Motif Investing - Getting Beaten At Its Own Game

For several years, we’ve enthusiastically recommended Motif investing for new and experienced investors for its affordable approach to social portfolio building. However, it’s important for us to constantly reevaluate the platforms we recommend, especially as other services enter the space. Today, Motif doesn’t distinguish itself the way it once did. Other platforms are beating it at its own game, and Motif’s attempts to pivot its offerings have not introduced anything we feel our readers really need. They even eliminated their signup bonus. We’ll get into greater detail below.

Motif is a platform used to buy bundles of stocks, with recent expansions into retirement fund planning and IPO access. Motif is named after its chief value proposition: the “Motif” bundle of stocks that can be bought for $9.95. When this package was introduced, this was literally the cheapest way to buy stocks anywhere we had seen. But today with no-commission buying options like Robinhood, the $9.95 price tag has lost its luster somewhat. More on that later.

Motifs can be built around any industry or concept (Solar Power, Natural Gas, Craft Beer…you name it). Every single month, user-made Motifs in the Motif catalog boast strong returns, and the company’s own stock bundles also remain popular.

Motif Impact is a newer option for Motif investors. It’s values-based investment, combined with Betterment-style portfolio building automation based on Modern Portfolio Theory. Many investors are disturbed that their stake in unethical companies is also a stake in global warming, child labor, or pollution.

While we applaud Motif for offering a chance at ethical investing, we question whether the “values based” companies selected for these portfolios are really so different from the ones cast by the wayside. The criteria Motif uses for cutting ties with one company while accepting another are far from clear. It’s also hard for us to recommend a product that is necessarily less diversified than similar automated portfolios offered by competitors like Betterment. Less diversification means more turbulence and, often, lower returns.

Motif Impact portfolios may or may not actually make the difference they suggest, perhaps offering investors warm fuzzies but not much more. This potentially half-baked attempt at socially aware investment doesn’t have any place in our portfolios, so we certainly won’t recommend it to our readers either. In any case, people who want to hand-pick ethical companies could do so through other brokers (or on a custom Motif itself!), and in some places would save money doing so. If you still want Motif to handle it for you, they’ll do it for $9.95/month.

Motif’s Methods

Motif investing is built around the stock and ETFs bundles they sell. ETFs and stocks are grouped together in bundles of up to 30. These are known as “Motifs”, and they cost $9.95 (a $250 minimum account deposit is necessary for first-timers). You can trade single stocks and ETFs at Motif for $4.95, but in most cases users opt for the larger Motif bundles. Motif also allows fractional share buying; this way, you can put every dollar in your portfolio to work.

Motifs are built around specific ideas, sectors, industries, or trends. You’ll find Motifs that represent just about any financial micro-sector you can think of: Businesses With Lots of Facebook Likes, Bio-Tech Innovations, Cancer, 3D Printing, High-Performing Dividend stocks, etc.

If you want to build your own Motif from scratch, there are two customization options for you. 1) You could customize an existing Motif. That’s $4.95 to replace a single security, or $9.95 for unlimited shuffling. All users can also customize the allocation balance of any Motif securities for free. 2) You can also build your own Motif from scratch. This costs $9.95, just like buying one of Motif’s ready-made offerings.

Your custom Motifs are made available to the general user base. Anytime someone buys, rebalances, or adjusts a Motif you created, you get royalties. With low trading costs, the best social interaction in modern brokerage, royalties, and endless customization, Motif has something for every investor.

This is what made Motif exciting in its early days. And while you can still buy Motifs this way, it’s no longer the cheapest game in town. The fact that Motifs are still available for a one-time price of $9.95 makes it very strange that the Motif Impact portfolios offer what are essentially robo-managed Motifs, for $9.95 every month. Again, we loved Motifs when they were new, but the deviation from this winning strategy has us scratching our heads.

Motif’s Creator Royalty Program and Social Media System

Whenever another user buys or rebalances a Motif you created you get $1 as a thank-you from Motif. This may not seem like very much, but as some Motifs attract hundreds or even thousands of investors, the Creator Reward Program is a definite perk.

Your custom Motifs become available on the general Brokerage Catalog. The program gives you a visual dashboard where you can see every time someone watches, buys, adjusts, or sells your Motif. Most of these actions cost $9.95 for the user performing the action, so $1 represents 10% of Motif’s potential profit.

This is a good time to bring up Motif’s social media aspect. When your Motif goes live, you might start to see people leaving comments about it and giving it ratings. It’s possible to do this with all Motifs, and you may be surprised how insightful user comments are. I’ve made spontaneous purchase decisions on more than one occasion just because another user had something interesting to say about a Motif.

You can make friends with other users, or bring over your own from your friends on Facebook. These friends can be grouped into Circles, a la Google+. You and your circles can have private conversations. At all points of Motif social, you’ll have the ability to decide who gets to see your investment behaviors and comments, and who does not.

Motif’s Impact and Trading Accounts

As described above, Impact Accounts allow users to invest, purportedly without owning shares of companies that go against their values. In a typical mutual fund, an investor might unwittingly be supporting unfair labor practices or pollution. Motif has identified these offenders, and removes them from Impact Accounts based on Fair Employment, Sustainable Planet, or Good Corporate Behavior.

The problem is that, at $9.95 per month, all Motif is really offering is a less-diversified portfolio than is available for a lower price at Betterment. The same portfolio could also be cobbled together for much less money using Motif’s own products, but even cheaper trading is now available through other competitors. From a price/value perspective, there’s little to make Motif Impact more than a marketing ploy. Still, there are additional services one gets for the price.

Tax-advantaged trading is automatically performed by Motif’s algorithms, earning the user stronger returns in the long run as is typical in the robo-advisor industry. If your portfolio underperforms, Motif guarantees to return 100% of your service fees. The monthly fee for Impact Accounts is a flat $9.95 (for the first $100,000 invested). This is more expensive than some immediate competitor platforms, but Motif users may find that the ethical investment aspect is worth the extra cost.

Motif Frequently Asked Questions

Here are some of the most commonly asked questions about Motif from the web for quick visual reference.

How Much Does Motif Cost?

  • $9.95 for most purchases and sales.
  • $9.95 for Impact Account and Trading Account monthly subscriptions (discounts after $100,000 invested)
  • $4.95 for individual stocks. No fee for withdrawal.

How Does Motif Make Money?

Motif charges commissions on various investment behaviors, like buying or selling Motifs ($9.95), buying or selling individual stocks ($4.95).

How Many Users Does Motif Have?

More than 250,000.

Final Thoughts on Motif

It’s a shame to see a great service lose a step to competitors, but that’s exactly what has happened with Motif. The Motif bundling model was cheap and innovative when it was introduced, but it has been priced out by newer platforms. On the other hand, Motif’s lame attempt at “values based” robo-advising is done better and cheaper by Betterment. We’re also a little sore that they got rid of their once-generous signup bonus.

Motif can still be worth the money if you want to hand-build portfolios or directly observe the portfolio strategies of other users. This was always where Motif shined. Unfortunately, this is no longer their primary emphasis, and as the company continues to double down on its robo-advisor offerings, we can’t give it the wholehearted recommendation we once did.

 

Motif Review

Rating: 1.5 / 5
Motif ratingMotif rating
Read our Motif Investing Review to learn more about themed, idea investments.
Motif Investing Review
Written by: Andrew Black
Date Published: 10/25/2017
1.5 / 5 stars