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An Open Letter to the Teams at Betterment & Wealthfront:

Just a quick note to say: We’ve been there.

Charles Schwab has been making a lot of noise over the past several months about their “robo advisor” offering…announcing that they’ll be announcing an announcement soon. They are gearing up the marketing machine, and there will be much money spent.

But just as you are about to, we’ve faced “Chuck” before and have not only lived to tell, but have a thriving business to show for it. Back in 2005, many told us there was no way TradeKing could compete against the established online brokers – we were entering a mature space with strong technology innovators whose pockets ran deep. We were told they’d snuff us out in a minute.

It turned out that plenty of self-directed investors were tired of “The Big Guys’” confusing pricing tiers and tendency to ignore the phone ringing unless you’d parked a million bucks in your account. These investors were also primed for tons of free education, an easy-to-understand options trading platform, and a fair, straightforward way of doing business. So we were off and running.

Then sure enough, some of the big guys begrudgingly started to reduce their pricing and remove some of the confusing tiers we’d pushed to eliminate. Surely their new, more aggressive pricing would spell defeat for us. But not so, we continued to grow significantly year-over-year.

Well, here we are today with more than $4B in client assets and a half a million clients who wanted something different from what the enormous players in the market had to offer. Our new online advisory offering, which adds our own secret sauce to managed portfolios, is growing, too, despite the myriad of other offerings already available. Simplicity and low cost backed by deep brokerage experience and killer service has proven to be a winning recipe for us regardless of the competition or market environment.

The truth of it is, the market loves choice. So the bigger players will out-shout and out-spend many of us, but all that will do is attract more interest and attention to a space we all believe can help the independent investor succeed.

Perhaps all of this is something you’ve known all along, but I thought a little historical context from a firm that’s already seen the “Chucky films” Part 1 & 2, never hurts.

Rich Hagen
CEO of TradeKing Advisors