Easy options option

This new-to-Houston startup is simplifying trading for the next generation of investors

Andre Norman founded Jellifin, an options trading platform, flipping the script on the traditional investment process. Courtesy Jellfin

Say you're a young, working professional who wants to get involved in trading. Where do you start?

If you get involved in options, which are contracts that give investors the ability to buy or sell a stock at a specific price on or before a specific date, you might go the traditional route and seek out a brokerage that focuses on options trading. There's a major catch, though: most brokerages tack on a fee of anywhere between $7 and $20 per trade, says Andre Norman, founder of Jellifin, an online options trading platform, is disrupting that norm.

The company works with individuals and brokers to provide an options trading platform at a flat monthly fee. This allows investors to trade as frequently or infrequently as they please, and to not factor in the cost of a trade fee when considering what's best for their portfolio.

"A lot of people don't invest because of the high costs associated with trading," Norman said. "We allow them to get into investing without having to pay huge amounts of money."

Jellifin was founded in early 2017 in Gainesville, Florida, but relocated to Houston in 2018. Norman moved for his then-fiance's job, but had little to no expectation for the city.

"I did light research, and realized it was trying to foster an entrepreneurial community, as well as innovation, so I came in with no expectations," he says. "When I got involved with Station Houston, I was blown away by what's being done and what's currently in play. It was a great move. This is where we're going to stay forever."

Pivoting Jellifin
When he started the company, Norman says his goal was to provide investors with a cheaper way to trade options. Originally, the company worked commission free — same way of trading at a reduced price. The company worked that way until 2018, when Jellifiin pivoted toward more of a B-to-B clientele — brokerage firms, trading companies, and trading companies. It became more of a white label company where the brokerages could license the software.

"We realized our core expertise was in the software development itself, and we realize customers like our product, but we saw more opportunity in working with brokerage firms which will then inadvertently disperse our platform toward their customer base," Norman says. "So, in the end, we're still serving the same core customer and the same demographic, but now we figured out a way to target them more effectively at a larger scale."

The pivot was ultimately a good move, but it didn't mean it made things easier for Norman and his team — in fact, the opposite happened.

"Surprisingly, it's increased our workload. When we started working with brokerages, one of the core problems we realized is that they're small, and they don't have the in-house expertise or resources to build their own trading platforms," he says. "Our value proposition to them is that we can be their support."

How it works
The brokerage firms that use Jellifin's services license the trading platform — they agree to a minimum of two years — and they pay a monthly subscription fee.

"It's a volume-based pricing system — the brokerage payment covers what [the individual customer] would pay," Norman explains. "The brokerage pays for the software itself, and whatever sort of arrangement that the user has with the brokerage is up to them."

The current industry norm is $7 per options trade, Norman says, plus the contract fees. An option trade could run you anywhere from $7.50 to over $20 per trade.

"That's a big problem in the industry," he says. "What we've brought to the user base is [the ability to spend] $9.99 per month for unlimited trading. The actual cost per trade is pennies on the dollar, but brokerage firms still mark it up thousands of percent, because the average user doesn't understand what goes on when they click 'Place Trade.'"

Because of this ease of use, the company has attracted millennials — specifically the age range of 28 to 33.

"They invest quite frequently — I wouldn't say they're day traders, but they're very actively invested in the stock market," he says. "They're not a passive investor. They trade on a weekly basis."

Norman says, based on their assessment, that their average user earns an income of anywhere from $70,000 to $120,000 annually.

Weighing the options
The company plans to grow — and is even looking for sales and marketing hires.

"Right now, we're a team of six, and we're all engineers," Norman says. "I would say we're hiring, but for the right positions. … we're looking to grow more organically and not raise huge amounts of capital. We work closely with our partners, and we grow as they grow."

So far, the company has raised just under $500,000 to date, but is planning to raise an amount in the millions of dollars.

"We will be raising a new round hopefully sometime soon, but there's no rush to get to that," Norman says. "For us, personally, our generating capital from the companies we work with."

It's National Retirement Security Week — and to celebrate, you need to start thinking about saving. Getty Images

National Retirement Security Week is upon us. In 2006, the United States Senate passed a resolution establishing the third week of October as a time to raise awareness about the importance of retirement savings and to encourage Americans to contribute to their retirement plans. The sponsors of the resolution hoped Americans would think about their retirement goals and assess their progress.

The Senate had good advice. Consider this: less than half of Americans have calculated how much money they will need to have in retirement. Additionally, the average person will spend a whopping 20 years in retirement. This data means you need to be proactive in your retirement planning, especially if you plan to retire early. Experts project that the average American will need 70 – 90 percent of their pre-retirement income to continue to live in their current standard of living. Even with well-funded savings, retirees will face challenges such as high costs of healthcare and the future of Medicare and Social Security.

For young investors

Research has shown that younger Americans, approximately ages 18 to 35, say the ideal time to retire is 60 years old. However, young professionals need to remember that the full retirement age for social security benefits is 67 years of age. Therefore, saving early in their career is key to attaining a livable retirement income.

Additionally, many young Americans are simply not saving for retirement at all. Data has demonstrated that two-thirds of Millennials have nothing saved. A rule of thumb is to continually save 10 to 15 percent of your income throughout your career for retirement. If you would like to retire at 60 years of age, you should be saving 20 percent or more.

First step: Start saving

Therefore, your first step should be starting to save today, and it should be a priority. By beginning to save as soon as possible, you benefit from the power of compound interest. Each year's investment gains build on the next year's gains. Ideally, you should begin saving for retirement in your early twenties at the beginning of your career. Saving early can reap big rewards later. However, if you are further along in your career and have not been saving, start now.

Many employers offer 401(k) plans, allowing employees to save for retirement before taxes are taken out of their paycheck. If your company offers a 401(k) plan, ensure you are enrolled and contributing at least enough to receive the maximum matching contribution. In 2019, the IRS allows you to contribute up to $19,000, and for those 50 and over, you may contribute $25,000. While 401(k)s have many benefits, there are some restrictions. For example, the plan may require you to leave the money in for a minimum amount of time before you are entitled to your employer's matching contributions. To ensure you understand your employer's plan, consult the plan administrator.

Not all employers offer retirement plans. If that is your case, or you are self-employed, look into an IRA. These accounts are another smart way to save for retirement. IRAs are controlled by you, not your employer. You can choose either a Roth IRA or a Traditional IRA. The difference between the two varies on issues such as age restrictions, income limits, and tax breaks. For an IRA in 2019, you may contribute $6,000 per person, or $7,000 for those 50 and over. Similar to 401(k)s, IRAs can be set up by automatic deduction if you so choose.

No matter your industry or the season of your life, take the time this National Retirement Security Week to educate yourself on your saving options, focus on your retirement goals, and begin the action steps necessary to be able to retire securely.

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Marcellus Davis is a financial adviser with the Wealth Management Division of Morgan Stanley in Houston.