Passiv, whose technology helps passive investors manage their portfolios, has partnered with Silicon Valley-based Alpaca, which should help the Fredericton company expand in the all-important U.S. market.
Alpaca is a stock brokerage that operates an application program interface, or API, that allows users to program their own “robo-advisor”, or a program that will automatically balance a passive stock portfolio.
Passiv aims to help passive investors who don’t know computer programing. It is developing a new solution based on the Alpaca API to give Alpaca clients the option of replicating robo-advisor portfolios without having to write a line of code.
“We’re excited to partner with Alpaca because their robust API will enable us to build more powerful features, create amazing user experiences and help more people to invest,’‘ said Passiv CEO Brendan Lee Young in a statement.
Passiv announced the new partnership at the Money 20/20 conference in Las Vegas, which it attended as part of the Atlantic Fintech Mission organized by Venn Innovation.
Passive investing is the practice of investing money in low-cost assets like ETFs and holding them for a long period of time so that transaction fees and other costs don’t eat into the holder's ultimate returns. The problem is that different assets appreciate (or depreciate) at different rates. So, to maintain a portfolio at the proper balance between stocks, bonds and other assets, the owner has to keep monitoring and tinkering with the portfolio. It takes time.
Robo-adviser services do this automatically, but they cost money. What Passiv does is help passive investors rebalance their portfolio cheaply and easily. It notifies users when cash comes into their account and when their portfolio drifts out of alignment with their target.
“We’re very excited to see Passiv building a robo-advisor product on top of our platform,” said Alpaca CEO Yoshi Yokokawa. “This proves Alpaca’s community-driven approach and brings us one step closer to our vision of creating a developer-first investing infrastructure.”
Passiv now has three employees and its product is used to manage more than $250 million of funds in Canada. Lee Young, who co-founded Passiv almost three years ago with CTO Brendan Wood, said in an email that Passiv’s revenues have been increasing by four times annually, and the agreement with Alpaca should accelerate the growth.
“With this announcement and a push into the U.S. market, we expect for it to grow by 10x in the next year,” said Lee Young. “This will allow us to demonstrate how we can improve the investing experience for other brokerages in the U.S., U.K. and other parts of the globe.”
Passiv, which already has a partnership with Canadian online brokerage Questrade, said that major American online brokerages like Charles Schwab, TD Ameritrade, E*Trade, and Fidelity are dropping their trading commissions. This raises the question of how these brokerages plan to differentiate themselves. Lee Young believes that having open APIs and faster processes for vetting and partnering with companies like his could be one part of the solution.
“It’s really hard to get access to online brokers’ APIs and not all APIs are of good quality,” he said. “In my opinion, brokerages will need to get better at partnering, improving their APIs and also curating the right tools for clients if they want to compete.”
He added he was impressed with Alpaca’s openness to making changes to its API to accommodate Passiv, and that the New Brunswick company’s developers were elated by how easy it was to integrate with Alpaca.
Lee Young said his company is eager to find more partners: “We are going to be supporting and seeking more partnerships with U.S. brokerages, as well as raising capital.”