89: President of BMO InvestorLine on exploding trading activity for discount brokerages in 2021

In this episode I speak with the president of BMO InvestorLine, Silvio Stroescu, to get his response to the long wait times for clients calling in for customer service that all discount brokerages seem to be experiencing. 

Silvio provides some shocking numbers showing the absolute explosion in new account openings and trading activity. Year-over-Year increases in trading activity have reached +200% in some recent months. The first nine days of 2021, which is really only five trading days, saw more transactions than all of January 2020.

Why the surge? And what are they doing to reduce wait times. Silvio candidly answers these questions and more. 

Transcript

Silvio Stroescu: 0:00

Trading volume in December was 45%. Higher than what you would typically see in the old reality. During the peak season, let's call it a peak RSP season slowest month is 45%. Higher than then like previous records, right. So that's the magnitude of this.

Unknown: 0:27

This is Erica Ehm. And you're listening to the mostly money podcast with Preet Banerjee, when you could be listening to my podcast the reinvention of the vj, get your priorities straight!

Preet Banerjee: 0:47

This is mostly money and I'm your host Preet Banerjee. Now on the show today I'll be speaking with the president of BMO investor line, partly in response to a Rob Carrick article in a tweet that we were both tagged in, in which a client of BMO investor line was complaining about not being able to get through to a customer service rep to make transactions in their self directed discount brokerage account. And I'll point out that that seems to be a common complaint across the industry. So we're going to hear his response to that. But first, I need to make a disclosure of a conflict of interest. I consider Silvio to be a friend. And we've worked together on some small projects at his previous firm. We share a love of motorcycles, we bonded over that. And also I've done some work for beemo. In the past, I think before Silvio was there. So let me introduce my guest. He's the president of BMO investment line, Silvio Soares qu. And Sylvia, thank you for taking the time out of your busy schedule to speak with me on the podcast, and welcome to the show.

Silvio Stroescu: 1:46

Hey, thanks, Preet, and thanks for the opportunity to talk through this. I think it's an important topic. And it's best for us to be out here chatting about it, so people have a better understanding of what's happening.

Preet Banerjee: 1:56

Yeah, and you know, I'll give some background. So there was a tweet from someone who tagged as both and they were talking about how they had an issue talking to a customer service rep about some kind of transaction that they wanted to execute or a question that hey, I don't know exactly what their issue was. But they'd said that had been a couple of days of trying, and the wait times were at sometimes over an hour each time. And as I mentioned, Rob Carrick, arguably the most influential personal finance writer in Canada wrote an article about this a month ago. And it was an opinion piece, which based on what he had been hearing from readers and seeing online, the number one complaint against discount brokers in general, seem to be the long wait times to speak to anyone across the board. Not this is not just a beemo issued, this was across the board. So let me just start with your response to that.

Silvio Stroescu: 2:49

Well, first, allow me to just acknowledge the fact that indeed, the wait times are long, they are a source of frustration for our clients. And we are disappointed to be in this position and put our clients in a position where they have to wait so long at the phones. And we are holding ourselves accountable to close the gap as a matter of fact, to work smart and fast to close the gap between capacity available to to handle this level of demand. So fully, fully acknowledging that it is a challenge has been a challenging time, I would frame this with an analogy of you know, we're faced with a tsunami of demand. And that's this tsunami is actually flooded all boats. That's that's what's happening right now. And indeed, look, the reality is we have to work on the boats itself, making sure that we reduce the wait times. The story is also the tsunami itself, like just the significant exponential increase in demand is is the root of of what we're facing.

Preet Banerjee: 3:45

What do you think is driving all this this demand right now?

Silvio Stroescu: 3:50

We should really start with a bit of context, which goes a pre COVID. Right, let's call it pre pre last spring, which, you know, seems like a very long time ago, in hindsight, but adoption of digital investing was already growing, and it was growing at an accelerated pace year over year, you'd see more and more Canadians adopt digital investing. So we were already on this, you know, accelerated curve of adoption. what's happened since March is that curve has just exponentially taken off. Right? And when we asked people before, you know, we expected it as you know, preed we're passionate about digital investing. I know you are too. So we ask people, you know, what's preventing you from actually doing more of this stuff yourself doing more of it online? The number one answer people provide in that context is time, just lack of time, right? Like I don't have the time to actually make the transactions make the trades I don't have the time required to build my level of knowledge. I don't have the time required to actually do all that research and it is also a emotional component to it. Right? I guess, you know, if I had the time I'll build my confidence and with confidence, I would I would do this more and better and more often, right? So what's transpired since March is you know, people have have the time to be able to make to ramp up their knowledge. You know, we call it always be learning, right I, you know, investors that have adopted DIY platform self directed platforms are in this like always be learning mode feeding and curiosity to learn about how to trade, how to build their portfolios, how to, you know, evolve their learning from cash accounts to opening margin accounts, trading and options, right. So the the difference breed, if I was to sum it up is just people now half the time to actually feed that curiosity.

Preet Banerjee: 5:35

Yeah, and I think along those lines, there's so many people who are now working from home. And that tends to be people who are working in a knowledge economy type job in front of a computer. And when you're at work in the office place, it's hard to execute trades, because people can kind of see what you're doing. But when you're at home, you know, you could be on, you know, the eighth zoom conference call of the day, and you've got a second screen or window open, where you're executing your trades. So I imagine just the fact that so many people are working from home, and that no one is sort of monitoring what they're doing at their desk, also affords them the ability to trade, which sounds like, you know, this is behavior that I don't know, is in alignment with good investing principles. We're going to talk about that. But let's let's go back to this issue about, you know, the increased demand, and how this has put a strain on the current system. So you talked about pre COVID, there being an acceleration in digital adoption, but then that hit an inflection point, and really increased after the lockdown started. So can you give us a sense to, you know, how long had the long wait times been an issue? Was it before COVID that it started to creep up? And what have the trends been in terms of how long people are waiting to talk to someone?

Silvio Stroescu: 6:56

Yeah, let me let me first started just by adding some quants. And and just a really size of that demand, right. So you know, pre COVID, you'd see an increase in adoption of digital investing, where new client growth would be up by 15 to 20%. a year. Right? I do. That's kind of the the clip that we were seeing as far as increasing adoption. what's transpired since the spring is the number of new clients is up two and a half times compared to previous years, right. So you go from, you know, the 15 to 20% range. And now two and a half times, training activity is actually up two and a half times, we've had months where it was up three times year over year, just to stay on a trading activity side of things. December, which typically for us pretty is a pretty slow month, right? December was 45%. Higher the trading volume in December was 45%. Higher than what you would typically see in the old reality, during the peak season, let's call it a peak RSP season slowest month is 45%. Higher than then like previous records, right? So that's the magnitude of this in January. So far, we're seeing an increase of 30%. Over December, like we're setting new records on these goalposts keep moving right. One final a soundbite on that just to give you a sense of the magnitude, transaction. So this includes, you know, fund transfers, as well as account transfers, they're up to five times your

Preet Banerjee: 8:21

five time first nine days of

Silvio Stroescu: 8:23

five times, first nine days of January. So that includes January 1, right? First nine days of January, we had more transactions than we did in all of January 2020. So that's it. That's that's what we're chasing, if you want to think of it that way, as far as demand is moving the goalposts keep moving, and we have to ramp up capacity to get there.

Preet Banerjee: 8:46

I have so many questions, I have so many questions. Do you have a sense as to where the bulk of transfers are coming from or any trends, where you're saying, oh, there's a massive increase in transfers from these types of institutions? Do you have any anything you can share on that?

Silvio Stroescu: 8:59

What time will you see is not so much the types of institutions but you know, it's empowerment, you know, this feeling of I'm in power now, right? What time is a superpower, frankly, right, to to be able to make my own decision. So you have some investors that were you know, delegating their investment decision to either financial planners, advisors in the past or investing in products that were that didn't require them to be more hands on, you know, package portfolios. That way, you're delegating even that investment management decision, not just the advice component of financial planners. So we're seeing these clients and look, I'm going to do more On My Own right now. So that's, that's part of the trend. The second when you look at the makeup of the client base on self directed platforms, about two thirds of the client base, I'm going to say, you know, in the old reality, two thirds of the client base where clients over 55 Well, we've seen since the spring, two thirds of the growth is actually driven by clients under 35. Right so you tend to have more people that are new to investing, the ones that were already trading on the platforms are consolidating their investments, right. So if they had cash and savings accounts elsewhere, or different investment accounts, through a different approach to investing, they're consolidating more towards a self directed platform. So those are some of the themes that we're seeing.

Preet Banerjee: 10:18

And when it comes to people are making transfers, how long does it take to complete a transfer? Because I know that that's an issue within the industry as well. Usually, it's the relinquishing institution that is kind of holding things up as long as they can. But how long does it take to transfer account these days? Well, look,

Silvio Stroescu: 10:34

we're we're in transition there, I should say from, you know, the the old process which everything has to be mailed, right. So you know, if that's the process that the actual transaction lands in, you're looking at anywhere between four to sometimes eight weeks. And there's also a more automated process, which actually makes it happen in less than two weeks, right. So and that continues to get even better. So not all transactions can go through the automated process. So it does take a little bit longer. And as you can imagine, as you're waiting for your funds to arrive, you naturally would call them to look for an update, right? And you want to know what's going on. And there's there's not a lot of transparency in that process as far as having really good policies, aware where that account transfers sitting every day.

Preet Banerjee: 11:16

So we have Okay, so we've got increased dramatically increased trading activity, we've got a lot of people transferring accounts. What do people call in about? Like, I have to be honest, you know, of all the discount brokers I've ever used in? I don't know, decades, I've never called in for anything. But I'm in the industry, or at least was and you know, this is kind of what I do. So I don't need as much help, I would think as the average person. But what do people call into a discount broker? About what are the common types of customer service questions?

Silvio Stroescu: 11:50

will just based on the sheer increase in demand, I'd say there are questions that you would have typically had before, obviously, you know, at a different magnitude different level of volume, right then, and these include, you know, how long where's my transfer? Where's my account transfer? How long does this take the conversation we just had around that process. And you have people that sometimes forget their passwords, right. So if you haven't traded for a long time, forget your password, these are all just admin maintenance type of transactions, we've done a lot of work to make sure that the online capabilities are simple, intuitive, and people are aware they can do this stuff online. So we've navigated a lot of these transactions and are navigating a lot of these transactions online. If I was to sum up again, the theme as far as why people are calling, let's say, for one is leveling up. And let me let me unpack that a little bit. So we have a lot of new investors that hadn't invested in self directed platforms. So either they, they were new to investing all together. So they're leveling up now to say, Okay, I'm going to start investing. And I'm actually going to do this on my own in a self directed platform. So that requires you to build a level of knowledge. And you ramp up with a learning curve. From that perspective, you have another segment of investors who again, we're delegating their investment decisions to an advisor, financial planner, now they're saying, I'm going to do this on my own. So they're technically leveling up, and also on a learning curve in that journey as well. And then you have people that had been trading on a self directed platform before, but maybe they had a cash account, let's call it a basic account, or RSP account or a TFSA. What they're saying now is, I want to do more, right, and they're opening up margin accounts. And they're they're building capabilities to to learn how to trade options. So they're learning about that process as well. So this leveling up is actually happening on such a broad range of of investor segments, which naturally leads to, to calls into this, as you know, operate on these platforms, we don't provide advice. But when you go through a learning curve, you you want to you want to speak to human right to actually give you some validation and some comfort in that process as well. So I would I would sum it up with that as the core theme for why you're seeing, you know, the increase in calls, obviously, again, complemented the fact that you just got to share increase in demand.

Preet Banerjee: 14:02

And and how many customer service reps did you do you have right now? What are the plans to address these wait times? Are you doing anything to ramp up capacity?

Silvio Stroescu: 14:13

Yes, look, this is our top priority has been our top priority. So let me just go back to a question you asked earlier. And, you know, how long have the wait time has been an issue? When you look at the average for 2020 calendar year, our wait time average is 12 minutes, right? So we've been hovering around 40 minutes average at the beginning of January. Just to put all that into perspective. This the last quarter of 2020 was when we started seeing more of this challenge coming through. So if you think about what it looked like for the first three quarters of the year, we average wait times in less than two minutes, one minute and in some cases as well. We had events like march for examples on event the third week of March where we all started working from home all of a sudden and things were happening in the market. You know that was that was a bit of a week. That was an anomaly, I'd say in the context of 2020, at least the first half of the year. We also had long wait time, in an event going back a couple years ago, when the cannabis sector was was getting prominence and trading and us that sector was gaining prominence. Right. So, but that was an event, it had a start date, and it had an end date. Right, right. But beyond that, I mean, you're looking at an average of two, three minutes, wait times. Now, average means obviously longest call will be longer than that. And you have a big percentage of calls that are under that as well. That's that's where we stand. So it's, it's been a more pronounced challenge on the wait times front, especially November, December and kicking off the year in January.

Preet Banerjee: 15:39

Now, you know, when you are managing people's accounts, there's a big responsibility in terms of security and the technology infrastructure that you have. So I imagine that your your call service reps, were also sent home to work from home in some cases are not allowed to come into they're normally where they would work. So can you tell me what that was? Like? Like, where were the reps? Where are they now? And how is that sort of been a variable that needed to be accounted for

Silvio Stroescu: 16:09

the bulk of that mobilization happen in March and April, right, and 100% of our agents were actually working from a physical location, physical contact center, one in Montreal, one in a couple in Toronto, and one in Mississauga, as well. And we've mobilized to have them work remote. First of all, we still had some folks work in the physical locations, as we do today. So we had to address the spacing just for health purposes, and making sure that we had the right distancing within our physical locations, we have the capability now where 80% of our agents can work from home. So there's also a bit of rotation where some choose to work from home and a rotate and come into our front a physical location, you know, every now and then on a rotational basis. That's where we are today, fully activated. And if you think about how fast that happened, a metabolic pace that that needed to happen in the first couple of months. You know, that's, I would say, We checked that box, primarily, right? So what we're facing now is not a matter of navigating how we mobilize remote work is just simply keeping up and catching up to the goalposts on demand that are moving. And look, the other question you asked was, what have we done right to to mobilize? And how do we ramp up the staffing? We started this back in the summer, right? So we said a couple of things we need to do. First of all, we need to wrap up our hiring. And we need to do more of more hire more people in the old process, which is, you know, hire, recruit, first hire train in physical locations and just do more of that. That the magnitude increase there is for four times like we quadrupled the size of new hires, from you know, this entire process, starting with recruitment, to hiring to training, which takes months, right. So think about that is up for x, again, an exponential increase in what we've done to improve capacity. The second thing we've done is looked across the business, not just our investment in business, but across the bank to say can we actually attract more talent to actually help with the capacity. The last training class we had, the numbers increased seven times from what we would have typically had like this, the training class that is actually active right now. And we'll be on the floor answering calls and productive in the queues in a couple of weeks. It's it's seven times higher than what we had prior to, to see and to speak in demand. So we started this process pre back in the summer, we've been sprinting through the marathon to make sure that we we ramp up the capacity. And we've also done on the hiring front, we've actually changed how we hire right. So it's one thing to say we're going to do more of the same internal process. But we also activated what we refer to as Street to screen. And this is remote, remote recruitment, remote hiring, remote training, remote activation into the queue. So you don't have to set foot into context and it to be able to do that. That's a transformational process. And we had the first class as part of that new process actually started training at the beginning of January. So that's what we've done on the hiring front. And then he filled lobby one. One more comment on this. We also looked at how do we contain and address more of this demand online on the platform, right? So we looked at all these micro journeys that led to a call. And we said we have to get better at improving that journey online, make it more intuitive, and also build awareness that it exists. All the efforts we've done on that front as well as simplifying some legacy process just to make it easier. Some things that we've done before we said, you know, there's little value in this and it's just an impediment for our clients to stop doing it. We measure our trades to call ratio, just as a measure of efficiency, the trades to call ratio has increased 65% as a result of us being able to contain more online. So we're, we're in we're on the right track. The reason why we still have a gap today is the impact from that exponential increase in demand has been imminent. Right, and once the goalposts move, you feel that very same day, the impact from our activities on capacity have a bit of a time lag, right, which you know, include especially on the hiring fraud, recruit, hire, train, and license, right, like that's, that's a nuance we shouldn't forget in the context of our agents. They also need to be licensed and build their proficiency requirements as well.

Preet Banerjee: 20:20

Yeah, I was gonna ask you, because so investing online is oio. Right? So it's no it's not advice. So sorry, order execution only. And so people who who create an account there, they are basically taking all responsibility for the riskiness of their trades, and you are execution services only for those platforms. So when it comes to the licensing that's required for these reps, what what did they need to what license do they need,

Silvio Stroescu: 20:45

what they need, they still need to be fully iraq licensed, so they don't provide advice, but they have to go through all the proficiency requirements, including the course on ethics, the Canadian securities course, which which has two parts to it, so they have to be fully fully licensed. And if they're supporting trades and options, for example, they also have to have that licensing as well. So even though they don't provide advice, the proficiency requirements are full fledged.

Preet Banerjee: 21:16

The conversation with Silvio Stroescu continues in a moment, but I wanted to give a shout out to some listeners who have left some kind reviews for the show. Doug M. 34. sg 183 60, Apollon seven and Brent Goucher, thank you for taking the time to leave ratings and reviews on Apple podcasts. I also wanted to let you know that I just published a crash course on what's really been happening with GameStop. I'm sure you've heard that name this past week. I know you have questions. Why has a mall based retailer have physical copies of video games? Some would argue assume to die business model. Given that you can download copies of video games in order console's online. Why they seen their share price up as much as 10,000%. In just one year, most of them in the last month. What is a short squeeze? What else is really happening? So you can check that out on YouTube. My main channel can be found under my name, Preet Banerjee. And before we get back to Silvio, if you are enjoying the content on this podcast, I really do appreciate it when you take the time to leave a rating and review wherever you get your podcasts. And I don't run ads on the podcast yet, but that might change in the future. And in the meantime, I guess I'll provide some kind of placeholder and kind of do some public service announcements or something like that, again, just as a placeholder, so I don't know. Get your prostate checked or something. Anyways, back to my conversation with the president of BMO investor line, Silvio Stroescu. Now, I want to just pull from the headlines. So I'm sure you're familiar with GameStop. And the gamma squeezed that almost bankrupted? I think, one hedge fund I think it was Melvin capital had to get bailed out by some other hedge funds. Because basically, I don't know if you're familiar with the redditors. On this, this Reddit called Wall Street bets, have pushed up the price of GameStop. so high that it's it's forced a short covering, and it's it's kind of embarrassed, like these professional, you know, money managers. It's kind of funny to watch. But there's so many people who are subscribed to that, that Reddit there, I think there's like 2 million active users or something like that. And they are driving the the market price for, you know, the security and some other ones. And so, when someone calls in and do they, what's the training around getting a call that says, hey, I want to buy GameStop, I want to buy call options? Should I do that? Like, I'm assuming they get asked, you know, hey, do you think this is a good idea? What's the training around that for an order execution only platform?

Silvio Stroescu: 24:09

Well, look, you're you're not diving deeper into the, you know, whether you should or shouldn't, right, but what we do is we say, you know, we grounded in principles, right? So, you know, typically would say like, Alright, so how does that fit? You know, does that fit with your plans? Like we don't even get into how does that fit with your plans? And if you think, you know, if it fits with your plans, and you've got a deliberate reason for it, then, you know, it's your decision, right? So we don't get into the advice on whether you should do it, you know, should do it. We do feel the effect of it, right? So you do see an increase, you know, slight increase in volume as well and those things do happen. But the extent of it is just to make sure that we just help groundings in some principles, right, as opposed to telling you whether or not he should do it or whether it makes sense for him.

Preet Banerjee: 24:51

Yeah. Last thing on this, this overall issue about capacity. So you've you've you mentioned that one class is seven times the normal intake for people that you're training for this positions. Now, do you have a sense as to whether or not this demand is going to be temporary? Or do you feel that there's going to be a sustained level for this type of trading activity?

Silvio Stroescu: 25:11

I believe that it's, you know, what we're seeing is not an event, right. And I made reference earlier to cannabis and I talked about that, as an event, I get started on x date, and it kind of, you know, sizzled off on on this y date, right? That's not what we're seeing here. We're not seeing an event, we were seeing an acceleration of adoption. And to me, this is an inflection point in that adoption of digital investing breed. So that's, that that's our view for it. Now, I don't believe we're going to see to you know, trading volume for January become the norm, right. I mean, right now, again, we just had a new record. 30%, higher, right. So I don't think this will be the norm. But if you think about where we were in the previous peaks, and what I referenced around RSP, season, and December just blew out of the water, that new reality, the new norm will actually be higher than the previous peaks. That's that's where I see this landing up. So it's somewhere between the previous records as far as monthly trading activity, and slightly below the the peaks that we're seeing. And I'd argue, and I expect what we're seeing in January and February will actually be our peaks, right? And that will level off. beyond that. And the main reason for that, and just informing that perspective is, during the the cannabis sector trading event, right, you didn't see as many new clients join the platform, right. And if there was a blip, and there was, it wasn't as sustained right now we're seeing this like two and a half times increase in new client during the platform. And it's been happening, right and continues to happen. And it continues to grow. So primarily based on that, and the sentiment and and frankly, just some other macro elements around all of us have lived digitally for 910 months now. Right? And we likely wolfer after a few more months, right? So

Preet Banerjee: 26:50

has it only been nine or 10 months, it feels like forever.

Silvio Stroescu: 26:53

It's just reset, right? how we live our lives and how we do things. Right. So to me, this is this is sustainable beyond what we're seeing.

Preet Banerjee: 27:01

Right now, there have been other sort of investment stories that have been catching the eyes of investors and headline writers. Certainly with GameStop. We also saw Bitcoin had another run up and a bit of a drop as well. And so when people have the ability to access, you know, the markets much more easily than they ever had before, there are some risks that people can do real damage to their own portfolios. What are your thoughts or plans on? How do you address that? Because certainly, there are going to be some people who are just not going to listen to advice, they're going to listen to a forum, or they're going to read the, you know, their take some kind of trading course and you know, they're fine, they're big, they're adults, they could do that. But there are some people are gonna say, Okay, I got interested because of this headline in Bitcoin or GameStop, or people have been making a lot of money even though the economy doesn't seem to reflect that. And they're now interested enough to say, Okay, I want to open up an account, I want to empower myself a little bit more. What can you do at a self directed brokerage, to help guide people who may be in need of some help, but for whatever reason, they're just not going to go full service? They still want to do it themselves. But what what are their options? I know that there are some guided portfolios, all in one ETF tickets, solutions, what have you, what do you recommend to people who are coming, but they need just a little bit more than just, you know, no advice? What are the options? So first, look, it's just,

Silvio Stroescu: 28:33

I would phrase it as grounded in Northstar, right, like so first of all, articulate what your Northstar is. And I use grounding, in Northstar deliberately, right, so understand why you're doing this in the first place. Right? I you know, and it goes back to having a deliberate perspective on you know, why you're joining the platform, why you're investing in the first place, and in many cases, and I suggest even writing it down and conversations that I have with my friends, as well as, hey, write it down again, write it out for yourself, not for anybody else, just write it down. So you actually understand why you started doing this in the first place, and what your intent is right off the bat. And then we say, you know, the tenants around investing, like the principle that I've been around for a long time, they're still the same today. Right? I mean, you know, fundamentals are harder to pin down, you know, in this market, right. But the, the actual tenants of investing are still the same, right. So think about diversification, you know, think about how do you make sure that you crystallize your goals, and what you're doing is actually in alignment with those goals. Right. So those those standards still apply, Preet. And that the third element of this, I'd say, is just man, the power of advice and that importance of advice, like, you know, if we're talking about trends in self directed platforms, I'll tell you, I would complement that with the need for advice is is even higher now. Right. So what we've done in the context of the digital platform, you have folks that are adopting self directed platform because they want to do more on their own right, and they want to be able to make their own decisions, but they're also looking validation right there, beyond just the conversations around, helped me understand and get more comfortable to know what I'm doing and how I should do this stuff. They're also looking for validation, we created a service called advice direct. And in this context, you actually have advice. So we do provide you guidance on how to build your portfolio, how to make sure that it's well diversified, how to rebalance your portfolio along the way to make sure that it stays aligned with your goals. So there's a digital tool that provides you advice and guidance on how to build and manage your portfolio. And then you also have access to an advisor. So someone that actually can speak to you and complement the actual digital tools with with a human being. The new ones here is that you still place a trade yourself, that you're still working on the platform, making the trade yourself but you have the benefit of complementing, you know, your your intent to do more on your own with support from this digital tool, and any advisor. And even prior to prior to spring and prior to March, we saw adoption of that platform growing exponentially as well. And that continues. Right? So it's it's just thinking differently about how do we now build services, and build awareness of services that already exist, and and make sure that we're helping folks that way. We also launched a portfolio health check. So this is something that we've been working on since the spring where we saw this happening, we said, well, what's the next step? You know, what would investors look for beyond this? And what would be the step after that? So using some foresight back in the spring, we build a portfolio health check tool, which helps you now run your portfolio through this tool and identifies First of all, it asked you, you know, what are your goals, and remember the ground that we talked about, it starts off with that to identify why you're doing this in the first place. So it helps you with that self conversation of grounding, and, you know, grounding in your North Star, and then it actually you put in your holdings, and we then give you an output that talks about the health of your portfolio. So are you well diversified across sectors, geographies? Is your asset allocation in line with with your goals? And, you know, what does that look like overall? So we've just launched that a couple of weeks ago, and it's available on our site, happy to share a link so we can include it for listeners of the podcast as well, that said that, you know, that's one of the tools we keep, which can complement what you have on the platform. And and frankly, look, we're seeing adoption of those services grow advice direct, for example, December record month, as well, for new accounts and client joining that platform. And this tool, I imagine it will, will get a lot of traction as well.

Preet Banerjee: 32:34

Yeah, I think that this hybrid model where you have, you know, digital tools with access to to advice seems to be a model right for, for growth, like that seems like the next paradigm. But what about coxes? There are a lot of people who, whether different reasons, people go to a self directed platform, one is pure empowerment, they just want to trade on their own, their cost might actually end up going up versus you skip it, or they're heavy traders. But there are a lot of people who who move to self directed platforms, because they explicitly want to save on costs. And so they might go to either, you know, super long buy and hold portfolio, buying individual stocks and build out a portfolio or they might use a couch potato strategy with index funds, what have you. But there are a lot of people who are kind of in between those extremes. So So talk to me about what is the cause for advice direct? And what's the cause for this portfolio? Check? Is that like a free tool available on the platform? Do you have to pay for these two different types of services? Talk to me about costs?

Silvio Stroescu: 33:37

Yeah, so look, first, the portfolio health check. It's a free tool. So you plug in some information, you know, we have some information about your profile. And we we guide you on how to identify that Northstar and then the output with with flags to say look previous should be reviewing your diversification and so on all that is free. That is a sliver of the portfolio optimization engine that we have within the advice direct so it gives you a sense of a test drive if you will, of what advice to write could do for you. But this component of it is free now if you want to pursue that further and set up an advice direct account so you have these types of notifications and you know, I'm telling you when you should make some changes to your portfolio because you need to realign with your goals, then you'd go into the full tool for advice direct. The pricing for that is 75 basis points and it's tiered as well. So there is a cap once once you get to a certain threshold of investable assets, you know becomes capped and that cap is at 3700 3750 off top my head as far as what what the overall cap is so the more you have invested in that the more you benefit from from the service and also from a pricing perspective. It also includes a number of free trades as well so you're not paying for the fee as well as trades right? So that's that's a good combo there. Just you know the if you look at who's trading under selling During the platform, a majority of the investors are actually investors, you know, the buy and hold type that you reference, right. So, you see, as far as active traders, they're anywhere between five to 6% of all the investors on the platform and by active traders, I mean, they do more than 10 trades a month, right? So the bulk of the investors on the platform tend to be more of the, you know, buy and hold, rebalance longer term investors.

Preet Banerjee: 35:25

Do you do you have a sense as to the average hold period, for someone on your platform, like when they buy any position, give any idea what the average hold time is? Well, it's

Silvio Stroescu: 35:36

obvious, if you're a long term investors, I mean, you know, these people are holding until they reach their goals, right. So So that's, I would say, the bulk of it would be that now average hold time for security, I don't have the breakdown of that to say how much they hold to the security because naturally, people rebalance their their portfolios. But as far as how long they stay invested in, you know, how much to stay invested and how that stays, you know, consistent across, across their tenure. You have more of those buy and hold. Even in March, right, when we saw a lot of volatility, I mean, the activity that happened was, you know, not people just buying jumping in and out of holding securities, you also had existing clients, especially retirees that were actually de risking their portfolios, right. So in that case, it looked like they were selling out, but, you know, they were, they were de risking just to have, frankly, more available to them in cash. And, you know, in many cases, while the supplement retirement incomes and making sure that cash is there to be able to do that.

Preet Banerjee: 36:33

Now, speaking of cash, one of the things that we've noticed is that people are looking at at this as kind of like a tale of two economies, you have people who have been affected negatively the most, they tend to be on the lower end of the income spectrum, working in retail jobs, the jobs most affected by lockdowns and restrictions, and they're been, you know, completely decimated. And then you have a lot of people who are more kind of white collar, who are able to work behind a computer either at from an office or from a home office. And so they may not have necessarily lost any income, but they've lost the ability to spend because they're not able to travel. And for a lot of people, you know, not traveling is like, you know, five grand extra in your pocket, not going out to restaurants as often as putting extra money in people's pockets. So we see that there is some people who are actually sitting on a lot more cash than they've ever had access to before. And they're putting it into their investment accounts. Are they sitting in cash? Or are they deploying that? Do you have any sense of that.

Silvio Stroescu: 37:36

So savings rate is up overall, just to just to build on your point as well. And I think that's a healthy thing. That's a really good thing. And I think people are also reacting to you know, the shock that that we all faced in March and and people that didn't have a lot of savings for the emergency funds top top to be able to withstand that type of exogenous shock, you know, they're they're ramping it up. So I think there's there's an element of that as well. When you look at our platform, the younger clients, so let's call them clients on a 35, which you and I could consider ourselves in that category. Once upon a time pre but clients, younger clients are actually deploying more cash if you index to, typically new clients come in, and let's say they're bringing in 100,000, how much 100,000 gets deployed, more of the initial cash coming into the account is being deployed by the younger investors. Right. So they're, they're looking for, you know, time in the market, as opposed to timing the market, right. And then you also have older clients, retirees in particular, they've de risked, right, so they have higher cash positions, as we just talked about, potentially think about how do I supplement my incomes, right. And the income that I used to get from bonds and the fixed income component, my portfolio is not paying what it used to. So I need to have some cash to be able to supplement that. And, frankly, you know, I don't know how long this takes, right. So I want to make sure that I'm covered there. So let's say, you know, those are smart decisions, right? Again, you know, it's not every single client, but if you roll it up, but you know, that's that's the view that we see from a higher vantage point. And then you have some folks that are just looking for opportunities, right, and just waiting for that opportunity. And I think, again, to hold that this whole idea of like timing to market actually beats timing to market applies to that. But I think for the most part cash, just the role of cash has expanded. And either, you know, be able to protect myself, supplement my income, make sure that I have savings to respond to exhaustion as exogenous shocks, I see that the role of cash has expanded and over indexing towards people that are holding cash is that really, you know, those that have to depend on that as far as retirement income.

Preet Banerjee: 39:43

All right. We'll leave it there. But I want to thank you so much for coming on the podcast and sort of addressing the concerns that have been raised by various writers and people tweeting at us both. So I appreciate your candor in addressing that. Interesting times to say the least When this is all over, are you going to? Are you going to upgrade your bike? Or are you happy with your bike? What's going on?

Silvio Stroescu: 40:06

Hey, look where we're celebrating and what we're celebrating, frankly, it's just that bigger story of it's an army of demand, right? I mean, like it's a privileged position to be in an industry that sees the level of demand. So, so super, super happy about this. And thanks for giving me the opportunity to jump on here. We have to be responsive, as you know, through social channels and making sure that our clients understand what's happening and why and what we've done about it just in terms of our accountability. I'm not upgrading my bike. Now I have a bike that I'm happy with right now. My goal would be to get out there a little bit more and write a bit more next summer. And that's that's the goal for the year, but it's not a year of the upgrade. I actually,

Preet Banerjee: 40:44

I'm in right now. Listen, I'm not allowed to get a new motorcycle. What ended up happening was my partner was on the balcony and we overlook the gardener. And I think you know this but I had a Ducati and it was stolen. And I've been thinking about getting a new bike to replace it and she's out on the balcony I was in the office and all all of a sudden I hear just hear this this is yell you're not allowed to get a new bike. Like what the heck happened? Someone just got smoked on the highway, right like in front of her like from the balcony she could see So that pretty much was the nail in the coffin. I am not allowed to get into the bike that she knows of.

Silvio Stroescu: 41:27

They're always they're always tracks right tracks are also an option, right?

Preet Banerjee: 41:30

Exactly. Yeah, exactly. There's private roads. There's the drag strip, there's dirt biking. See? Thank you so much Silvio. It's, it's been a pleasure.

Silvio Stroescu: 41:40

Likewise, pleasure to connect and thanks for the opportunity. Cheers and keep safe.