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Kathy King

Folio News


Peer-To-Peer Lenders Get Into Secondary Market
(by Arden Dale, The Wall Street Journal)

October 20, 2008 — Peer-to-peer lenders are stepping into new turf with a move into the secondary loan market. Lending Club, a major peer-to-peer lender based in Sunnyvale, Calif., last week started letting its customers buy and sell loans after the Securities and Exchange Commission approved the activity. more

Edward R. Woods, a senior analyst at Boston-based research firm Celent, said the move by Lending Club is clearly a first in peer-to-peer lending, and that it has also breached new territory “in terms of the ease which consumers can get into the secondary lending market.”

Peer-to-peer lenders put together loans between individuals. Borrowers post loan requests along with information about themselves on peer-to-peer Web sites, and people step forward to offer money. by starting a second market, peer-to-peer lenders hope to attract more customers partly by increasing the ease with which they can get their money back.

Lending Club customers appear to like the new initiative so far. In the first four days of business since the company launched the initiative on Oct. 14, about 600 new lenders signed up on the site and transferred a total of $1.2 million into their accounts, said Renaud Laplanche, the firm’s chief executive.

Lending Club supports its secondary market with a trading platform on its website run by FOLIOfn Inc., a registered broker. Lenders open an account with FOLIOfn and use the funds available in their lending club accounts to buy notes through the trading platform. There isn’t a cost to open the FOLIOfn account, said Laplanche, but there is a 1% trading fee to trade notes.

The Wall Street Shuffle
(host Dan Cofall, BizRadio)

October 2, 2008 — Steve Wallman, former SEC Commissioner from 1994-1997 and currently CEO and founder of Folio Investing, was interviewed by Dan Cofall on his radio show “The Wall Street Shuffle.” more

The topic was Wallman’s alternative plan to the financial bailout proposed by Congress. Unlike the Congressional plan, Wallman’s approach addresses the underlying cause of the problem—namely, homeowners’ mortgage delinquencies and foreclosures. His proposal calls for the government to stabilize housing. Here’s how, explains Wallman: Offer any financial institution that owns a mortgage of an owner-occupied home in distress, to provide that homeowner — in lieu of any penalties or foreclosure — a government guarantee of the current or missed payments under the mortgage. If the homeowner agrees to have the government take over the payments, the financial institution would inform the government, the government would make the payments, and — in exchange — the homeowner would sign a note agreeing to repay the government some years in the future — say, 10 — with interest at the same rate currently required under the homeowner’s mortgage.

The plan is simple, halts the cycle of foreclosures, and restores capital and liquidity to the financial system.

Dan Cofall told Wallman in the BizRadio interview: “Your plan is so elegant for solving the problem…You put taxpayers first in your proposal. This is what I call reaching across the aisle” to both Democrats and Republicans. He concluded: “I think your plan is genius.”

Research Specialists Aim SMAs at DC Mid-Market
(by Neil Anderson,

August 14, 2008 — Zacks Investment Management just jumped into the defined contribution mid- market through an alliance with FOLIOfn Institutional. On Thursday, the Chicago-based RIA (a subsidiary of Zacks Investment Research) unveiled the new SMA-based offering targeted at firms with $20 million to $50 million in DC assets. more

The partnership represents more distribution for Vienna, Virginia-based FOLIOfn, which is pushing into the 401(k) space with its back office and fractional-share trading platform services by teaming up with TPAs and distributing entirely through advisors. FOLIOfn also unveiled an alliance with Alliance Benefit Group Carolina in June.

“We embrace these types of partnerships that bring innovation to the market,” stated Greg Vigrass, president of FOLIOfn Institutional.

Andy Zimmer, Zacks Wealth Management managing director, said his firm plans to go to the independent RIA channel and “act as a one-stop-shop for them. We’re absolutely looking to partner with other TPAs.”

Alan Smith, vice president of institutional sales at FOLIOfn, agreed: “We can plug and play with just about any local TPA. Between the two of us, we’re really able to go out and talk to any size plan.”

Zimmer added that Zacks has been working with FOLIOfn for seven years on private client group business, making the partnership a natural fit.

President and CEO, F-Squared Investments What Took So Long for the Industry’s First $15,000 Low-Fee SMAs?
(by Howard Present, Broker Dealer Journal)

August 7, 2008 — Conventional wisdom held that it was impossible to offer a low-fee separately managed account (SMA), while dramatically dropping the minimum. Traditionally, SMAs started at $100,000, cost about 100 bp before compensating the advisor or broker, and required about $1 million in investable assets. more

F-Squared Investments chose to buck the conventional wisdom, however, with “a breakthrough solution” SMA requiring just a $15,000 investment and an all-in cost to advisors of 55 bp. This makes the SMA accessible to a substantially larger number of clients—those with investable assets of $150,000 to $200,000. “That means that SMAs could be an option for a significant majority of an advisor’s client base, not the current minority,” noted Present, who is President and CEO of F-Squared Investments.

F-Squared was able to bring this innovative solution to the market, thanks to relationships with FOLIOfn Institutional and Smartleaf, two other firms that shared their philosophy of cost controls and thoughtful use of technology. “FOLIOfn is a discount brokerage firm in Virginia that has innovated the use of fractional shares and basket trading techniques to dramatically lower operational and implementation costs,” wrote Present. Smartleaf is a Cambridge, Mass.-based firm that provides industry-leading solutions for overlay wrap programs.

FOLIOfn Benefits from New DC Distribution
(by Neil Anderson, 401kWire)

June 24, 2008 — FOLIOfn Institutional just snagged a distribution partner in the retirement plan space. On Tuesday the Vienna, Virginia-based back office and trading platform firm unveiled an alliance with Alliance Benefit Group Carolinas aimed at the advisor-sold marketplace. And through the partnership, FOLIOfn aims to connect with the other ABG member firms as well. more

Alan Smith, vice president of FOLIOfn Institutional, said the partnership allows the firm to “reach essentially nationwide” in the 401(k) space, through the ABG network. He praised ABG for its “good understanding of boutique retirement plans.” In creating the partnership, Smith said that several of the 401(k) industry’s hot topics, like fee transparency and fee compression, played a huge role.

While the Charlotte, North Carolina-based TPA handles the administration and recordkeeping, FOLIOfn brings back office support and custody for advisors who build their own model portfolios, or Folios, for their plans.

Alliance Benefit Group, FOLIOfn Offer Retirement Plan Systems
(by Rebecca Moore, PlanAdviser)

June 24, 2008 — Retirement plan consultant and record keeper Alliance Benefit Group has teamed up with FOLIOfn to offer advisers retirement plan systems. Alliance Benefit Group Carolinas, LLC (ABG Carolinas), will be utilizing its defined contribution and defined benefit administrative services together with the custody and technological resources provided by FOLIOfn Institutional, a division of FOLIOfn. The two companies will offer customized, professionally managed retirement plan systems. more

ABG Carolinas said several registered investment advisory firms are already on board and it is seeking to partner with more advisers who are looking for solutions outside the bundled mutual fund arena.

Emerald’s Alternative Allocation Strategies Offered on FOLIOfn Platform
(by Ellie Behling, PlanAdviser)

June 16, 2008 — The Emerald Allocation Strategies (EAS) hedges investments as an alternative to hedge funds, and is now offered on the FOLIOfn Institutional platform, a self-clearing trading platform with technology services for broker/dealer representatives and independent advisors. more

The new offering from Emerald is aimed at financial advisors who wish to outsource all or a portion of their back-office, administrative, reporting, and investment needs. Emerald said the launch is part of a broader effort to introduce its investment program to advisors and broker/dealers.

Separately Managed Accounts Have Tax Benefits
(by Allison Colter,

June 2, 2008 — If you’re tired of paying taxes on mutual fund distributions, you might want to consider investing through a separately managed account. more

F-Squared Investments of Wellesley, Massachusetts, recently started offering a handful of products with one of the lowest minimums around: $15,000. That’s at the higher end of the minimums on mutual funds aimed at retail investors. Howard Present, president and CEO of F-Squared, says that with a $15,000 minimum, an investor with as little as $100,000 to $200,000 can enter the club.

What’s so great about separately managed accounts? You actually own the underlying securities. That means you won’t incur a capital gain unless the securities are sold at a profit although you may get a tax bill for stock dividends or interest on bonds.

You can’t sign up for one of these accounts on your own; you must do it through a registered investment advisor or broker-dealer. And it may be relatively difficult to find one that offers the accounts, because F-Squared is making them available only via the FOLIOfn trading and custody platform. Present says FOLIOfn offers the capability to trade fractions of shares, which may be necessary with smaller accounts.

Start-Up Pushes SMA Minimums to New Low
(by Tom Stabile, FUNDfire)

May 7, 2008 — Separately managed accounts (SMAs), once unavailable for those with less than $1 million to invest, are now feasible for investments of just $15,000, thanks to five new SMA strategies introduced by F-Squared Investments of Wellesley, Massachusetts. Each offers a $15,000 minimum investment and all-inclusive fees of 55 basis points. Previously, high minimum investment requirements made it difficult to obtain adequate diversification, even at the $1 million level. This new offering makes SMAs attractive for investors with $100,000 to $200,000. more

Implemented on the FOLIOfn Investments, Inc. platform, together with tax management and client-level account customization via overlay management software from Smartleaf, the new SMAs give independent advisors a product that can compete against mutual fund wrap programs, where total costs may range between 120 and 140 basis points. The article notes that FOLIOfn’s proprietary fractional-trading system is a key component of these SMAs, since it allows small accounts to mirror the holdings of larger SMAs without incurring prohibitive trading fees.

The ability to set the rate at 55 basis points owes largely to the technology and the fact that all SMA transactions—including custody—are streamlined on one platform. Greg Vigrass, president of FOLIOfn Institutional, commented: “In the past there was a barrier to bring SMAs to this level. It’s no longer the factor here.”

The Do-It-Yourself Retirement Fund
(by Katy Marquardt, U.S. News & World Report)

March 19, 2008 — To avoid the one-size-fits-all approach of target-date funds, FOLIOfn, a Vienna, Virginia-based brokerage, recently launched a series of “building block portfolios,” which come in moderate, conservative and aggressive variations for each target date offered. more

A Folio “wizard” helps investors choose the best fit. Each “folio” contains a basket of exchange-traded funds (ETFs) that gradually shifts to a more conservative allocation over time. “Here’s the twist: Investors can tweak their portfolio at will, since they technically own the ETFs directly,” writes Marquardt. Unlike mutual funds, the folios aren’t run by a paid fund manager and registered with the U.S. Securities and Exchange Commission (SEC). This structure promotes customization and flexibility, while maximizing diversification — in contrast to many of the existing target-date solutions, which simply track the S&P 500.

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