Fin-tech’s ability to remove barriers to entry meant it was only natural someone would eventually apply the mindset to the trading process.
Dan Raju was among the first to see the possibilities.
Mr. Raju is the co-founder and CEO of Tradier, a cloud-based financial services provider and brokerage API company. Tradier offers a set of fully hosted APIs, modules and other tools which power many leading trading, investing and digital advising platforms.
A fundamental industry shift began in 2008 and 2009, Mr. Raju said. The investing space was governed by big names like TD, Schwab, Fidelity and Goldman Sachs, firms closely guarding access to the technology powering the space.
That technology became cheaper to develop and more people did exactly that. Smaller, nimbler companies began improving on different slivers of investing.
“That unlocked access for many,” Mr. Raju said. “The main factors held within this legacy structure began chipping off.”
“My co-founders and I felt if there was a way by which you can create a platform to enable unbundling it can help people access capital markets.”
That access becomes even wider if you provide everything someone needs to start their own platform, Mr. Raju said. In the past the only way to compete was to spend years and millions of dollars building infrastructure and acquiring and interpreting data. None of those activities on their own bring direct value to financial institutions, that is why new entrants were shut out until now.
“We’ve taken access to the market and exposed it as an API,” Mr. Raju said.
That design can be customized to meet the needs of different participants, whether they be banks offering additional services or an investment adviser looking to become more efficient. They can be in operation within days, Mr. Raju added.
Mr. Raju used the example of a Wall Street firm wanting to offer international customers the ability to trade in the U.S. markets. The average customer may go to Yahoo Finance to read up on different stocks but they had to go elsewhere to buy them.
The firm decides they want to offer customers the ability to learn and trade in one place. They develop relationships with the different stock exchanges. Then comes years of building, testing and revising the technology, a process whose cost could surpass $2 million.
“Pull the curtain back,” Mr. Raju said. “When you realize 90 percent of platforms are controlled by the top five incumbents, that means little choice or downward price push.”
The biggest positive is customers now have many choices in many areas. Log on to a Tradier-powered platform and you have instant access to 50 platforms.
If you choose to purchase a small amount of shares, you are not paying a hefty percentage in fees, Mr. Raju said. In the past it was common for someone desiring to buy a $20 share to pay $10 in fees.
By offering an open API, Tradier facilitates faster development, some in areas they may not have envisioned on their own.
“We work with the customer, take the framework and help them navigate their way through the choices to produce something effective for them,” Mr. Raju said. The process is helped by the fact that people offering financial products are generally sophisticated and need little more than the framework, he added.
Mr. Raju and I spoke shortly after Warren Buffett was quoted on robo-advisors (he was not a big fan). While Mr. Raju felt Mr. Buffett was taking more of a historical view, Mr. Raju believes robo-advisors do indeed have a role to play.
Younger investors, those used to more automation in many areas of their lives, are looking for, at minimum, the foundational information in a more efficient form. Automation of that basic information reduces the cost of providing the information, and allows the adviser to provide more complex interpretations. Yes, for a smaller rate, but also in less time.
There are always improvements that can be made to Tradier, Mr. Raju said. In December, Tradier integrated predictive analytics platform WooTrader into its API, a move allowing users to directly purchase and sell stocks from within its system. WooTrader leverages more than 350 indicators to produce weighted rankings reflecting current trends.
On Jan. 28, Tradier announced the integration of Quotail, an advanced options-trading platform providing its users with a unique options scanner, real-time trade alerts, time-series analysis tools and data visualizations.
“At end of the day it’s about letting great products be built on top of us and enabling products to build on us to give value to investors,” Mr. Raju said. “These amazing products add capability to the entire process.”
One of the reasons for Tradier’s success is its willingness to open its API to its partners, a stark contrast to the establishment’s closely guarded legacy infrastructure. Building on his thoughts about WooTrader and Quotail, Mr. Raju spoke of a new, collaborative atmosphere.
“In the market people want to innovate and are looking to an amazing number of permutations and choices. Customers need companies delivering services not by themselves but by an ecosystem of providers.”