Motif Investing Review 2018

January 5, 2018
Motif Investing Review

Motif Investing offers a unique combination of brokerage services and managed investment portfolios.

A Motif trading account allows you to trade individual securities, participate in select IPOs, build customized 30-stock portfolios (called a motif), or choose from a catalog of professional and community-built motifs.

A Motif impact portfolio is a fully-automated investment portfolio aligned with your personal values. It’s similar to the managed portfolios offered by other robo-advisors, with a few key differences that I highlight later in this review.

This unique strategy landed Motif Investing a position on CNBC’s recent “Disruptor 50” list, which includes the 50 most innovative firms in finance.

Motif Trading Account

If you decide to open a motif trading account, you gain access to all of the brokerage services discussed below.

Trade Individual Securities

The Motif trading account allows you to trade any publicly listed stock or ETF for $4.95, which includes fractional shares. All brokerage-related services provided by Motif Investing (mentioned below) allow you to invest using fractional shares.

Fractional shares allow you to trade securities using dollar amounts rather than shares. For example, if you have $500 to invest in stock, Motif Investing will allow you to purchase exactly $500 of stock, regardless of the share price. The vast majority of other brokerage services require that you trade using whole shares. If you don’t have enough money to purchase the exact number of shares that you want, your money will not be invested.

While $4.95 is competitive pricing, investors can trade any stock or ETF for free using  M1 Finance (see my review).

Trade IPOs

Motif Investing is the first discount broker to provide full access to initial public offerings. Here are the steps required to participate:

  1. Create a free IPO trading account
  2. Browse and select any IPOs you’re interested in
  3. Place a conditional order. The minimum investment is $250 and the maximum varies by IPO.

There are no commissions or fees for IPO purchases. To sell your IPO shares, you pay the standard $4.95 fee. Motif Investing is the first discount broker to offer IPO investments directly to retail investors.

Create, Modify, and Trade Motifs

In addition to individual securities and IPOs, you can trade motifs for a flat $9.95. You can create your own motif using any combination of 30 stocks and ETFs, or you can select professional motifs designed by the Motif Investing team or community motifs designed by other investors.

There are thousands of different motifs available now. You can browse by name, theme, investment performance, popularity, dividend yield, and more.

Motif Investing Review

Every motif is fully customizable. You can start from scratch using your ideal combination of 30 stocks and ETFs, or you can customize a professional or community designed motif. You can replace any of the pre-selected individual securities or change the weighting if you want to own more or less of an individual company.
Motif Investing Reviews

Again, while $9.95 is competitive pricing in the traditional brokerage space, it doesn’t compare to the free trades offered by M1 Finance.

Motif Royalty Program

One of the distinguishing factors that set Motif Investing apart from other brokerages is the community. Thousands of investors participate by creating and sharing Motifs.

You can get paid to share your personal Motif through the Motif Creator Royalty Program:

  1. Open a motif trading account and opt into the royalty program.
  2. Build a custom motif and make it publicly available.
  3. Every time someone purchases or rebalances your motif, you earn $1.
  4. Track your royalty earnings through an easy-to-use and dynamic dashboard.

Motif Impact Portfolios

In addition to all of the brokerage services discussed above, Motif offers automated Impact Portfolios for $9.95/month. The minimum required investment is $1,000.

The asset allocation of each Impact Portfolio is determined by your risk tolerance and time horizon. The underlying investments differ according to your chosen values, such as planet sustainability, fair labor, or corporate behavior.

The stock, real estate, and commodities portion of your Impact Portfolio is determined by the corresponding value-based MSCI stock index. Each Impact Portfolio uses a different MSCI index corresponding to sustainability, fair labor, corporate behavior, etc.

Instead of investing in the entire MSCI index, Motif opts for direct stock ownership in the largest companies within each index. The disadvantage of this approach is less diversification in your Impact Portfolio. The benefit is that direct stock ownership avoids all expenses and fees.

The bond portion of your Impact Portfolio is comprised of diversified ETFs. These are the standard index ETFs used by all robo-advisors, offering massive diversification and low fees.

To illustrate, here is the recommended asset allocation in the “fair labor” Motif Impact Portfolio.

motif impact portfolio review


You can select each category to view the investment recommendations. For example, the U.S. stocks category includes the following investments:

motif impact portfolio details


How Motif Impact Portfolios Compare

First, the Motif Impact investment recommendations are inferior to those provided by Wealthfront, Betterment, and M1 Finance. The Impact Portfolio includes direct stock ownership (so does M1 Finance), but overall diversification is weak. More importantly, Motif Impact Portfolios provide none of the advanced tax and financial planning features offered by competitors.

The value-based investing approach is the only distinguishing investment feature. If you are interested, you can recreate each of the Impact Portfolios without paying any monthly fee. First create a free Motif Investing account, then navigate to the Impact Portfolio of interest and review the portfolio recommendations (as I demonstrated earlier in this review). With the list of companies in hand, create a free M1 Finance account and purchase the individual stocks or ETFs for free.

Beyond the portfolio, there are pricing concerns. Motif charges $9.95/month per $100,000 invested. There are no pro-rated charges. If you have $50,000 to invest, you pay $9.95/month. For every $100,000 breakpoint, you will pay an additional $9.95/month.

Using hypothetical account values, here is how that fee compares to competitors:

Account BalanceMotif Impact
Annual Fee
M1 Finance
Annual Fee
Wealthfront
Annual Fee
Betterment
Annual Fee
$75,000$119.40$0$150.00$187.50
$150,000$238.80$0$337.50$375.00
$250,000$358.20$0$587.50$625.00
$450,000$597.00$0$1,087.50$1,125
$750,000$955.20$0$1,837.50$1,875
$1,500,000$1910.40$0$3,712.50$3,750

M1 Finance allows you to trade stocks and ETFs for free.

Betterment charges a flat 0.25% of the account balance annually and offers up to one year of free service with qualifying deposit.

Wealthfront charges a flat 0.25% of the account balance annually and offers Cash Cow readers the first $15,000 managed free.

Motif Investing Fees

ActionFeeDetails
Trade Stock or ETF$4.95No minimum investment
Trade/Rebalance a Motif$9.95$300 minimum investment
Purchase IPOs$0$250 minimum investment
Sell IPOs$4.95N/A
Motif Impact Portfolios$9.95/month$1,000 minimum investment
Platform Inactivity Fee$10See details below
IRA Account Termination$95Full IRA account closure

It’s worth noting that you can trade individual securities within your motif. You will pay the standard $4.95 commission per sale or exchange, which means two individual trades will cost as much as exchanging your entire motif.

The inactivity fee only applies if you meet all of the following conditions:

  • Have less than $10,000 in combined securities and cash in the account but more than $0
  • Have not placed a commission trade in the account within the last 6 months
  • Are not active Motif Blue subscribers or Impact account holders

Motif Investing Drawbacks

Brokerage Trade Commissions – The commissions charged by Motif are reasonable, but they can’t compete with the free M1 Finance platform.

Motif Impact Portfolios – The features do not justify the fee, and you can find better managed investing solutions elsewhere.

Dividend Reinvestment – If a stock in your motif pays a stock dividend (unlikely), the additional stock shares are automatically reinvested in your motif. If the dividend is in cash (likely), the money will be credited to your account balance. Motif does not offer any type of cash dividend reinvestment at this time.

Fees – I’m not a big fan of the account inactivity fee or IRA closure fee, but these fees are fairly standard at discount brokers.

Motif Investing Review Summary

I can’t recommend the automated Motif Impact Portfolios. When compared to the competition, the fee is not justified. There aren’t enough valuable features to recommend Motif Impact Portfolios over Wealthfront, Betterment, or M1 Finance.

The brokerage component of Motif Investing is good, but difficult to justify when compared to the free M1 Finance platform. The only remaining feature that is unavailable at competitors is the free direct IPO access, if you are interested in that market.

Motif Investing Review 2018
Summary
If you are looking to trade stocks or ETFs, Motif Investing offers a solid platform, but fees are higher than M1 Finance. If you are looking for an automated investment solution, the Motif Impact Portfolios fall short of the competition.
Pricing7.1
Features8.4
Ease of Use8.1
Customer Support7
Investment Options8.1
Strengths
Direct IPO access
Motif royalty program
Solid brokerage platform
Weaknesses
Lackluster Impact Portfolios
No cash dividend reinvestment
7.7
Overall
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37 Comments on "Motif Investing Review 2018"

avatar
JR
JR
Nice review. A few questions if I may. I just purchased a professional Motif portfolio, the Ultimate Buy and Hold 50% Equity 50% Bond as designed by Paul Merriman the noted and now retired financial advisor. The asset allocation is well designed and my question is will that asset allocation be fixed as it if or do I have to rebalance it myself? I would very much like to keep the asset allocation without having to adjust it. If I need to rebalance it how do I do that and is that a charge for this. Furthermore, if I want… Read more »
Gerry
Gerry

Please walk thru this scenario

I have a portfolio of stocks at various percentages and 1 stock is 30% of the weight
I want to reduce that stock to 3%
Do the other stocks pick up the balance or can I increase 1 stock by 27%?

Kevin Wibowo
Kevin Wibowo

Hey Jacob, great article! I am wondering if a non-US citizen not living in the US can open an account and invest with motif investing?

Very interested to try this.

Thank you

Keith Schiavoni
Keith Schiavoni

Hi Jacob,

Thanks for your review. Do you know how complex the order execution can be? Do they offer limit, stop, trailing stop, bracket orders etc? Can you short? How about margin?

Thanks again!