Tag Archives: broker

SkyGrid: Case study on ad-supported investment media

Is the elusive “Bloomberg for the masses” attainable?  Of course, most do-it-yourself investors cannot afford the cost of thousands of dollars per month for these expensive terminals.  But, what about making a platform free for subscribers and monetizing the platform via advertising?

That’s exactly what SkyGrid is attempting.  Until recently, SkyGrid charged $6000 per seat/year for a flash interface that allows users to track financial news on stocks and sectors they’re interested in.  In April, the company, which raised $11M in April from top venture firms, transitioned away from a premium model to a completely free model.  SkyGrid has made free accounts available to New Rules of Investing readers.  If you’re interested, go here to sign up for a free account: http://www.skygrid.com/reg/?id=8x89a9e3

The Service


SkyGrid users log in to their accounts over the web via their browsers.  Once in, users are greeted with the only human-arranged editorial component on the platform: the day’s top or breaking financial stories.

SkyGrid produces a user-defined customizable news-stream.  Users of the system can customize SkyGrid to continuously stream stories about stocks in their portfolios.  SkyGrid compiles this content based on what the company described as a complex, multi-step process that includes:

  • crawling/scraping data/headlines from feeds in real time
  • validating reputation (link structure, click volumes) to weed out only content appropriate for a high-end user, like a hedge fund manager
  • testing if the content is important/impactful  for investors (Steve Jobs = important for Apple),
  • applying sentiment indicators (green if the content is positive, red if it’s not) via semantic analysis developed by computational linguists (something the firm says is very different from keyword analysis)
  • real time clustering (grouping various articles around similar themes)

The upshot is that users get a vertical stream of  headlines which they can click through to read the entire article.


  • The system works really quickly and it appears to be eerily on target with its content.
  • I found very few articles streaming by that weren’t interesting or important for shareholders.
  • I believe this comes from good science, programming, user interface and tying it all together, a focus on investors.  SkyGrid has developed this for investor use and investor use only and it shows.
  • It even follows Twitter streams where more and more investment content is being shared


  • This may be another case of coming to a knife fight with a gun or a solution looking for a problem.  I found the amount of information hard to digest.  As an hedge fund analyst, I was paid to discover profitable investments.  Does actually having this amount of information make me better at that?  I’m not convinced.

Building News Streamsskygrid_portfolio

Because SkyGrid is a smart, content aggregator built with investors in mind (as opposed to some of their competitors that are merely trying to sell to investors), SkyGrid has some interesting functionality when it comes to customization of news streams.

  • Uploading tickers of portfolio: for institutional investors monitoring lots of stocks, the ability to upload a list of tickers makes it really easy to set up
  • Sector analysis: I like what SkyGrid has done here.  Instead of using old-hack sectoror industry number/jargon, SkyGrid allows investors to monitor sectors the way they think about investing in them.  So, no “information retrieval” for “web portals” or “hardware components” for “consumer electronics”.  This isn’t trivial and is quite useful.


  • customizing a news stream is really easy on SkyGrid.
  • upload function is really helpful for professionals or retail investors monitoring a lot of positions
  • sector tools approach industry analysis the way investors do, not like the Dewey Decimal system does
  • Good filter system gives users ability to tune out blogs, mainstream media, news wires, etc.


  • I’d like more help here with idea generation.  For many investors, they know exactly what they want to monitor.  Others need help.  Maybe pre-seeded news streams with commonly held stocks could help.  Or maybe seeing celebrity investors’ news streams could help prod users for ideas.  I think more work here will help many retail investors as well as professionals who are less web-savvy.
  • While the filtering provided allows investors to tune out certain types of sources, it would be more interesting to filter out specific sources.  Maybe I’m interested in TechCrunch.  Or maybe I’m not.  I’d like to be able to decide as I go to amplify or drown out certain sources.

Social components

There are a few important components built-in on SkyGrid that connects the platform to the greater whitespace of social networks:

  1. Each of the streaming headlines can be easily posted to social networks like Twitter, adding to the virality of the platform, though it’s unclear to me if there are any beneficial network effects for users by having additional users on the platform (it’s clearly good for SkyGrid’s marketing and distrubition).
  2. The customizable news-stream can be shared out with others, much in the way content aggregator, Alltop allows users to create my.alltop.com (see my.alltop.com/zackmiller, as an example)
  3. Users can rate that they like certain articles.  These articles are then tagged so users can revisit them.  At the aggregate level, there is even some rudimentary ranking of top favorited items.


  • Basic sharing functionality outside of the SkyGrid platform onto social networks.


  • There don’t seem to be any (easy to find, at least) internal social components.  I’d like more insight into others’ news streams.  That voyeurism works well for me and on the web in general.  We’re seeing portfolio peeking in expert investing communities, like Covestor.
  • analytics: I can’t put my finger on it exactly but there is probably some interesting stuff to be done here with meta information that would be useful for investors.  I’d like to see some data (ie., 76% of articles on Apple are normally positive, today shows only 25% — maybe the beginning of a turn in sentiment)

New Rules of Investing Overall Ratingraiders-sword_l

UsabilityPass +

SkyGrid does everything it purports to do.  It’s a great user experience to have an ongoing conversation stream of all the stocks and sectors in one’s portfolio. The filters are great — read only that content that’s pertinent to a shareholder.  The rest is just noise and SkyGrid tunes it out.

New Rules Meter:    Pass-

This is a level of how Web 2.0 the site actually is.  The site scrapes and analyzes content really well but doesn’t do a great job of sharing/producing content withing its own 4 walls.  Unlike Twitter, which combines both external content and commentary on top of it, SkyGrid seems a pretty static environment at this point.  Because we’re dealing with financial information, this could certainly be by design but it would be interesting to create some type of network effect, where users can also create content and share.

Needs Fulfillment: Questionable

It’s here that I struggle.  SkyGrid does what it does quite well.  I’m just not convinced anyone really NEEDS it.  Combine a chintzy Yahoo Finance with StockTwits and a good blog aggregator like Google Reader and how much do you really miss?  SkyGrid is another program that demands attention.  I like to keep a separate window open on a separate screen from where I’m looking just to let it scroll — much in the same way I use the Twitter client, TweetDeck.  I like it but just not sure how ultimately valuable this is.  It’s like half-listening into a conference call or letting CNBC play in the background.

That’s just me — what do you think?  What are your perspectives on SkyGrid?

I’m going to use a future post to delve into the business model — turning an institutional-grade investment platform into an ad-supported thin client.  Stay tuned.

SkyGrid has made free accounts available to New Rules of Investing readers.  If you’re interested, go here to sign up for a free account: http://www.skygrid.com/reg/?id=8x89a9e3

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WSJ is wrong about the future of investment research

Very interesting article yesterday at the Wall Street Journal.  Entitled, “Stock-Research Reform to Die“, the article describes what’s happened in the wake of Eliot Spitzer’s landmark settlement against Wall Street brokers in 2003.

StockResearchUnderusedByRetailBrokerageAccording to the WSJ, this settlement was part of a wider Wall Street wrist-slap against ingrained culture that issued “overly optimistic stock research in order to win investment banking business.”

One of the results of the settlement required major brokerage houses to spend $460+ million on independent stock research for their clients.

The WSJ’s conclusion: six years later and almost no clients are using independent research.

At Credit Suisse, which has mostly institutional clients, the number of times retail clients accessed independent research from the firm’s Web site ranged from 16 during the third year of the settlement to 110 the first year.

At the old Salomon Smith Barney — now part of Morgan Stanley’s Morgan Stanley Smith Barney — its roughly 4 million retail households accessed about 12,000 reports each month. Less than 2% of Goldman Sachs Group Inc.’s Private Wealth Management clients likely downloaded a report each month, according to data from the public reports.

The WSJ mentions 3 reasons why investors haven’t taken up independent research at their broker:

  1. investors rely upon their brokers to act as a screen:  While 11% of brokers consumed independent research at least occasionally, they typically don’t send independent research out to clients.
  2. investors don’t rely as heavily on stock research today as they used to: “In the late 1990s, a positive report from a hot analyst could send a stock soaring. That effect is more muted today.”
  3. structural changes away from brokers to advisors: Commission-based business is old-school.  It’s been replaced by fee-based professionals acting as advisors.  There is less emphasis on trading at the retail level and less need for this type of research.  Combined with chinese walls going up between brokerage and investment banking, banks are cutting back on research teams as research becomes harder to monetize without the tie-in with banking.

Just wanted to chime in with a couple of comments:

  • I agree that full-service brokerage clients rely upon their brokers to act as screens.  That’s why they pay them and why they work with an advisor.  The vast majority of clients do not know how to read research or want to be bothered.  They want a quick synopsis why they should own a particular stock and for that, the broker acts as a type of well-heeled Cliffs Notes.
  • Maybe investors weren’t even aware that independent research was an option?  Do they know why it’s important?  Are investors aware of the biases which still exist in sell-side research?
  • Why depend on the guilt party to distribute the cure to the sickness?  That’s nuts.
  • Totally disagree with the fact that investors don’t rely on research. I would say that it’s more accurate to say that given historical conflicts of interests, investors no longer trust institutional research.  Given the gaping void left by Wall Street and the rise of financial bloggers and aggregation sites like SeekingAlpha,  many investors are actually consuming more research on more companies than ever.  We’re in a Renaissance/Gold Run/Bull Market for investment content — it’s institutional research that’s not finding its footing.
  • It’s hard for brokers today. Without an edge in research or asymmetrical information, it’s hard to push stocks and get paid for it.  That’s why many brokers have become mere wolves-in-sheeps-clothing: they’re still brokers but get paid as advisors.  We’re also seeing the emergence of true financial fiduciaries who work extremely hard for their fees and performance for clients, in up and down markets.   These advisors are doing real research or hiring people who do and they’re the ones consuming the research, not clients.
  • I think we’re seeing the investment field changing so quickly before our eyes.  On one hand, we’re seeing investors go boutique and sign up with independent financial advisors.  This is like more full-service than full-service.  On the other hand, we’re seeing investors retake the reins of their portfolios and managing things on their own — classic DIY investing online.  There is also a middle ground of investors who want more control but also want professional advice to support them along the way.  Regardless of the model, someone is consuming research, whether it’s the client or the advisor.
  • We need new business models to foster more independent research to fill the gap left by Wall St.’s void.  Tools to rate accuracy and trust-worthiness.  Performance.  From individual positions in a portfolio to the dynamics of portfolio management in general.

Interesting to see that most of the firms polled in the WSJ article were not planning on continuing distributing independent research.  Some have jettisoned research while others are bolstering their efforts.  That still leaves a tremendous opportunity out there for anyone who can provide actionable advice to the majority of investors out there.

Additional Resources

Broker’s Guide to Finding a New Job

Times are tough

Tough for everyone and tough for stock brokers who are reeling from both the nasty performance of the stock market over the past year and from structural changes in their business.  So far this year (May 2009), over 17,000 brokers have left the profession which would equate to 35,000 exiting the business by year’s end (2009).   That’s almost 6% of the entire field opting out.


Taking stock and figuring out what to do

Become a franchise player

So, what’s a broker to do?  If you’re at the top of your field (generating over $1m+ in fees per year), there is heated competition for your skills and you should find numerous firms looking to pick you up on sweet terms.  In this case, become a franchise player.

Planning your next move

If you’re not there yet (ie. generating less than $250k in fees) and still employed, it’s probably worthwhile making a game plan about what to do next in your career.  Change is prudent and sometimes necessary, so have a plan.  You planned your clients’ moves involving lots of money.  Pretty high stakes.  Your career is too and requires the same type of oversight right now.

I think a broker’s career management decision tree is pretty simple at a high level right down and it centers on two options: do I stay in the business in some capacity or do I find a new field of employment?

Stay in business vs. Find a new field of employment

Stay in business

  1. Switch brokerage firms: huge finders fees and great incentives.  If you are a big or even medium sized producer, you’ll find better payout rates at many firms.
  2. Become an Registered Investment Advisor (RIA): Join another firm, start your own.  The business is headed in this direction anyway — away from commission-based advice.  Many have left the wirehouse world and have started up their own advisory firms.  Start one yourself and bring your clients with you or join another firm and leverage their startup costs.
  3. Find another role in brokerage/advisory world: When I was an analyst at a hedge fund, we had someone whose sole job was to help the funds under management locate borrowable stock to short.  He wined and dined his prime brokerage relationships and enabled the fund to make a lot of money because we could get our hands on stock to short while others could not.  Similarly, lots of hedge funds need help with back office functions or client management (aka bringing in investment dollars).  If you have a strong book of business, help raise money for startup hedge or mutual funds.
  4. Find a different way to monetize your skills: Jim Cramer is no longer a money manager.  He’s a media personality and he butters his bread by being entertaining and teaching millions of people about investing.  He is a credible source of information (whether you like him or not) because he has such great institutional experience.  He is entertaining and has helped excite millions of investors.  Others have created financial newsletters to sell on the side.  Others have created trading systems for do-it-yourself investors.  Still others aren’t quite sure where all this is leading and have started blogging to begin building an online reputation.  Use SeekingAlpha to help showcase your skills.
  5. Become a recruiter: Sound strange?  Nah, Heidrick and Struggles, one of the leading executive recruiting firms really grew from its financial services practice.  Times are tough but recruiting requires very little sunk capital, a phone, computer and a rolodex.  Close a couple of searches and that can make your whole year.
  6. Become an expert: Slow times create opportunities.  Take this time to rebrand yourself as an expert in something.  Anything.  Maybe it’s wealth transfer.  Maybe it’s tech stocks.  Anything that can differentiate you from your peers will pay off.  Participate with your expertise up in an expert community, like Covestor. Show off using social media, like Twitter.

Change fields

  1. Find a business development/sales position: Like making deals? Once outside the financial industry, you can use your ability to close and speak persuasively to help build companies, partnerships and sales.  Media companies are hiring (NOT newspapers).
  2. Start your own franchise: Find and research franchise opportunities.  Franchises allow you to run your own business but with corporate backing.  It’s a great way to begin a new career for someone who wants to be their own boss and run a restaurant, dry cleaning, office supply store, whatever.
  3. Join a non-profit: Non-profits are suffering.  Rainmakers are having a hard time luring fresh funds in a down market.  Your book of business and rolodex may make a great partner working with a nonprofit to make a difference.  You won’t know until you try.
  4. Dabble in real estate: You know rich people.  You know people who are looking for opportunities. There are always opportunities looking for rich people.  Be the matchmaker.
  5. Try something out of the box: Check out US News 30 Best Careers for 2009.  They’re quite different than what you’ve been doing up to now.  There’s no better time to redefine yourself than right now.  Ghostwriting is up there — if you like writing and are good at it, take a stab at helping to write a business book for a colleague.

Distress creates opportunities.  Financial advisors and brokers are facing the double-whammy of a shrinking asset pool combined with an industry that is changing quickly in the face of increased regulation, more competition and further disintermediation by the Internet.  You can take this time to make yourself more competitive when the economy picks up or opt to do something completely new.  Brokers have access to investment money, understand financial products and know a thing or two about client service.  Put those to work in something that’s going to both spiritually and fiscally rewarding.

Advisors, and registered reps, stepping up with custom marketing materials

We’ve taken the bent on this blog that content sells advisory services.  As competition for a shrinking asset base in the U.S. increases, creating custom content — ebooks, newsletters, etc. — can help you target your perfect customer with value-add from the beginning of the relationship.  By providing value and differentiation from step 1, a financial advisor or broker can immediately distinguish himself from his competition.  More than that, it also opens up various revenue channels — some old, some new, as well.

custom-publishingKristen McNamara writes extremely well for Dow Jones on the various business issues facing financial advisors.  A recent article, To Stand Out, Pitch Yourself, describes the evolution of the content-driven strategy that is now taking hold at the major wirehouses.

According to McNamara:

Some large brokerage firms, including Merrill Lynch & Co. (NYSE:MER) (MER) and Raymond James Financial Inc. (NYSE:RJF) (RJF), currently or will soon allow financial advisors to create their own custom marketing pieces.

This is an amazing development.  It’s a huge milestone that these large financial firms are permitting their advisors to create custom marketing materials in an onerous environment of compliance regulations.  It’s also incredible that these firms are actually providing resources to help their advisors create these so called, pitch books.

Again, from McNamara:

Merrill Lynch (NYSE:MER) , in response to advisor demand, is rolling out a new program to enable its advisors to create custom brochures highlighting their specific strengths and ability to harness the resources of the entire firm, says Steve Samuels, first vice president and director of global training and organizational design.

The program is in test-pilot mode due to the technology involved. Merrill expects to make it available to the firm’s full brokerage force in a matter of months, Samuels says.

I’m sure in the beginning of this process, these firms will merely approve numerous slides created in-house for inclusion in advisor materials.  It will take more time to develop the internal processes for approval of actual individual materials.  Regardless of timelines, though, this is the future of the New Rules of Investing — both advisors and investors locating each other and working together in new models.

Key to McNamara’s thesis is that success comes in this age by pitching capabilities, not products.  And even more, honing that pitch to the right prospect.  Says McNamara, “Investment products and service offerings vary little from firm to firm. What differentiates an advisor, and what many have difficulty conveying, is his or her ability to uncover and meet clients’ individual needs.”

This, dear reader, is the $1,000,000,000,000 question.  We’re just at the beginning of the race.

Additional Resouces

Schwab no longer run by Schwab: discount broker pioneer steps down

“Fire your broker!”  How many of us remember those ads of yore that implored brokerage clients to fire their wirehouse broker and move over to Schwab (SCHW)?  They are indelibly imprinted on my brain, anyway.

Charles Schwab

What’s more is that the message as definitely driven the direction of the brokerage business over the past couple decades.  Industry studies show that retail brokers are finding it harder and harder to compete against online brokers.  So, Schwab was definitely onto something when he introduced the discount, DIY (do-it-yourself) model to investing.  It was revolutionary at the time.

Interesting to see that after founding the firm in 1971 and with a couple of stabs of having outsiders at the helm, Charles Schwab seems to be moving aside and empowering a new general to take the helm of the $26B financial services firm.

What’s interesting here is that new CEO Walter Bettinger II has been instrumental in refining Schwab’s

retail branch network and service centers.  Having a leader with a focus on the retail customer is not by chance.  After Schwab and other online brokers moved into full-services by providing banking, wealth management, and mortgage products, it seems that the aftermath of the popping of the debt bubble is leading to a renewed focus on retail.

This is a good thing for Schwab, its customers, and the industry in general.