, in the early nineties or nine eighties,
Speaker 1: when it might take a couple of hours even to
Speaker 1: get your trade actually executed and confirmed. Did that change
Speaker 1: trading behavior in your opinion? Did people start trading in
Speaker 1: a different way now that they had virtually instant haineous execution.
Speaker 1: I think that's part of it. I think the you know,
Speaker 1: it's a culmination. I think of a few things. Obviously,
Speaker 1: the executions were becoming better, so the access was much
Speaker 1: better and the information was much better. Obviously, when you
Speaker 1: think about as time were revolving, you've got the real
Speaker 1: time quotes at this point in time. You know, Daytaud
Speaker 1: been the first broken to offer free real time streaming quotes.
Speaker 1: That you had a a quote terminal, you know, per
Speaker 1: se where you could put a watch list together and
Speaker 1: watch a whole bunch of stocks. And then I think
Speaker 1: the when you think about sort of what was happening
Speaker 1: at that point in time, you know, the market was
Speaker 1: going up, and there's there is a flock mentality when
Speaker 1: things go up. You talked about bitcoin before. I don't
Speaker 1: think it. You know, people all of a sudden had
Speaker 1: a passion for digital currency. It's that people were making money,
Speaker 1: and there's this like I don't want to be left
Speaker 1: out type of a thing. So people start getting involved
Speaker 1: and saying I want to find a way to make money,
Speaker 1: just like you know, my neighbors making a whole bunch
Speaker 1: of money, so they don't never want to be left out.
Speaker 1: So there was you know, the flock mentality was going
Speaker 1: on that point time, and people were making, you know,
Speaker 1: irrational decisions, was pushing companies that were not making money
Speaker 1: to these lofty levels. But when you have a whole
Speaker 1: bunch of all coming in, it certainly contributed to sort of, um,
Speaker 1: what was happening at that point in time. But we're
Speaker 1: also that we're also starting to add in other things
Speaker 1: like education news. These are things you could you when
Speaker 1: you wanted to buy a stock back in the eighties
Speaker 1: or early nineties, you called up your full service broker
Speaker 1: and you'd be lucky if they soldion. And like an
Speaker 1: end of report that was like eight months old, like
Speaker 1: there was no information. You can literally you can now
Speaker 1: find a whole bunch of you know, data, whether it
Speaker 1: be fundamental analysis or technical analysis, right, you know, from
Speaker 1: your computer terminal. In early two thousands, when the sort
Speaker 1: of the number of new people entering the market daily,
Speaker 1: I mean it got so big that it overwhelmed the systems, right.
Speaker 1: There started to be outages at that part because it's
Speaker 1: just the infrastructure still at the time had a hard time.
Speaker 1: Um keeping up with it. Did you were people worried
Speaker 1: about that? Were people inside the company or in company
Speaker 1: is like worried about like, Okay, when this bubble bursts
Speaker 1: or when this can't be sustainable, and then there's gonna
Speaker 1: be a lot of people who their first introduction to
Speaker 1: the stock market is going to be a pretty tough one. Yeah,
Speaker 1: I think that's a word of everybody today. I mean,
Speaker 1: we've we we've obviously gotten much better in the ability
Speaker 1: to stabilize all the systems and be able to handle
Speaker 1: the scale that's that's been going on. But back then
Speaker 1: it was a big issue that you know, an outage
Speaker 1: was not an abnormal thing to happen once a week,
Speaker 1: especially during the very busy times, And it's all about
Speaker 1: how quick you can recover and to make sure that
Speaker 1: your clients were taken care of. And I think that's
Speaker 1: the main thing when when things there there's an expectation
Speaker 1: at some point in time that systems will go down,
Speaker 1: but what what our clients want or us to stand
Speaker 1: behind that and make sure that we make any adjustments
Speaker 1: necessary if there was a problem. Alright, So Joe and
Speaker 1: I alluded to this in our intro, but one thing
Speaker 1: I'm really curious about is who is trading individual stocks nowadays,
Speaker 1: because again and again, you know, the emphasis all seems
Speaker 1: to be on passive investing on index funds. Is anyone
Speaker 1: still trading actively in individual stocks? Well, I would say,
Speaker 1: you know, one thing is that we've just come off
Speaker 1: for record year last year, So I think that you know,
Speaker 1: the idea that the last two years, two thousand seven
Speaker 1: team was a record for US, I would say for
Speaker 1: the industry, and I don't want to just speak just
Speaker 1: on you know, each trade alone, but it was a
Speaker 1: record for two thousand seventeen, two thousand and eighteen, we're
Speaker 1: both tremendous years for the industry in general. So clients
Speaker 1: are definitely still trading online. Um, I think the word
Speaker 1: actively is you know, you can debate what actively actually
Speaker 1: means when you talk about passive investing passive investing. I
Speaker 1: would say, in general, the average customers a passive investor,
Speaker 1: we you know, are our client, you know base, A
Speaker 1: very small number of them are what you would define
Speaker 1: as an active trader or a day trader that some
Speaker 1: people might want to put in there. Most people are
Speaker 1: actually actually just putting together a portfolio and buying an
Speaker 1: holding and making slight adjustments throughout the year. Nonetheless, there
Speaker 1: is still interest in individual stocks. So do you see
Speaker 1: any are there any sort of demographics or anything that
Speaker 1: you could say about the people that say, like, no,
Speaker 1: I don't want to just put half my money and
Speaker 1: spy and have my money and a bond fund and
Speaker 1: let a ride. Like who are the people that sort
Speaker 1: of don't accept this idea that they just have to
Speaker 1: have a passive portfolio. Yeah. I think if you think
Speaker 1: about you know, you take the different I would call
Speaker 1: them like generations that are out there. So self directed
Speaker 1: clients cover everyone from like eighteen years old only up
Speaker 1: to you know, there are eighties and nineties that are
Speaker 1: that are self directed trading, And I think what you
Speaker 1: get is just there there's a different interest in the
Speaker 1: stocks that they may or may not like. You know,
Speaker 1: if you get the older generation, a lot of the
Speaker 1: you think about sort of the staple stocks that they're
Speaker 1: familiar with when they grew up, you know, the IBM
Speaker 1: s and that those companies are very familiar with. And
Speaker 1: then you kind of go into the the other side
Speaker 1: and you think about like a twenty year old or
Speaker 1: twenty four year old that's buying and selling stocks. Uh,
Speaker 1: they're interested in other things. It could be you know,
Speaker 1: water stocks or some type of you know, social type
Speaker 1: of thing, or netflix, things that they're familiar with like Facebook.
Speaker 1: I think the older generations some just don't are not
Speaker 1: using things like this. They don't really care about it.
Speaker 1: It's not going to trade it. So it's about the
Speaker 1: things that they use. Has always been the interest of
Speaker 1: no matter how you know, how young or old you are.
Speaker 1: Has that always been the case that you see this
Speaker 1: sort of demographic segmentation of the family of stocks that
Speaker 1: people buy or is that something kind of new in
Speaker 1: which if you like break it down by age group,
Speaker 1: whether it's millennials versus older people, you can actually just
Speaker 1: see a very like just different pool of stocks that
Speaker 1: they're Again, I think a lot depends and mostly because
Speaker 1: we've got millions of customers. It's you know, it's hard
Speaker 1: to kind of really hone in on one particular thing,
Speaker 1: but if but if you think about the stocks that
Speaker 1: they're trading, that's one element. There are things depending upon
Speaker 1: the trader you are. Are you know, are you are
Speaker 1: you an active trader? H and do you take advantage
Speaker 1: of volatility? Now you're looking for stocks that are volatile,
Speaker 1: so you don't really care about the name. You really
Speaker 1: care about the volatility in the stock, and that's what
Speaker 1: you're more concerned with. So I think a lot has
Speaker 1: to do with the type of investor you are, or
Speaker 1: a trader um whether using technical analysis or fundamental analysis,
Speaker 1: or there's an industry that you want to be in
Speaker 1: on and say, hey, I'm a little bit nervous about
Speaker 1: the market today, I want to get more defensive. Let
Speaker 1: me go try to find some really high quality defensive stocks,
Speaker 1: and so you'll spend some time looking at them and saying,
Speaker 1: all right, which which is the best stock at this
Speaker 1: particular group that I actually want to buy from my portfolio.
Speaker 1: So I think it really depends, you know, with the
Speaker 1: number of customers that we have. So has the shift
Speaker 1: towards passive investing spurred E Trade to to change anything
Speaker 1: about its business model or to provide, you know, certain
Speaker 1: services that are geared more towards passive investors. Yeah, I
Speaker 1: mean our model has evolved every year, it evolves. I
Speaker 1: mean I think that any think about sort of the
Speaker 1: past investing topic is that, yes, if the growth of
Speaker 1: the ETFs demonstrates that there is a you know, a
Speaker 1: large interest in clients investing in low cost diversified products.
Speaker 1: So that's the data supports the fact that that's the case.
Speaker 1: Part of that has been taking money from mutual funds
Speaker 1: in the e t f s, but the rest is
Speaker 1: just having the ability the access to some of these
Speaker 1: you know, great sub sectors that you can use in
Speaker 1: your portfolios diversified in different ways. So I think that
Speaker 1: you know, from from an et F standpoint that that's
Speaker 1: a that's a big part of it. There are things
Speaker 1: you think about other products like let's call it like
Speaker 1: robo investing, So the ability to to put your money
Speaker 1: where you don't have to have a whole like five
Speaker 1: dollars to put it in a particular portfolio and will
Speaker 1: actually go back and realocate the portfolio. If the stocks
Speaker 1: become too heavily weight in the portfolio, it will be
Speaker 1: a readjustment get you back to where your risk tolerance is.
Speaker 1: So these are the ideas that these are. These are
Speaker 1: products that are growing uh and there's definitely interest in it.
Speaker 1: And I think that the a lot of it's come
Speaker 1: from the movement of quite a few investors that are
Speaker 1: coming from the full service firms into the online trading firms.
Speaker 1: What's next? You mentioned that the industry is always evolving
Speaker 1: the rise of robo in the last few years, a
Speaker 1: sort of auto matic portfolio allocation is big on the
Speaker 1: roadmap as you look ahead, what are what do you
Speaker 1: see around the corner for where the space is going
Speaker 1: to go? Yeah, I think technology continues to play a
Speaker 1: really large part in what's going on, you know, overall,
Speaker 1: And I think, you know, just when you think this
Speaker 1: industry gets commoditized, there's something that sort of helps accelerate
Speaker 1: what's happening in a particular marketplace. I think that you know,
Speaker 1: as we you know, we look at our customers and
Speaker 1: I put them in three categories. One is do it
Speaker 1: yourself that the ones do it with me. So I
Speaker 1: need a little help, but I don't want to delegate
Speaker 1: my portfolio. Then there's sort of like how do I
Speaker 1: just delegate us? Want to give you my money and
Speaker 1: just I want you to run out of no time.
Speaker 1: It's the tools and the the tools and the ability
Speaker 1: to educate these clients is to me is the game changers.
Speaker 1: Like we we want to we have an invested stake
Speaker 1: in making our clients successful. So everything that we do
Speaker 1: is all about risk management. How do we actually take
Speaker 1: and scale the educational offerings that we have two more
Speaker 1: clients today is something that we're really pushing on. So
Speaker 1: I think education is really a big thing for us
Speaker 1: to make sure that we can make them very successful
Speaker 1: and teach them about great products like options, where you know,
Speaker 1: typically people are like, wow, those are very risky products,
Speaker 1: but actually they're very conservatives. Well if you use them properly.
Speaker 1: How do we educate them to help them generate income
Speaker 1: in their portfolio or protect their portfolio. They're worried about
Speaker 1: the market going down. So I mentioned this earlier in
Speaker 1: the intro, but I'm really interested in what kind of
Speaker 1: data the retail brokerages like each trade l T, dumrrigrade
Speaker 1: get to see from their customers and how useful it
Speaker 1: is in sort of predicting I guess, the durability or
Speaker 1: the fragility of a stock market rally. What kind of
Speaker 1: stuff do you get to see and at what point
Speaker 1: do you start seeing behavior or what type of behavior
Speaker 1: would suggest to you that investors are getting you know,
Speaker 1: a little bit too excited or a little bit to
Speaker 1: eu fork about equities. Yeah, we've had a good run.
Speaker 1: I mean there's been this has been a ten year
Speaker 1: plus run that we've had in the marketplace. So I
Speaker 1: think that the enthusiasm still remains pretty high. And if
Speaker 1: you went into last year, it's sort it's the first
Speaker 1: year and ten years that we've had a downward market,
Speaker 1: but we still saw netflows coming into the marketplace at
Speaker 1: that point in time, so kind of clients were buying
Speaker 1: on dips in general at at e trade. So I
Speaker 1: think there's still a lot of confidence in the market
Speaker 1: place for from as a long term investor, we try
Speaker 1: to teach our clients that you know, from the short term,
Speaker 1: make sure that your risk tolerance is properly. Your portfolio
Speaker 1: matches your risk tolerance. Uh. And if you look at
Speaker 1: them like let's say February five, when the market went
Speaker 1: down tremendously that day, uh, it's it's not It's an
Speaker 1: opportunity time for people to take a look saying were
Speaker 1: you comfortable with how your portfolio performed on that given day.
Speaker 1: If not, it's time to make some adjustments. Uh. You
Speaker 1: don't want to make them when the market is going down.
Speaker 1: You want to do it when things are a bit
Speaker 1: more rational. So I think that's a that's a time
Speaker 1: when people started to think about how they reallocate their portfolio.
Speaker 1: So I think for right now, you know, people are
Speaker 1: still very confident in the marketplace. That could change. But
Speaker 1: the one thing that's really changed, I think in the
Speaker 1: marketplaces the volatility, and the volatility has created, you know,
Speaker 1: again a bit more anxiety for some investors. Are they
Speaker 1: comfortable being in that environment? How do we teach people
Speaker 1: bowl how to investor trade in a volatile market environment?
Speaker 1: So if you think about it, the market went up
Speaker 1: or down one percent sixty seven times last year. In
Speaker 1: two thousand seventeen it happened less than ten times. So
Speaker 1: you think about sort of the different market that we
Speaker 1: have today, will it become less you know, volatile? I
Speaker 1: would argue will not. But we have to reteach investors
Speaker 1: how to stomach these types of movements in the in
Speaker 1: the stock market on a given day and still remain
Speaker 1: long term investors. From a business model standpoint, each trade
Speaker 1: started off is just an online trading platform, but it
Speaker 1: has everything now right, I mean, there's like you can
Speaker 1: get a mortgage there right, not anymore? Oh not anymore. No,
Speaker 1: it was a thing at one point it was until
Speaker 1: until it wasn't a good thing. Okay, I was gonna ask, like,
Speaker 1: I mean, you see different um platforms sort of going
Speaker 1: to different degrees in terms of how much they want
Speaker 1: to be a full fledged bank. You have something like
Speaker 1: so far coming at it from the lending side. Now
Speaker 1: they're adding more online trading. Is there arranged for sort
Speaker 1: of different size and scope of the full financial services
Speaker 1: or is everyone just gonna sort of eventually offer everything. Yeah,
Speaker 1: I think it depends on everyone and what they're trying
Speaker 1: to achieve. You know, at each trade, we have a bank.
Speaker 1: We had a bank since the nineties. It's and it's
Speaker 1: been part of our fabric of how we're doing. It's
Speaker 1: very integrated into our particular offering. Not everybody has a bank,
Speaker 1: you know, someone like TV Merrior Trade does not have
Speaker 1: a bank, even though they've got a large ownership in
Speaker 1: that company in the Merry Trade. So everybody's got a
Speaker 1: different model of how they want to go about doing things.
Speaker 1: But I would agree that we're continuing offering. If the
Speaker 1: clients have a have a need, you will see more
Speaker 1: of the brokers find a way to offer it at
Speaker 1: a lower price. So if there are some things that
Speaker 1: the full service industry or another industry is doing that's
Speaker 1: charging high fees for it, and we're able to break
Speaker 1: down the barriers and give access, whether it be hopefully
Speaker 1: online at a lower cost, and help the client style
Speaker 1: will always be looking for opportunities in that that area. Well,
Speaker 1: fascinating to have you here, Chris Larkin of Each Trade,
Speaker 1: Thank you very much for joining us. Thanks for confining me.
Speaker 1: Dr Bloomberg, Welcome back, Tracy. This topic fills me with
Speaker 1: so much nostalgia and it really is fascinating thinking about
Speaker 1: how much is new and has changed in the last
Speaker 1: two decades. Like I know, I didn't know what an
Speaker 1: e t F was, Like I guess they existed when
Speaker 1: I first got interested in the market, but I certainly
Speaker 1: wasn't aware of them. The idea of things like education
Speaker 1: about portfolio risk or automated robo portfolios, like it really
Speaker 1: is sort of like bewildering how different this landscape is
Speaker 1: than it was in the late nineties. It makes me sad, joke,
Speaker 1: because I feel like I missed out on the golden
Speaker 1: age of active individual equities trading and now it's really
Speaker 1: boring because it's just, oh, put your money in you
Speaker 1: know this SMP five hundred index track her. Yeah. Well,
Speaker 1: you know, as Chris said, are still like people of
Speaker 1: our generation still buy stocks, Like I don't know how
Speaker 1: old you are, but you know people are at GE
Speaker 1: We could buy and IBM and Berkshire Hathaway, Like if
Speaker 1: we wanted to buy the stocks from our generation, we
Speaker 1: still could. Uh. I don't know if I want to
Speaker 1: buy G at this point. Yeah. Um. But you know
Speaker 1: also this question of well, the thing that I find
Speaker 1: really interesting is whether or not the platform itself has
Speaker 1: influenced investor behavior. You know, you hear this all the time,
Speaker 1: like people talk about how E t F s you
Speaker 1: can buy them with a click of a button. And
Speaker 1: maybe that makes people, I guess, more accustomed to instantaneous gratification.
Speaker 1: Maybe it makes people more unused to losses, because there
Speaker 1: may be kind of getting used to the notion that
Speaker 1: they can just get rid of their stuff very easily
Speaker 1: as well. I don't know. It's a sort of open
Speaker 1: ended question. No, absolutely, And I think that's a theme
Speaker 1: that we've hit multiple times on this podcast, like the
Speaker 1: sort of the connection between the vehicle through which one
Speaker 1: can buy the asset and then the price behavior of
Speaker 1: the asset again. You certainly saw it in a crypto
Speaker 1: in seventeen. You see it in real estate. People are
Speaker 1: always sort of inventing new ways of funneling one's money
Speaker 1: into an asset class, and I think by definition that
Speaker 1: ends up changing how it trades and prices at the
Speaker 1: same time. Yeah. Absolutely, This has been another episode of
Speaker 1: the Odd Thoughts podcast. I'm Tracy Alloway. You can follow
Speaker 1: me on Twitter at Tracy Alloway, and I'm Joe Wasn't though.
Speaker 1: You could follow me on Twitter at the Stalwart, and
Speaker 1: you should follow our producer on Twitter Toe for Foreheads.
Speaker 1: He's at Foreheads T, as well as the Bloomberg head
Speaker 1: of podcast, Francesco Leafy at Francesco Today. Thanks for listening.