WEBVTT
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Thanks everyone for joining us. I'm Sebastian, I'm the CEO of Experio, and I'm
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joined by Julie, one of our principal designers.
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Between the two of us, we have a lot of experience in the financial services
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market, and we're here to talk about some of the things we think belong in
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self-directed investing experiences.
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Just a quick introduction to Experio, for those of you who aren't familiar.
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We're a company that is building the front ends that power finance, and the AI
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that's transforming those front ends.
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We've been around 25 years, and our typical customer is a tier one brokerage,
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wealth advisor, asset manager, looking to provide a differentiating digital
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experience backed by great data, backed by great data analytics, to their
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customers. One of our cornerstones is building unforgettable user experiences.
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We believe that a lot of investment is overcomplicated and not accessible,
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especially to retail investors, and we're on a mission to make concepts like we're
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going to talk about today easier to understand and easier to implement.
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We deploy the solutions we bring to these customers with key
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data analytics partners across the industry,
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and are compatible usually with the sorts of data and environments that you're
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already working with. As a company, we work with our customers both in
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a strategy and design perspective, helping them understand and design what they
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want to deliver in their digital analytics experiences to their customers.
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As well as supply a set of tools that actually accelerate.
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We believe with the ability to accelerate, we help our customers stand out with how
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they want to differentiate their platform.
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We have a platform called Experio Connected Finance, which contains a set of
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pre-built and extensible workflows, user interfaces, AI experiences, that allow us
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to deploy a set of capabilities to each customer that are nonetheless specific and
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customized for the experience that they want to provide.
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We have a pretty large suite of tools that cover investing in general, both
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advisor facing and retail investing.
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And today, we're going to talk about a few of them that we're building now that we
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believe will help change the self-directed experience.
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Just thought I'd start first with a little kind of preamble as to why we think this
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is interesting and exciting. Both Julie and I have participated as investors and
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providers to this universe for many years.
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And the theme that we keep seeing is that the sort of sophisticated
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tools that institutional investors use to reduce risk and increase returns
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have always been kind of reserved for the few, right?
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It was 70 years ago, we got modern portfolio theory, but it took decades still for
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Bogle to build Vanguard and for a lot of the implications of that theory to come
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out to the masses. And even so, for many of the last decades, a lot of these
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capabilities around rebalancing and such have only been available to advisors
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and institutional managers or retail investors using mutual funds and ETFs.
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And of course, there's been a huge amount of innovation in that space.
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There's target date funds and thematic funds that help investors carry out what
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they want. But we feel like there's still a gap, which is in the 2000s,
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2010s, platforms experimented with giving robo-advisors to their customers.
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And they've had some success with that, and some customers find that useful.
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But we increasingly find when we talk to the customers that we serve, that
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individuals, especially younger investors, are really interested in something that
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is more personalized, that takes care of them, that is accessible and transparent
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to them. They still value financial advice.
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And as advisors turn more and more towards helping people with long-term planning,
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the question of how exactly is my portfolio managed if I want to do that myself, is
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still really live for a lot of individual investors.
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And I think even with the explosion of ETFs and the innovation of that space, we
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increasingly see people want to be able to take a bit of control for themselves.
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Julie, I know you've been thinking a lot about this as you've talked to people.
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Mm-hmm. Yeah. So just kind of reiterating some of the things that Sebastian had
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said. Some of our traditional experiences is really about researching those
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individual investments, right? And really focusing on buying and selling particular
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securities or monitoring the performance and maybe looking at charting analytics or
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anything like that. As well as really we're putting the onus on the user to
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interpret that data and really take that data and figure out
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what it means to them and how it applies to them.
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But what we're seeing as we're talking with more and more clients and we're talking
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with more and more customers, users,
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users are demanding more of an evolved experience where they are able to understand
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those opportunities. So opportunities are being brought to them, not necessarily
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we're giving suggestions or advice, but we're allowing them to be able to see those
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opportunities that are available to them, rather than having to go stock pick and
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research from that point of view. We're seeing users really wanting to build and
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manage their portfolios. I think coming out of the whole robo phase of investing,
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if you will, I think it was great to get a lot of people in the door to start
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investing, but now they're like, "Okay, I think I can do this on my own.
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I just need those tools to be able to get me there, so that as a self-directed
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user, I can kind of have onus on my own finances and my own portfolio." And then
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around that, just receiving that contextual guidance so that the user feels like
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they're in control, that they're making the right decisions, that they're not just
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flying out by themselves, right? That they have that support that is helping them
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along the way. And then we have with our portfolio monitoring systems, we
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have some really useful insights and actions that can be derived from things that
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the users has already told us, like goals that they might have or
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things that they're trying to achieve. So that's another piece of it.
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It's just, I guess in a nutshell, we're going from that stock picking mentality of,
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"Oh, my dad told me I should go buy this stock," right?
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To, "How can I create a portfolio that's going to take care of me and my household,
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and what does that look like?" So a lot of
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these products are really built
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around this core idea.
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Yeah. I think all of us in every field are facing information overload, right?
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Totally.
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And so we increasingly look to our user interfaces to help funnel that down for us.
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And the self-directed experiences of the past were primarily targeted around doing
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some per stock research and entering an order in the OMS, right?
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I think that notion of having a longer term conversation with the user, exposing
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tools to them that they would like to use because they've been learning outside the
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platform from influencers and TikTok videos and well-written articles and all
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manner of sources. And they know they should be doing something about this, and
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maybe they don't want to call an advisor and have them do it, or maybe they're the
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type of person who wants to do it themselves.
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The tools are lacking in the medium that they now expect to find them in.
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So what we're going to talk about today are three primary tools that, Julie and I
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were just talking about this this morning and yesterday.
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There's just not a lot of great tools out there for self-directed investors in this
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space other than your buddy Chad's spreadsheet, right? Stuff gets passed around.
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There's little startups here and there, maybe in the fire crowd, right?
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But there's just not really great experiences around this in most of the
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self-directed space. The first is rebalancing.
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I think anyone that spends a minute learning about how they should invest,
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hopefully learns pretty quickly that your strategic asset allocation accounts for
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more than 90% of the variability in your returns.
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Mm-hmm.
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They know they need to get dialed into some risk profile that makes sense to them
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based on their plans. And if you rebalance in a disciplined
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way, all the studies suggest that there's a significant increase in your
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risk-adjusted return, on the order of a quarter or a half of a basis point over
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time, which really adds up. And also importantly for people thinking about how and
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why they want to invest, in a 60/40 portfolio, for instance, if you don't
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rebalance, your peak-to-trough losses could be
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20% higher than you originally expected. That's a significant amount of money.
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So there's no magic, make more money because you rebalanced.
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But you have to rebalance to stay in the risk profile that you have chosen and
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planned for.
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What I think is interesting, sorry, just one second.
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Yeah.
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What I think is interesting about that one is we're seeing a bunch of portfolio
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builder tools, right? We're seeing some of the competitors in the space actually
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going out and like building a competitive, like a builder where I can build a
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portfolio. It's great, but then what do I do next?
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Yeah.
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It's just like sitting out there, is the next natural step is to rebalance it and
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make sure that it's in alignment. But I think that that's a huge gap that we're
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just not seeing, is like, what do I do next?
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I have this great portfolio, I'm all set up, but then a year later,
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I could be-
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Yeah
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... completely out from what I had originally set up.
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Exactly. And who's got time for that, right?
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We're going to talk about how that can be made more accessible.
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There's an obvious conversation to be had, which we're not going to get into today,
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about do some of these platforms not want to help you rebalance because they'd
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rather you use their advisor to do that.
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And frankly, I think the world where that's defensible is slowly closing, right?
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Mm-hmm.
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These tools have to be available for the kinds of investors who are interested in
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them. So yeah, it's about attention span. It's about implementation.
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And then also, if you're listening from a brokerage that's looking to implement
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some of this stuff, it's good for your customers to stay in the risk profile that
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they want. And frankly, it's good for you to remind them to trade now and again.
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There is actually activity that results that is a win-win for both parties.
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Direct indexing is certainly an interesting trend right now, and I think that's for
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a couple of reasons.
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Number one, certainly at some of the larger advisors, there's a very direct kind of
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cost saving, tax alpha play that's being pitched to very large investors.
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And certainly by making some of the tools for direct indexing available to
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individual investors, there are sophisticated users that can take advantage of
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that. And there are some users who are interested in that.
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The larger trend, I think is, we talk about how ETFs are exploding everywhere,
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right? A lot of today's investors are very interested in investing in a particular
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way. But unlike in the past where that meant figuring out Motorola was building
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phones, this means, oh, I'm going to invest in this, this, and this
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theme because of my macro belief or my personal beliefs, right?
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Mm-hmm.
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And yet with the realization that indexing and rebalancing is part of having that
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systemic presence in the market and taking advantage of the portfolio theory we
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know,
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investors are aware that being able to invest in an index is the smart thing.
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So, how can they invest in an index that reflects their theme, their
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bet, or their values? So we'll talk a little bit
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about that.
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Yeah. And finally, tax loss harvesting is just a tool that for most users will
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save them a little bit of money every year and potentially a lot of money over
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time, and is part of responsible financial planning that they may be doing
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themselves, but is just irritating and hard to do across almost all
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platforms that we see. Gosh, even in my brokerage, just pulling up a list of my
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short-term and long-term tax lot gains and losses is a quest.
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And so I just put them all into a spreadsheet in Escrow to figure it out.
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I'm not sure that it does a perfect job, right?
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This is the state of the art right now for most investors.
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And yet there's
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really value in being able to do this tax loss harvesting.
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In many years, especially if there's a downturn, the studies show that up to 100
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basis points of value over several years are available here if you have offsetting
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gains and so on. So these are each tools that have been proven
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by institutional experience that individual investors are aware that they need.
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But the tools just aren't really accessible.
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And I think there's some structural reasons to do with cannibalization of business,
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and I think there's also just the issue of can someone build a user interface that
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makes it sensible? That's what we're going to talk about.
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Mm-hmm.
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So let's start with rebalancing, Julie.
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We're just making a spreadsheet here, right? Click, click, click.
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Yeah, exactly. So I think
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something that was interesting to me, if you go back and you think about, I don't
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know, what was it like five, maybe eight years ago, maybe 10 years ago, Amazon
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rolled out notifications, right?
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And you could go sign up for all these alerts and you could say, like, "Hey, next
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time I need this thing, send me an alert," or whatever it is, right?
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But now, if you think about it, a lot of that stuff is happening on your behalf.
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So I might have some vitamins or something that I have ordered, and Amazon realizes
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that I'm ordering it every month or I'm ordering every three months, right?
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And so then all of a sudden when I go to my Amazon page, those vitamins are sitting
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right there, and I didn't do anything. I didn't set up an alert.
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I didn't set up a notification. I didn't do any of those things.
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It's a passive way of giving that user that information.
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We have the same kind of concept here with rebalancing and these notifications, is
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that if this user had set up a portfolio using our portfolio
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builder tool that we have, we know what they want their allocation to be,
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right? We know what they want that
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drift or that allocation to be. And so we can automatically send a
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notification saying that, "Hey, your portfolio is out of balance based off of your
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target that you've already set up." And then at the same time, it's always good to
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review at the end of the year just to make sure that everything's okay, right?
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So as another way of kind of cuing the user in, it's the end of the year, you might
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want to look at a rebalance just to make sure that your investments are on track.
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Yeah. I think this has to do with the information overload, right?
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I know I should rebalance, and I have a spreadsheet for it, and fine, I like making
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spreadsheets, and so I've dealt with it.
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But
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when is it going to happen? When am I tracking that I'm out of track?
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And then when am I going to do the calculators, right?
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And in a self-directed platform with a Canadian OEO or a US self-directed
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license, you can't be pushing, it's time to trade right now.
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You can't be sending direct recommendations on how to do it.
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And so our approach is very much that there are reasonable times at which this
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reminder is sensible, and there's reasonable bands
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of out of weightness that are useful to signal, which can be set up when you're
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building your portfolio. But at that point, we get to take care of it for you, and
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we're going to send you a prompt. And you're going to go take care of it yourself
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because it's a self-directed environment.
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Yep.
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What does that look like?
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Yeah. So this is kind of a look at the product that we have, and it's a pretty
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intuitive step-by-step process where we allow the user to kind of set up accounts,
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select a target, do that construction, and then define some rules.
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And this is actually really important to us because there's not one way to do this,
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right? There could be defining the approach of the rebalance could be like, I
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really just want to get close to my target, or I really want as few trades as
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possible. This is kind of sort of like when you go on Google Maps and you say,
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"Hey, I want to go to this destination." It doesn't always just give you one route,
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right? You could go the shortest distance, you could go with tolls, you could go
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with the least amount of traffic. So we're using some design cues from the Google
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Map interface to say, like, okay, how do you want to approach this?
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And we're giving them a little bit of a cue on the right of like, okay, this is how
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close you could get based off of this route that you're taking.
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Yeah. And the underlying puzzle here that's so irritating to actually do, if you
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have a two-position portfolio, you're probably all right. You don't need the tool.
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Yeah, exactly.
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But when people are building their own and of course, over time, they build up a
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legacy. They have the stock their dad gave them.
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They have their employee stock that they're not allowed to sell, or they've got
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some legacy accounts they've brought in.
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This eventually gets complex enough to where generating the list of trades that is
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required to perform the rebalance is itself a job.
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Mm-hmm.
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We publish an optimizer that does that job in a simple and deterministic way, but
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we can't say what the best way to rebalance your portfolio is.
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A, that's not allowed in our license, right, if we're self-directed.
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And B, to Julie's point, there's not only one way to get there.
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So for instance, I might be in a static point where I've got no particular
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contributions or savings. It's just time for me to rebalance. I'm going to do it.
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What gets me closest to the target?
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I'll run that and generate a list of trades that maybe honor that exclusion that I
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don't want in place
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to get me closest to the possible target, the allocation target.
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Or maybe I'm sensitive to the commissions I'm paying because of how I'm charged,
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for instance. I want to make fewer trades, or I want to shepherd each one and look
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at it.
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Mm-hmm.
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More often is the case that people are not jumping into just rebalance because it's
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Wednesday and buy and sell to get precise.
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If they're disciplined investors looking at a process like this, they may have cash
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available every month or every quarter on part of a plan.
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They may have dividends that are coming off of their investment.
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And so a very common operation is not necessarily get me as close as
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I can, because I'm an institutional product manager.
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The goal is use the cash I have, right? How close can I get?
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And so by quickly being able to look at the differences between those approaches,
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the investor can decide what trades they want to actually go execute.
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And that's where I think we owe them more than, "Here's what the optimizer said.
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Are you feeling lucky?" Right?
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Yeah.
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It has to be transparency.
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100%. Can you imagine checking out an online shop and not actually seeing the
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total cost, the taxes, the discount code that I entered, right?
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That would be a horrible experience because I'd be like, "Wait, I just bought
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something and I don't even know how much it costs or what the details are."
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The Airbnb cleaning fee, right?
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Totally. All those things are just hidden, right?
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And then you're just like, "Wait, what?
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What did I just buy?" So I think that actually that mentality is actually something
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that
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we are seeing a lot in the self-directed space where we just forget to show them
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this part, right? We just don't show them that.
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We're going to map it out and show you in a review of how does this impact your
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portfolio from all angles, right?
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Yeah.
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We're partners with Morningstar, and we can use their X-ray tool, their X-ray data
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to be able to give some really great displays around what exactly is this going to
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do. It's not just going to give me a list of trades, but it's also going to say,
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"Okay, these are some smart insights that we can derive based off of this data
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that's going to give you some context to where you're moving." You
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might be affecting performance. Sure, I got closer to my target, but then is that
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actually going to meet the performance needs that I have, or the risk level?
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Maybe I'm taking on more risk than I'm comfortable with. All those kinds of things.
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So this is our reviewing the rebalance plan, which gives you that
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information and shows you that comparison and shows you those trades, just so that
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we're just being as transparent as possible.
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Good UX isn't about hiding complexity.
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I think sometimes we go down that route of just simplifying it so much that the
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user doesn't get that information.
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It's really about revealing it at the right time, and the right amount of
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information so that the user can digest it.
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I totally agree, and I also just still find it surprising how few platforms let you
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see your trading back, right?
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Yeah.
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They'll show you the ticket, and you're going to spend $500 buying this stock, and
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that's clear, and hit enter and see what it filled at.
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That's all that OMS stuff just works, but the OMG, what happened is not working,
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right?
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Mm-hmm.
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I can't see what that impact is. And yeah, in the case of a rebalance, I'm
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intentionally creating a portfolio-wide impact that I want to see the impact of.
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Yeah.
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So,
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we're going to take the next tool, and talk a little bit about how some of the same
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principles apply, which is direct indexing.
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Mm-hmm. Yeah, so this is, I think, what was it?
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10 years ago-ish, ESG became the craze, right?
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Everyone wanted to see ESG, ESG, ESG, and that's great, but we were only showing
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ESG from a stock level point of view.
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I could only go see Apple and see what the rating was for Apple's ESG.
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Mm-hmm.
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This is actually taking it one level up, where I could say, I
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want to be able to create an index of stocks that don't have fossil fuels or
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tobacco, or it aligns with my values.
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So this feels like the next generation of where we should be going with that
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content, rather than just looking at individual ESG ratings on individual holdings.
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So how can we take a tool where the user can say, "I want to be able to pick what
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is in my index and what I invest in." We see this in Spotify, right?
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Where back in the day, we would have albums, and it would be like, okay, here's
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your list of songs from one to 10, and it was curated by the
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musician. And
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that's the order that you're supposed to be listening or enjoying this.
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But today, no one does that. It's all about Spotify lists, where I could say, no,
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I'm in the mood for this kind of music, and these are the things that I want, and
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that same idea should apply to finance.
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Or it's like, actually, this is the index that I believe in.
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So this is kind of a funny example, but I could say, I really want the S&P 500, but
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I don't want technology, because I just don't feel like technology is where it's
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going to go in the next 10 years. We're already seeing a little bit of a dip in
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technology. How is that going to impact me moving forward?
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So it gives me the opportunity literally with one click to say, I don't want
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technology, and you can get a list of trades from that point of view.
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Yeah. And in this case, we would show them that they would have dramatically
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underperformed historically-
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Yeah
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... and have a large tracking error.
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But maybe their theme is, yep, it's outplayed, right?
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Mm-hmm.
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The X technology sector is going to win here.
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So I think this is about letting users express their preferences, and there's a few
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directions we can go from here, not all of what we're going to show today.
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There is, of course, an ETF that does this exact strategy, and you could use this
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preference to go find it and buy it.
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Helping people find the ETFs that they want is another area that we do a lot of
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work in. I'm not going to talk about our screener today, but we could rig this to
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go show that. Some users may want to put together an index that is much more
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back test based, right? I want to buy the four least expensive biotech companies
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that are profitable in this market cap range every quarter, right?
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Mm-hmm.
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I think there's a small number of users that are interested in that.
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That is pretty straightforward to go put together.
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But what really reflects a lot of users' interests is the ability to say, here are
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the general themes that I'm interested in as expressed by commonly available
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indexes, and here's the exception I want to take from them.
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Mm-hmm.
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One that's not on this screen, as it just doesn't fit on it, is I want it equal
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weight, right? Instead of market cap.
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Okay.
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So, this is an approach that people find compelling and don't always have a fund
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that they can easily discover or trust or invest in,
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that lets them invest the way that they want to invest.
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The other aspect for a sophisticated investor is that, when combined with tax loss
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harvesting, a directly invested index often provides the ability to
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harvest tax losses over time, right?
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Mm-hmm.
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If I have 300 positions, 10 or 20 of them are going to be down in any given year.
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I can sell those, harvest the losses if that's appropriate for me to do.
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I'll find out in my tax loss harvest calculator.
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So there are multiple benefits that can accrue to someone who does direct indexing,
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from preferences to potential performance enhancements or tax loss harvesting.
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Mm-hmm.
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So, how does that actually work when they say they want to do it, Julie?
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Yeah. So this is a little bit of our review screen, sort of similar to what we had
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on the screen for the rebalancing piece, but it allows the user to be able to see
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all of those stocks that they're potentially going to buy.
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And here is that trade impact screen that you were talking about earlier, where we
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just really feel like
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every big decision really needs to have an awareness of what they're actually
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doing. So we've got some categories that we use, and our clients could tell us to
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use other categories, or to fit whatever needs they have.
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But, from everything from portfolio fit to cash to positions, what's
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interesting about this one is that the user's choosing to remove technology from
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this particular index that they're looking to do, but then they actually have some
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technology in their current portfolio that they already have sitting outside of
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this. So, the system's able to be like, hey, did you know, by the way, I know
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you're removing technology here, but there's still some sitting in your active
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holdings. Then we can look at concentration, realize gain loss, some of that stuff
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that you were talking about with some of the tax pieces.
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And then what does this not cover? So it just helps the user get an idea of,
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it was your point before, is excluding technology might cause your
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index to not have the same beta as the S&P, or that
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beta won't be relative to one just because there's going to be a lot of movement if
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you don't have technology sitting there.
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Mm-hmm.
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So-
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00:27:29.412 --> 00:27:32.982
Yeah, I may want to have technology handled separately. That's part of my strategy.
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This is my everything else, and I've got a special technology bit, right?
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Mm-hmm. Either way, I should be able to go see it.
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00:27:38.893 --> 00:27:42.192
Yeah, so I see the trade impact, and then I can go execute that trades.
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When we install this at a customer whose backend supports basket trades, we'll go
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submit all these as a basket trade.
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If they don't, the user may have to go through these, but the point is, it's a
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self-directed platform where they're now in control of this.
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We're not running an index for them.
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We're helping them with the set of tools that help them run their own index.
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We just take care of the calculations and the bulk work, so they don't have to do
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that.
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Mm-hmm.
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Yeah. And then,
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I feel like one of Experio's principles is just not letting the user
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fall on their face. We're not going to just give them this direct indexing tool and
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then just say, "Oh, good luck."
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Right.
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We're going to actually have displays that helps the user get
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basically a quote or a profile for their particular index that they've created, so
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they can see some performance numbers, the holdings that are associated, some tax
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loss, some realized gains. We can pull in our Morningstar partner risk
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score information,
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push some rebalancing education, and then using those alerting capabilities that we
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talked about before to help the user get those alerts of if their custom index is
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out of balance. We don't want them to just go from that tool to now looking
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at a traditional holdings page, which is confusing enough with it's all intermixed
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with everything else that they have.
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So this is creating basically a standalone page for that particular strategy that
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they've set up.
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Yeah. And just like with the regular rebalancing conversation in an arbitrary
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portfolio, if I don't rebalance my index, non-index for long,
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corporate actions and dividends and other sorts of things will eventually pull me
452
00:29:33.378 --> 00:29:36.768
out of whack. Maybe faster if I'm doing something like an equal weighted.
453
00:29:37.038 --> 00:29:42.348
And so we'll want to include this in our ongoing conversation with the user.
454
00:29:42.948 --> 00:29:43.248
Mm-hmm.
455
00:29:43.639 --> 00:29:47.658
Within some band, within some reasonable timeframe, your index is out of balance.
456
00:29:47.718 --> 00:29:52.548
And again, because we're targeting a self-directed license here, we can't go
457
00:29:52.608 --> 00:29:55.368
rebalance it for them. The whole point of this is that they want to do that
458
00:29:55.428 --> 00:30:00.078
themselves. Now when it's time, you saw earlier how that's a couple of checks on
459
00:30:00.139 --> 00:30:02.868
impact and understanding, and then execute the trades.
460
00:30:03.078 --> 00:30:06.889
It's meant to be easy, but it's meant to be in the user's control.
461
00:30:09.169 --> 00:30:13.698
The last thing we'll talk about today is tax loss harvesting.
462
00:30:13.968 --> 00:30:19.339
And obviously we've mentioned how it can be interesting in a direct indexing case
463
00:30:19.428 --> 00:30:25.218
as a specific case, but it really can apply to anyone with any kind of portfolio.
464
00:30:26.389 --> 00:30:30.498
Anyone at the end of the year should be looking at what are their already realized
465
00:30:30.589 --> 00:30:35.688
capital gains, what are some of their unrealized capital losses, how should they
466
00:30:35.748 --> 00:30:38.298
think about potentially offsetting those against each other.
467
00:30:39.258 --> 00:30:44.389
As part of a larger, longer financial plan, we're not publishing a set of advice
468
00:30:44.478 --> 00:30:47.389
around tax brackets or withdrawal rates or anything like that.
469
00:30:47.988 --> 00:30:53.208
But we do recognize that investors often find it difficult just even to know and
470
00:30:53.298 --> 00:30:58.128
sort into buckets what losses are available and what the impact would be if they
471
00:30:58.158 --> 00:31:02.808
were to go execute different strategies. So what are we looking at here?
472
00:31:03.678 --> 00:31:07.848
Yeah, so I actually went back and looked, because I was just curious, but the
473
00:31:07.968 --> 00:31:13.878
interest of tax management strategies by younger investors has gone up over
474
00:31:13.938 --> 00:31:19.758
the last year from 32% to 47%. So we're seeing a pretty significant growth
475
00:31:19.848 --> 00:31:25.068
just in the last year, two years. So this is something that users are looking for.
476
00:31:25.368 --> 00:31:27.108
They've started to create these portfolios.
477
00:31:27.139 --> 00:31:31.488
They've started to create these experiences that they want to then say, "Okay, am I
478
00:31:31.518 --> 00:31:34.669
doing the right thing at the end of the year in terms of tax strategies and
479
00:31:34.728 --> 00:31:39.468
savings?" And we're not saying that the user needs to be a tax expert to be able to
480
00:31:39.618 --> 00:31:44.568
use this tool. And the whole point is to help them be a tax expert without having
481
00:31:44.598 --> 00:31:45.738
to know the underlying
482
00:31:47.389 --> 00:31:47.718
data
483
00:31:49.368 --> 00:31:52.968
logic. You can rattle it off on your head, and I'm just like, "I don't remember.
484
00:31:53.298 --> 00:31:55.158
What is it again? 20%? I don't know."
485
00:31:55.517 --> 00:32:00.738
Right. But anyway, so it all starts again with that alert at the beginning where we're
486
00:32:00.768 --> 00:32:02.839
saying, "Hey, it's year-end. It's a good time to
487
00:32:04.488 --> 00:32:09.798
harvest those losses." We're doing some smart things by splitting the notification
488
00:32:09.858 --> 00:32:14.748
into short-term and long-term, so the user can see from both vantage points where
489
00:32:14.779 --> 00:32:18.858
are they sitting. And then, yeah, we're just really trying to create a tool that's
490
00:32:18.978 --> 00:32:23.779
super simple, that's like, "Hey, these are the losses that you have, and you can
491
00:32:23.839 --> 00:32:27.258
select them." And in the US, we select via tax lots.
492
00:32:27.858 --> 00:32:30.228
And then basically we find replacements, and then we can
493
00:32:31.488 --> 00:32:34.218
review that trade just like we have in some of the other tools.
494
00:32:35.688 --> 00:32:35.928
Yeah.
495
00:32:37.188 --> 00:32:41.839
And then, if I'm working, let's say, in the Canadian market, where we're also
496
00:32:41.868 --> 00:32:45.348
pretty active, the tax loss rules there are different.
497
00:32:45.618 --> 00:32:49.788
In the US, you can sell individual tax loss, and they carry their tax information
498
00:32:49.818 --> 00:32:51.169
with them, and it's pretty self-contained.
499
00:32:51.889 --> 00:32:56.178
In Canada, we have an average cost basis rule, which means that no brokerage
500
00:32:56.238 --> 00:32:58.669
necessarily knows your actual average cost basis.
501
00:32:58.938 --> 00:33:02.718
They know what they know about the positions you hold there, hopefully, but they
502
00:33:03.228 --> 00:33:06.768
may not know about positions that your family holds and such.
503
00:33:06.828 --> 00:33:11.568
So there may be an additional user interface step or maybe an integration we can do
504
00:33:11.718 --> 00:33:16.728
if the bank does pull in third-party information, where we can say, "Here's
505
00:33:16.758 --> 00:33:21.529
potential opportunities, but before we can show you calculated results, help us
506
00:33:21.589 --> 00:33:25.488
with your actual ACV," which unfortunately many people still have to track by
507
00:33:25.518 --> 00:33:27.468
themselves. There's some tools that help them with it.
508
00:33:28.248 --> 00:33:31.128
And once that's in place, we can go generate
509
00:33:32.358 --> 00:33:38.089
a similar list of potential loss harvesting and at an assumed marginal rate,
510
00:33:38.868 --> 00:33:42.948
what the savings may be. And it's only showing up a little bit in some of these
511
00:33:43.008 --> 00:33:48.529
hints down here on the side. But once something is sold,
512
00:33:49.008 --> 00:33:53.389
you enter a wash loss or a wash sale prohibition period, where you need to make
513
00:33:53.419 --> 00:33:55.698
sure you don't accidentally go buy it again.
514
00:33:56.628 --> 00:33:58.998
Or you may want to find a replacement for it.
515
00:33:59.029 --> 00:34:04.038
And so, over there on the right, you're seeing reminders that you shouldn't
516
00:34:04.068 --> 00:34:07.399
repurchase certain kinds of stock and maybe a warning that like, "Hey, you've got
517
00:34:07.458 --> 00:34:09.978
dividend reinvestment on this thing and you're just selling it.
518
00:34:10.008 --> 00:34:14.508
But the moment you get a dividend and rebuy it, it's going to be a prohibited
519
00:34:14.569 --> 00:34:18.258
loss." So, we're trying to bring all that information together for the person that
520
00:34:18.319 --> 00:34:20.449
is trying to understand the impact.
521
00:34:21.378 --> 00:34:26.868
And then, at the end of the day, some strategies involve finding a
522
00:34:26.899 --> 00:34:32.718
replacement. So if I want to be exposed to the US equity market quite
523
00:34:32.748 --> 00:34:37.758
broadly, I might own an ETF like VTI at the end of the year.
524
00:34:38.328 --> 00:34:41.387
Not in many years recently, but trust us, kids, it'll happen one day.
525
00:34:41.899 --> 00:34:46.518
You'll be down in the VTI at the end of the year, and you'll have maybe some gains
526
00:34:46.578 --> 00:34:48.378
you do choose to offset that against,
527
00:34:49.788 --> 00:34:53.478
and you sell it. Well, immediately what's going to happen, our little monitor's
528
00:34:53.508 --> 00:34:57.199
going to say, "Great, you harvested some tax losses, but you're underweight in your
529
00:34:57.318 --> 00:34:59.208
US allocation. What do you want to do about it?" Well,
530
00:35:00.468 --> 00:35:04.068
the idea is I should really be able to find a replacement pretty quickly.
531
00:35:04.128 --> 00:35:04.488
And so,
532
00:35:06.168 --> 00:35:11.808
we can bring our screener to play here, where we have sold the position and
533
00:35:12.558 --> 00:35:18.529
help people find similar positions that are hopefully not going to trigger the
534
00:35:18.588 --> 00:35:24.228
wash sale rule. So in this case, I might look at an iShares ITOT,
535
00:35:24.708 --> 00:35:30.529
which also has a very high correlation with my existing fund that I've sold,
536
00:35:31.218 --> 00:35:36.888
has the same almost identical asset allocation, like 99.8% US market.
537
00:35:38.178 --> 00:35:40.128
But it's tracking a different index.
538
00:35:41.148 --> 00:35:45.228
I can then use that sort of screening criteria to decide, okay, I'm comfortable
539
00:35:45.678 --> 00:35:46.188
with that,
540
00:35:48.078 --> 00:35:51.828
because obviously the tax implications are mine to process on my own as an
541
00:35:51.888 --> 00:35:55.428
investor. I'm just trying to help them, and I can go replace that.
542
00:35:55.488 --> 00:36:00.138
So we're trying to create a comprehensive experience that helps users calculate
543
00:36:00.498 --> 00:36:05.358
what could be, and nudge them into the next steps that they need to take, whether
544
00:36:05.388 --> 00:36:08.508
it's replacing or rebalancing or reinvesting.
545
00:36:10.038 --> 00:36:11.449
Yeah. You brought up our screener.
546
00:36:13.608 --> 00:36:18.468
Our Connected Finance products are pretty amazing in that they can ebb and flow
547
00:36:18.529 --> 00:36:22.428
based off of the amount of space and the part of the workflow that they're in.
548
00:36:22.908 --> 00:36:27.258
So if it's a full screening experience, and I'm going in and that's my task, we can
549
00:36:27.288 --> 00:36:30.798
show you a screener with all the bells and whistles and all the things.
550
00:36:31.128 --> 00:36:34.848
But in this instance, we just needed a portion of our screener to go in there with
551
00:36:34.878 --> 00:36:39.828
some filters and a much simpler display of what might be a full-on screener
552
00:36:39.888 --> 00:36:44.538
experience. It's the same code in the back end, but it's leveraging all of the same
553
00:36:44.598 --> 00:36:50.298
technology. But fitting it inside of a workflow in a tiny space that doesn't feel
554
00:36:50.358 --> 00:36:52.938
like a huge screener is taking over my experience.
555
00:36:54.018 --> 00:36:59.358
Where the goal of this is just to find some replacements versus having me go run
556
00:36:59.418 --> 00:37:01.608
some giant screens or whatever it might be.
557
00:37:02.358 --> 00:37:06.558
Yeah, and this is a common theme. Julia and I do talk about this a lot, which is
558
00:37:07.398 --> 00:37:12.678
that workflow we just presented in a typical brokerage site would be on, I don't
559
00:37:12.678 --> 00:37:16.218
know, two or three different tabs. Because there'd be a screening and research tab.
560
00:37:16.279 --> 00:37:22.128
There will be some sort of tax statements section where I can download my
561
00:37:22.188 --> 00:37:24.468
statements, and they might show me some year-end totals.
562
00:37:25.368 --> 00:37:29.898
And then if I want to trade, I'm going to have to go open a trade ticket somewhere
563
00:37:29.988 --> 00:37:35.928
else. And so being able to just remix those tools to make the
564
00:37:35.988 --> 00:37:40.758
experience make sense is a really powerful capability for usability.
565
00:37:41.268 --> 00:37:43.788
Even if you have these things on your site, it doesn't mean that they're actually
566
00:37:43.848 --> 00:37:47.268
usable for this workflow. And those are some of the problems we're trying to solve.
567
00:37:47.628 --> 00:37:52.158
As you say, with the Connected Finance platform being remixable and us caring a lot
568
00:37:52.188 --> 00:37:54.768
about the user interface that we deploy.
569
00:37:56.298 --> 00:38:00.048
That brings us to the end of talking about those three products, which are in
570
00:38:00.078 --> 00:38:04.728
development for us, and plan to release in the first quarter of next year.
571
00:38:05.718 --> 00:38:08.958
We talked about portfolio monitoring and watch lists.
572
00:38:09.018 --> 00:38:13.128
We didn't talk about the full breadth of capability that's there to be able to
573
00:38:13.188 --> 00:38:15.378
monitor all kinds of portfolio metrics.
574
00:38:15.438 --> 00:38:21.258
But when those metrics drive a rebalancing or index or tax
575
00:38:21.318 --> 00:38:24.738
loss harvesting, they can be driven by that portfolio monitoring system.
576
00:38:25.518 --> 00:38:29.538
We've talked about tax-aware construction or rebalancing.
577
00:38:29.928 --> 00:38:33.529
We talked about simple direct indexing, and we talked about how screeners are
578
00:38:33.588 --> 00:38:37.578
involved the whole time for finding and replacing your investments.
579
00:38:37.638 --> 00:38:42.858
So thanks everyone for attending. And visit us on our website.
580
00:38:42.949 --> 00:38:46.668
Call us if you have questions, and I hope we can build a really powerful digital
581
00:38:46.699 --> 00:38:47.449
experience for you.
582
00:38:48.288 --> 00:38:50.779
Yeah. That'd be great. Thank you so much.
583
00:38:53.868 --> 00:38:54.018
Okay.
