mephistopholes

The Long Case for ThinkorSwim Group

powersports,

Your post offers no point other than an irrelevant attack on my SA pseudonym. Is that all you've got? As far as my "dog getting whupped" turn your TOS stock chart one quarter turn to the right and you will see who's getting "whupped" ...TOS closing the day at $7.60. Sad for the faithful TOS spin doctors who talk around the company's horrible financials and continue to lead investors down the primrose path but even more sad for the faithful investors who are getting milked dry.

M

P.S. We thankfully sold at almost $14 a share so our dog is plenty happy.

The Long Case for ThinkorSwim Group

Soluskro,

I apologize for the delay in answering a couple outstanding questions from you and I appreciate your patience as I beat what I’m sure many believe to be a dead horse. Sometimes it's easy to lose track of our fight against consumer negligence and this week our efforts have been tied up on the mortgage companies. Brokerage is the next on the list for decriminalization so the proverbial horse isn’t dead just yet.

You asked, "you seem to actually want to go back to a focus on the investor education? Yes? No?" My response to that is that it is the duty of any company that handles the consumer dollar to educate the consumer regardless of whether they can profit from it or not. This was tricky for Investools who entered into the financial services business as a so-called education company. It's debatable whether the product they offered pre-merger was education or just glorified motivational hype masquerading as legitimate transfer of knowledge. I would encourage shareholders and consumers alike to continue to push for success metrics of the Investools "PHD, Masters and Associates" students on a then and now basis to really be able to gauge if former consumers got what they paid for or not. It was common knowledge pre-Think or Swim that the vast majority of Investools PHD students were paper trading well into their education, market success metrics were not available, and a high percentage of those purchased the programs with a credit card. It has also been questioned whether the Investools instructors and coaches were primarily paper trading when they boasted their high returns. This is what we would think would ultimately put an end to the edu-sales model that was born out of the seminar business that Barba and his gang still seem to be clinging to, even after the until the SEC got wise. The Think or Swim education model (pre-Investools), on the other hand, was legit from the get-go. This was a group of ex-floor traders and experts from the industry who were passionate about what they were doing who wanted to share their knowledge and weren’t concerned about commissions on education packages or selling mom and pop into a PHD. The educators were professional traders and not professional sales people trained by other professional sales people. This is the biggest difference between real education and the pseudo education that Investools still touts on its Investools.com website today. Incidentally, if investors were not confused enough before the peculiar name change on June 6th, they should be asking why the Investools.com website has not adjusted its marketing at all to adapt to their new effort to support “educated options investor” that Barba has become seemingly fond of in the past year and specifically with the new model. In fact, the website still screams of the seminar edu-sales model that has consistently been the thorn in this company’s side all along. Those signing up for these programs today, which still adhere to the pseudo academia model (associate, master and PHD) are not being taught by the expert floor traders over at Think or Swim. They will be taught by the Investools travelling sales associates and phone coaches in their Salt Lake City office who will be on a much tighter rope and won’t be able to make the return claims they have freely used in the past to gain individual credibility with consumers. Investors and consumers should be demanding to know what credentials these educators have, both the travelling sales people and the in-house coaches (and the management team for that matter). The instructor and coaching bios on the website are far from impressive compared to those of the ex-floor traders over at Think or Swim. To make a long story short, this company needs to be held fully accountable from here on out on what they are passing off as education or they will continue to not only casually embarrass themselves and wreak havoc on the stock price, they will be suspect when the aforementioned decriminalization horse rides into brokerage country. The mortgage lending industry was extremely lax and irresponsible when it came to providing education to consumers. They were quick to take the life’s savings of the consumer as a down payment to get them into their dream house, but when it came to providing basic education the consumer about their investment, they fell drastically short. As long as Think or Swim attempts to pass off the archaic, method-based, cotton candy education to consumers in an effort to bump account openings and pad the bottom line, they will not only fall short, but they will risk consumer and shareholder dollars alike. Think or Swim and all financial services companies who still profit from information distribution especially need to be held accountable to show success metrics and that’s what groups like ours are committed to doing (just in case you were wondering who the heck I am).

We have also long past the technological age where the information that the Investools program presents as well as the tools that it charges consumers for on their “Toolbox” website, are ubiquitous, not to mention free on just about any other financial services site. As we continue to see scrutiny on companies throughout the financial services sector, it’s our theory that those who are keeping information and resources behind lock and key and reserving them for consumers with room on their credit cards will be the first to come under suspicion.

I hope this helps and best to you.
~M

The Long Case for ThinkorSwim Group

Solukskorio,

The education business is not a scam and that is not the thesis. Investor education is a perfectly legitimate business if conducted ethically and we can actually thank Investools for this. Under the leadership of many who are now long gone, Investools took a penny stock company from a shady seminar business to a legitimate education company with many fine instructors and coaches. There are thousands of internet postings pertaining to the “Investools scam” and they can all be summed up by the words of successful Investools users; like any other educational offering, you get out of it what you put into it. There is a whole community of Investools die-hards, both on and off the payroll who are committed to helping each other become educated investors. But the company does not produce these educated investors at a healthy enough rate that will sustain those appealing metrics you so diligently outlined.

The problem is that once Think or Swim account openings, not student success, became the focal point of the operation at the top level of the business, this legitimacy of education or concern with student success fell quickly by the wayside, not at the hands of the educators but at the hands of an amateur management division overseen by a very greedy C-level staff wearing rose-colored glasses when it came to their own business. As you have so diligently pointed out for us, it is far easier to produce metrics on brokerage account openings than it is to gauge the success of a student. And thumbing through metrics on quality account openings is surely a lot more fun for overpaid, overrated CEOs and CFOs than thumbing through student retention metrics, which, even with the finest data analysts, are difficult to report against to investors and consumers. The Investools CEO and his dream team seemed too afraid to get their hands dirty and effectively separate from the seminar sales business and instead thought they could get away with merging it with legitimate financial services business created by the seemingly competent Sosnoff and Sheridan. In good financial services business, the two just don’t mix. To make matters worse, the education division, which was by no means a cash cow, seemed to inflate in headcount, expenditure and salary levels at a peculiar rate after the merger compared to the streamlined Think or Swim operation leaving investors and consumer advocacy groups to wonder who is really in charge of this oversized, top heavy organization. At last check it seemed to be a senior vice president named Andrew Scott who was closely affiliated with the legacy seminar business. Friday’s press release appears to indicate that Mr. Scott was demoted and is now teaching seminars again.

The "thesis" (is this English 101 or something?) is not about the legitimacy or quality of the former educational model. The thesis is that dishonest business practices and misinformation spewing from the mouths of fat and happy upper management, that will ultimately leave the Investools "alumni," consumers and investors with a bad taste in their mouth, who have bought into the Investools bull via national ad campaigns that anyone, regardless of their previous knowledge, can become a successful self-guided investor only to have the company change its mind mid-course. What happens to all of these people now that Think or Swim’s new model caters to the educated options investor? Are they going to wait up for the rest of those 275,000 graduates to learn how to successfully trade options and become prime Think or Swim account holders? They probably won’t and because, again, there is no predefined metric to evaluate success at the consumer level, that figure of 17 complaints, which we’re assuming are BBB complaints, will unfortunately not grow much higher. Disgruntled students who can’t find their instructor or who don’t want to stop their education mid-strategy to go learn vertical spreads with a new instructor under a new model will fall off in droves and most will never contact consumer advocacy groups. We encourage these consumers to hold Investools accountable for what they paid for and ask for their money back if they feel that the new direction of the company turns out to be contrary to what they have been promised at Investools workshops or via other means of purchasing their educational products (online or by calling into a sales call center).

Think or Swim didn’t need to wash its hands clean of investor education or the name Investools. It needed to wash its hands clean of bloated incompetence and egos (not to mention obscene salaries) at the upper echelons of the company, those who have likely never interacted with their own customers at any legitimate level and those who have no idea how to even define “educated options investor.” The simple law of gravity states that what goes up must come down. Despite a good run, the stock price today is a good indicator that this company is down. If the charts read correctly, down to about the same price it was at when the two companies “jumped into bed” with each other. Investors and consumers alike should not only be asking questions, they should be pissed.

The Long Case for ThinkorSwim Group

The disconnect between Thinkorswim’s intrinsic value and its current market value that Mr. Makula asserts is a product of rogue speculation, gross mismanagement and deplorable marketing tactics of the business, specifically Investools’ incompetent upper management, a disservice to itself and to its investors. But most importantly, the disservice is to the consumer. Ultimately, it’s this consumer who will decide the fate of this ambiguous and irresponsible thorn in the once legitimate brokerage business’s side.

The multiple failed attempts to “consummate” the marriage between Thinkorswim and Investools (this was the brilliant marketing spin used on the Thinkorswim website to announce the merger of the two companies) are more than just a product of trial and error. The company has rebranded, renamed and restructured numerous times since the acquisition of the brokerage entity and through these trials and errors (mostly errors) they have learned one thing. Large account openings are what produce profits. Not rocket science by any means. But therein lies the ever-present problem of an investor education division that was founded on the premise of taking broke (or just over broke), everyday consumers and teaching them how to invest in the stock market by going though method-based education, which is not as easy as Investools would have the consumer believe in its shameless advertising. Net, the legacy investor education model based its success on its ability to sell customers of the basic education (which has dropped from around $4,000 to $199 over the past few years), into expensive advanced education, which Investools fashioned as “Masters” and PHD” education, although having no formal academic accreditation. The result is that Investools was never able to successfully show to consumers or investors that their educational methods could turn the average consumer from just-over-broke to a holder of a quality account (over 40K). What was once perceived by many analysts as a brilliant move to turn the education business into an automatic lead source for its new mistress backfired once people caught on and realized that these leads, for the most part, did not equate to “quality” account openings that the company now relies upon to sustain. To follow in the simplistic vein of Mr. Makula’s peculiar comparison of financial services to the ladies lingerie business, simply put, after Investools and Thinkorswim married, Investools failed to put out.

So, onward to plan B. The more intelligent of the two newlyweds, Thinkorswim, eventually realized how difficult it would be to leverage these seminar-esque marketing techniques and apparently got fed up with “informal SEC inquiries.” It seems blending shady seminar sales tactics with regulated financial services business under the same roof under the guise of the same corporation is not only bold, it is downright stupid. With that spawned the “informal” investigation. Heaven forbid if an alert consumer actually questions the magician’s sleight of hand on stage of one of these educational seminars. Incidentally, unless you are an Investools “subscriber,” meaning that you purchase access to their analytical tools platform, as well as have a brokerage account with Thinkorswim, these seminars are not only ineffective, they dangerously instill the notion that anyone can become a successful options trader by going through their education tract. Yet, the company consistently fails to produce metrics to support this claim.

So, regardless of the valiant attempt over the past five years to validate and obtain credibility in the emerging “investor education” arena, it was much easier for Thinkorswim (the one who wears the pants in the aforementioned marriage), to simply kill their spouse. And that’s what Mr. Barbara’s bell ringing on Friday signified at the close of market—the end of Investools. It also likely explains the subtle (very subtle) release or repositioning of those who were connected with the Investools seminar business. Perhaps Thinkorswim, the brokerage, is unhappy with many of its new bride’s friends right now. And they have every right to be.

If all works out in this latest strategy effort, the company will no longer be pestered by wanna-be options traders, non-valuable account holders or skeptical consumers. Their focus will, at least for this round, lie on catering to serious options investors who have already been educated by some legitimate means, whether by Investools educators or not (likely not). But are serious, educated options traders going to want to “join the revolutuion” and join the Thinkorswim big top circus at the competitor-crushing rates that the volatile company has basked in for the past year? Probably not for long.

As Thinkorswim’s new and improved education division under the guise of Thinkorswim is busy washing the blood from its hands and teaching its new breed of pre-educated options investors how to lose larger sums of money with its quasi-methodical approach (like spread trades), don’t forget there remains a legacy 275,000 “graduates” of the Investools old that have little or nothing to show for their investment except for some outdated handbooks and a blown-up account. There are also plenty more items of baggage that carry the scent of a shady downtown Holiday Inn conference room. The seminar business is a scent that is nearly impossible to wash out. Thinkorswim can run (or swim or whatever the hell they do) but they can’t hide. At some point they are going to have to face not just their investors but the consumers, both today’s consumers as well as the ones they left downstream. Used cars are one thing but playing with people’s retirement accounts is another. Consumers (even the smart options traders) will eventually get wise.
Incidentally, the boasting of the Barron’s rating is passé, highly overused, and increasingly irrelevant as Thinkorswim continues to complicate and implode its own business model, confuse investors and leave its consumers out to dry. It’s one thing for the marketeers of this thousand-pound gorilla to throw this distinction around. It’s all they’ve got. But it’s unsettling to see this reference popping up in articles from people who don’t even get a kickback from the company. Despite Thinkorswim and its supporters clinging to this annual distinction for dear life, it’s really not that cool of a distinction anymore and neither is the Thinkorswim trading platform for that matter. It is unnecessarily busy and lacks logical best practices that other platforms are QUICKLY becoming keen on. Barron’s will figure this out eventually (hopefully this year), especially with the surge of legitimate consumer/user-centric brokerage platforms appearing. Serious options traders are much better off investing their money in smarter, longevity-focused companies with more consistent (and ethical) practices and companies who employ educated financial practitioners, not ego-driven spin doctors like Mr. Barbara and his obsequious bunch of non-investor dog and ponies to run their business. These legitimate companies will prevail through the “educated options investor” bubble by employing people who know how to position a business for longevity and sustainable growth. The irony is that Investools, or thinkorswim, or whatever their name is this week has employed many smart people throughout the years who are prepared and capable of building competitive businesses in the long-term market. But ego, greed and stupidity ultimately drive this company.

It seems, regardless of Thinkorwsim’s public execution of its “new wife” on Friday, it will take more than a name change to wash the blood from its hands. As the company’s website theme suggests, this truly is a circus of errors. Cut and run. Short or long, cut and run.