Weekly Briefing No. 162 | Stash’s co-founder on digital advice, trouble brewing for SoftBank, and more


Welcome to The FR. We’ve always got your best interests at heart.

In this edition:

  • Stash’s Brandon Krieg on Digital Financial Advice

  • Trouble Brewing for SoftBank

  • Fintech and Classic Cars

  • Is Apple Plotting a Post-iPhone World?

  • Point-Two-and-Twenty

  • Financial Exec Decamps for Fintech

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Brandon Krieg of Stash

With a background in electronic trading that has included both start-ups and large financial institutions, Brandon Krieg was well positioned to benefit from the continued convergence of technology and institutional trading. But instead, Krieg, along with co-founder Ed Robinson, started StashInvest (Stash for short) to focus on serving the mass customer who needs help in planning their financial future.

In a recent Wharton FinTech podcast, the down-to-earth Krieg explains why Weight Watchers was an inspiration for how he thought about building a digital advice platform (“You can’t lose 30 pounds overnight.”). He also reels off several compelling statistics to explain why Stash has followed its customers into banking services: “The average Stash customer pays about $360 a year in banking fees. That’s too much!” (17:55). With a fresh $37.5 million courtesy of a recent Series D led by Union Square Ventures, Krieg, Robinson & Co. are now poised to accelerate their ambitious product development plans.


Trouble Brewing for SoftBank

In an excellent piece of reporting, The Wall Street Journal (subscription) laid out a damning piece on SoftBank and its $100-billion Vision Fund. In a nutshell, the two largest backers of the Vision Fund — Saudi Arabia’s Public Investment Fund, or PIF, and Abu Dhabi’s Mubadala Investment Co. —  are becoming increasingly nervous over how SoftBank chief Masayoshi Son is handling their money.

One issue relates to how SoftBank often fronts the money for investments and then transfers those stakes to the Vision Fund at a marked-up price. (How and why did Vision Fund LPs agree to this practice?) Another problem is the degree to which SoftBank may be investing at the tippy top of the valuation cycle, with the We Company and SenseTime Group cited as examples. But perhaps more than anything else, Vision fund backers appear troubled by Son’s imperious behavior: “Some investors have complained to the Saudis that Mr. Son can overrule fund executives on investment decisions and that the fund’s decision-making process is chaotic, often leading to last-minute reversals.”

Fintech and Classic Cars: Beautiful Together

One of the primary results of the rise of fintech over the last decade-plus has been the democratization of previously exclusive financial products and services. For example, cash-strapped millennials who hadn’t yet amassed the necessary wealth to be worthwhile clients for financial advisers instead flocked to robo-advisory platforms that required no minimum balance.

A new fintech is aiming to bring a similar ethos to classic car ownership by offering small-dollar investors the chance to purchase a share ownership in the Ferrari or Lamborghini of their choice. Rally Rd., which has so far raised $10 million, lets investors purchase shares in cars that typically cost hundreds of thousands of dollars for as little as $50 per share. However, there’s a small catch — you can’t actually drive the car you are investing in. But, CNBC notes, Rally Rd. has attempted to come up with a workable middle ground by featuring the cars in showrooms; the objective is to use these “to give potential investors an opportunity to view what they're buying, even if they'll never get the chance to drive it on the road.”

Will it take off? Rally Rd.’s co-founder believes the chance will appeal to a growing base of people looking to invest in “rare asset classes.” Maybe we’ll see you out on the road ... or should we say the showroom?

Is Apple Planning for a Post-iPhone Future?

Apple Inc. and the iPhone go together like America and apple pie. While the launch of the iPod in the early aughts began Apple’s renaissance after a decade largely spent in the wilderness, it was really the 2007 launch of the iPhone that cemented the company’s place in the top tier of tech firms. But recent sluggish sales of its flagship product, particularly in emerging markets such as India and China, have led Apple to consider a future that doesn’t involve the iPhone — or at least one that isn’t so heavily reliant on it.

According to The Wall Street Journal (SUBSCRIPTION), the company is shifting its priorities across its services, artificial intelligence, hardware and retail divisions as it works to reduce its reliance on the sales of its signature product. The Journal further reports that recent leadership moves “reflect Apple’s efforts to transition from an iPhone-driven company into one where growth flows from services and potentially transformative technologies.”

Will this mean a shift to focusing on more enterprise technology that would be sold to the business world — such as Microsoft and Amazon Web Services — as opposed to just targeting the consumer market? Only time will tell, but it’s something worth watching.


“There is a large pool of investors that just wants simple products at a low price, and they should seek out the investment equivalent of Walmart.” That’s the perspective of Baillie
Gifford’s Tom Coutts, who wrote a highly entertaining and informative Q1 letter
entitled Riding the Gravy Train and subtitled it Quis Custodiet Ipsos Custodes? For those who got a C in Latin, that phrase translates to, “Who will watch the watchmen?”

In this case, the watchmen are the managers who keep watch over portfolios. The answer, implies Coutts, is that nobody is watching them, which is why many managers can still get away with charging gravy train fees (i.e., two and twenty). But for Coutts, it’s important to distinguish between price and value: “At the moment we have the unsustainable position of too much Walmart product being sold at Whole Foods prices.”


Bridgewater Exec Decamps for Fintech trueDigital

Thomas Kim, who recently served as chief operating officer of Bridgewater’s Investment Engine Group, has joined trueDigital as CEO. Known for partnering with Signature Bank to create its blockchain-powered Signet Platform (a few months before JP Morgan’s recent launch of its JPM Coin), trueDigital has set its sights on launching Commodity Futures Trading Commission-approved Bitcoin swaps. Prior to his roles at Bridgewater, Kim had been a managing director at Lehman Brothers and served as COO of TradingScreen and Mandarin Capital Technologies.

Quote of the Week

“As technology progresses, I believe that fintech will fundamentally change finance.”

— Taavet Hinrikus


HQ2 in NYC is no more.

Well, it was fun while it lasted. Amazon on Thursday announced it would pull out out of its plans to build a new headquarters in Long Island City, Queens. The tech giant bowed to increasing pressure from activists and some local Democratic elected officials who, in the end, perceived the deal differently from party leadership, as New York Gov. Andrew Cuomo and New York City Mayor Bill De Blasio both initially lauded the deal.

In November, after a year-long search, Amazon announced it had selected New York City and Northern Virginia to split duty as its second headquarters (nicknamed HQ2). Each city was expected to have more than 25,000 workers over time. We examined the economics of the deal at the time, and how it might benefit (or not) each area. It looks like New York ultimately decided the cost outweighed any possible benefits.

NYSE is suing the SEC

The financial world was rocked Friday morning when the president of the New York Stock Exchange announced, in an op-ed piece in The Wall Street Journal, it would be suing its regulator, the Securities and Exchange Commission (SEC).

Stacey Cunningham, the NYSE’s president, is attempting to block an SEC pilot program that would monitor the effects of the complex models of fee and rebates in share trading. The SEC’s plan would “impose government control on the incentives that public markets can offer,” Cunningham argued in the piece. He added: “Market-maker benefits will be sharply reduced for some securities and fully eliminated for others. To no one’s surprise, dozens of public companies either have asked the SEC to spare them from being selected for forced participation in the pilot or have opposed the pilot in its entirety.”

Joe Wald, CEO and founder of Clearpool, a financial technology company whose software designs electronic trading algorithms, offered his point of view. The SEC plan comes after years of both large and small market participants making their way to the SEC and the exchanges themselves, “to talk about how we can make our markets more efficient, how we can do things that are more transparent, how we can root out potential conflicts of interest or bias in order routing.”

“Taking a holistic look at this is important,” Wald adds. “It is not just about the access fee pilot. It is about market data, transparency and fairness across the board.”

Wald believes the SEC ultimately is using the pilot to try and create the most transparent and efficient markets.

“Ultimately, the exchanges recognize this may not be in their best interest to their bottom line, but I don’t think that should be their biggest concern,” he adds, “the biggest concern should be investors themselves…. are they missing out on opportunities to have better returns because markets may not be as efficient as they could be? That should be the focus.”

This will be an interesting one to keep an eye on.


Human narrowly edges out IBM Research’s AI system.

“While I cannot experience poverty directly, and have no complaints concerning my own standards of living, I still have the following to share: Regarding poverty, research clearly shows that a good preschool can help kids overcome the disadvantages often associated with poverty” (12.53).

Those words were spoken forcefully by IBM’s Project Debater in an Intelligence Squared debate that transpired this past week. The debate question was whether the government should should subsidize preschools, and Debater’s formidable opponent was renowned debate champion Harish Natarajan. Ultimately, Natarajan’s experience and creativity prevented the AI system which hadn’t been trained on the question beforehand from joining the victorious ranks of AlphaGo, Watson and AlphaZero.

But in a way, Project Debater’s “accomplishment” was more significant because it was trafficking in the infinitely complex and nuanced world of human language. Yes, words were mispronounced and sentences were awkwardly constructed. However, Dario Gill and the team of creators behind IBM’s latest AI solution can hold their heads high.

Ellie Mae goes private.

What was whispered for a while became reality this week: Mortgage technology provider Ellie Mae was acquired and taken private. For $99 a share in cash, or $3.7 billion, by private equity firm Thoma Bravo, it turns out.

The move makes sense for both sides, according to much of the industry consensus in the aftermath of the deal. For Ellie Mae, the move to becoming a private company means it reduces the oversight and limitations that come with being publicly traded.

Meanwhile, Thoma Bravo has acquired what has become almost the de facto IT system powering the digital mortgage industry, says Forbes, as Ellie Mae counts more than 2,000 lenders as its customers. And, Forbes further notes, Ellie Mae's increasingly entrenched position in powering the mortgage market is the sort of “moated” business Warren Buffet has always advocated investing in, one that can remain relatively resistant to broader economic headwinds.

Further, Thoma Bravo has stated the current Ellie management will remain on board, and that it has no plans to make radical changes to the company. This is certainly one we’ll be keeping an eye on in the coming months.

The big Bitcoin bet.

In 2014, uber VC Ben Horowitz of Andreessen Horowitz bet uber financial journalist Felix Salmon on the future of Bitcoin. Specifically, Horowitz believed that within five years’ time, a meaningful percentage of all Americans would have used bitcoin to buy stuff. The quintessentially British Salmon believed that this prediction was poppycock, asserting that because Bitcoin was inherently deflationary, owners of the currency were incentivized to hold on to their bitcoin. Adding to the sizzling divergence of perspective, the two men agreed to wager a pair of alpaca socks on top of the bragging rights that would accrue to the victor. Five years later, the bet had run its course, and a winner had been decided.

Quote of the Week

“Although we work through financial markets, our goal is to help Main Street, not Wall Street.”

~ Janet Yellen