What is this financial technology?
Keeping it simple, Part 1: Brokers vs Advisors, Multi-broker APIs, Mirror Trades.
At the heart of Emcee we are a bunch of engineering geeks and financial quants that are obsessed with anything at the crossroads of finance and technology. We designed a platform that delivers the most intuitive user experience while simplifying not only investing but all of the technology that makes our platform run. Our value proposition is pretty simple — learn about finance and investing through your friends and their every investment. But how does it all work? Let’s start with the basics.
Brokers vs. Advisors
Brokers are not specific to the finance industry. A server that takes your order and delivers your food at your favorite restaurant is acting like a broker. Your real estate agent that helps you find that dream home or one bedroom closet in NYC is your broker. You pay for your food and tip your server or pay for your apartment and try not to pay more than 10% commission to your NYC broker. A financial broker is pretty much the same. Ask your grandparents; they remember the days when they would call their financial broker to discuss the market and place an order — except for a stock and not for a meal or apartment.
So a financial broker takes an order, typically to buy or sell, and retrieves your shares of stock for you. And similar to other brokers, your financial broker will take a commission or tip, ideally for doing a good job on placing and retrieving your stock order. It is very important to understand the commission and fees your broker is charging you. Today most brokerages have complicated and tiered fee structures that demand a lot of attention from the customer. Does it make sense to pay a flat fee of $5 per each order you place regardless of how big the order is? Would a server charge you a fixed fee regardless of you much food you order? If they did, that’d only work in your favor if you order a lot of food.
What about those “no broker fee” apartments you find on StreetEasy — the ones that are still shown by brokers? How do those brokers make money? Well, we know sometimes those fees are passed on to landlords , so beware of fees priced into your rent! Other times the cost of a no-fee apartment is a limited set of apartments to choose from. Robinhood is a popular brokerage offering no-commission trading. Fortunately, the folks at Robinhoodwere smart enough to eliminate the costs of (limited) trading and empower a new generation of investors to trade for free. Genius.
Today, this function is done by robots (algorithms) created by financial brokerages that accept orders on mobile phones and web applications. The reality is that every brokerage is better suited for each person differently, similar to the way different real estate brokers service different types of clients. One must take into consideration the broker’s fee structure, product offerings, account minimums, and other variables relative to one’s appetite for risk, financial profile, and financial behavioral biases. If you are addicted to trading and check your phone for stock triggers every five seconds, and have an appetite for risk, then Robinhoodmight not be the brokerage for you. There are great blogs that review brokerages and we encourage you to check them out. NerdWalletdoes a great job.
At Emcee we help you decide which brokerage is best for you the minute you sign up and walk you through the process in real time. We’re advisors, not brokers; we don’t take orders, we offer advice. We’re more like your favorite sommelier (the guy that suggests wine pairings). You will place your order with the server after asking the sommelier what kind of wine complements your palette, your meal, the time of day, etc.
But we give more than just investment advice. We help you get started if you don’t have a brokerage account by guiding you through the process of opening an account with one of our partner brokerages. That’s right, you can open the right brokerage account for you on our platform without having to leave the platform.Right now, our favorite brokers, for good reasons, are E-Trade, Ally Invest, Robinhood, DriveWealth, and Interactive Brokers. That list will grow, but like your sommelier, we’re curating the list for you. If you already have a compatible brokerage accounts then you simply log in with your account and we place your order with that brokerage.
How? Multi-broker APIs.
What? Let’s just say the financial services industry is well connected. We know a guy that knows a guy at one of our partner brokerages. Except that guy is a robot. Your relationship with your brokerage is none of our business, we simply make sure they place your orders for you. Our robots communicate your orders, your current holdings, and cash balances with their robots. This way we make sure you’re not double dipping in stocks you already own and also validate that anyone you are mirroring actually owns the stocks they claim to. No gimmicks, just mimics.And what good would multi-broker APIs be without mirroring?
Mirror mirror on the wall, who is the best performer of them all?
Mirroring, copying, following, algorithmic replication all mean the same thing — do as I do and say. Do as I do is the standard we set at Emcee. Emcee allows you mirror the investment accounts and portfolios of your friends, financial savants, good luck chucks, AI powered investment analytics firms, and anyone else that is a leader on the platform. We also curate that list of leaders for you, but we’re getting sick of wine analogies. Like shopping on Amazon, you can filter leaders yourself or we’ll recommend them to you in a marketplace where you invest in what you want, with whoever you want, with whatever you want. Well, not with Shrute Bucks… but with as little as $5. This would not be possible without multi-broker APIs, because communication between brokers is key to this process.
But wait, how can you mirror a leader’s portfolio for as little as $5 even if that individual is like a millionaire? Stay tuned for part 2 where we discuss exactly that and much more. We are just getting started so if you want to learn more about Emcee or to take part in our beta pilot program, sign up below.
