Titan Invest & The Coronavirus
Titan Invest is a unique robo advisor in the crowded marketplace. In our latest Robo Report™, our Titan portfolio was the top performer relative to the Normalized Benchmark for the first quarter of 2020. This strong showing was in part due to their risk-management strategy of shorting the market instead of using traditional bonds.
However, top-tier performance is not the only thing exciting going on at Titan. The firm recently experienced a large growth in assets under management and a rise in customer engagement.
This happened during one of the most tumultuous time periods in recent memory due to COVID-19. Our senior research analyst David Goldstone sat down with Titan’s Clay Gardner, Co-founder and CIO, and Jason Rasmussen, Head of Growth, to learn more about what’s going on behind the scenes.
Titan grew tremendously during Q1. Jason explained that “at the end of May 2020, we have about $90 million [in assets] and over 10,000 clients”. This is up from approximately $57 million reported in the firm’s last 2020 ADV.
When asked about what drove this growth, Clay said that “100% has been organic. We don’t spend on marketing.” And he went on to elaborate that “word of mouth and referrals and press coverage, have driven client flows.”
The referral system at Titan is no small component of their strategy. Through offering a management fee reduction of 25 basis points for each referral, they have been able to grow their client base without spending on marketing.
When asked how dependent new-client acquisition is on portfolio performance, Clay responded, “We’ve seen very little correlation between client behavior, namely client retention, and performance. In fact you’ve actually seen investors do the right thing, buy low and sell high… It speaks to the research experience we built. The full stack, audio, video, notes, it’s actually starting to change behavior.”
We are accustomed to seeing market volatility lead to the average investor pulling out of the market. However, we are seeing early signs that this trend may be changing with the advent of modern technology.
Titan is also finding success in creating daily analysis and communication for their clients and subscribers. Jason explains that “in a period like a pandemic, you want someone to break it down for you and explain what’s going on. That’s a huge part of our offering. Clay does a weekly video where he breaks down what’s going on with your money, your specific holdings, the market, how you should interpret what’s going on.. our engagement rates have been insane.”
Jason continues, “We’ve seen 75% weekly actives and 95% monthly actives, so people are glued in.” The idea that an investment product is gaining this level of traction from an information perspective is evidence that mass communication can efficiently drive client engagement.
Responding to the question if COVID-19 actually benefited Titan, “we’ve always been a war-time company,” Clay said. “The financial services business for startups is not an easy one… We’ve built a business to be very lean and very frugal… We are using it as an opportunity to step in and be the best fiduciary… I think it shows up in the numbers. We have started to win share from the incumbents and start-ups.”
The Titan Investor
We asked about this new generation of investors. “We’re definitely targeting a younger demographic than the incumbents. Late twenties, thirties, folks who are digitally native… folks that are comfortable operating most of their lives on their mobile phones,” Clay said.
He added, “These are not the micro-investing customers…. They are in their formative years where they’re just hitting their earnings stride as young professionals. They’re trying to decide their manager, the place they should park the majority of their savings.”
Titan’s Value Proposition
When asked to explain Titan from the founder’s point of view, Clay explained, “We’re the first and only modern active manager. We think about the investing world at three poles: at one hand you have the do-it-yourself active traders… On the other pole you have the passive folks…There’s a massive middle ground.”
He goes on to say that “most of the alpha and most of the opportunity lies at the active managers, but they’re inaccessible to the masses. They charge high fees, they have high minimums, there’s all sorts of regulatory complexity… We managed money at these firms and our belief is that something like this should, and will, exist for the masses.”
Titan continues to be an interesting robo-advisor story from multiple perspectives. Its early success as an active manager combined with a successful referral strategy is fueling their growth. Additionally, their ability to effectively implement mass communication strategies is driving client engagement without needing to build out a large advisor force.