In August, the Israeli brokerage eToro hired Lule Demmissie, a longtime wealth-management director at TD Ameritrade and, more recently, president at Ally Invest, to head its growing presence in the U.S. Demmissie, who moved to the U.S. from Ethiopia when she was a teenager, has a lot on her plate.
The 13-year-old firm with 23 million users globally is joining a crowded field, trying to attract the same young retail investors as Coinbase Global Inc., Robinhood Markets Inc., Charles Schwab Corp. and many more. What makes eToro different, Demmissie says, is that it combines social media and investing, allowing users to mimic their favorite influencers’ portfolios. That may be a tough sell to regulators, who are circling the industry, especially those brokerages that are seen trying to “gameify” investing.
Currently, eToro offers U.S. investors only cryptocurrency products, but it plans to add equities by year-end and its “copy-trading” feature soon after. It’s also planning to go public through a special purpose acquisition company, or SPAC, and could list on Nasdaq by year-end. The firm’s Americas business amounted to 12% of funded accounts at the end of the second quarter, up from 6% a year earlier.
Demmissie, 47, works with a team based in Hoboken, New Jersey, where she spends two days a week. The rest of the time she operates out of her home in Brooklyn, where she recently answered questions by phone.
Her comments have been condensed and edited for clarity.
Tell me about your career before eToro.
I started out at JPMorgan and I supported the wealth business and the asset-management business there. That’s where I cut my teeth into our industry at a young age. Then, one of the advisers working at JPMorgan started up a practice at Merrill Lynch and he recruited me to be a financial adviser. I learned the emotional tick-tock of how people think about their money. At that time, self-directed investing was not what it is today. People needed an understanding of what money did and how to think of financial investing and how to extract their emotion out of money.
Then I decided I wanted to get my MBA and went to Columbia. After Columbia is when I got into things like product development and strategy.
You worked at Morgan Stanley for most of a decade, then TD Ameritrade and then Ally. Tell me about those jumps.
At that time (in 2009), disruption was starting to really well up and players like TD Ameritrade and others were nipping at the heels of the establishment players. And so TD Ameritrade recruited me to build out their wealth business for individual investors, not active traders. And at that time Robinhood was not around. So I helped build it. We helped build out the commission-free ETF programs, the trading tools for self-directed investors. I built out the wealth business, all of their robo-advisory business. It was just a ball. I was there about eight years and I felt like, ‘OK, I think I can even go smaller.’ That’s when Ally asked me to mature their investment business.
What kind of shift has the industry undergone in this period?
Investing has gone and will continue to go through the disintermediation that has happened in every other sector of our society. We have institutional powers sort of disintegrating and maybe more individual voices are rising in terms of how that industry is structured. What I love about this program and the ultimate reason why I stepped out of Ally and came here is the premise by which eToro built its DNA, which is that the retail investor doesn’t need a parent. They need guidance and education and a very easy system to use.
With so many competitors, how is eToro different?
There are three premises of this company. One is the ability to access instruments that typically one was not able to. The second is the ability to merge the social voice of influencers or people around the world who might be really good investors and traders and sharing the intel on the platform. Lastly, the ease with which I can copy them if I want to. I’ve not seen the financial firms of eToro’s stature move into the future like this.
I would say from a differentiation perspective, the biggest component is copy trader (which lets users copy the portfolios of successful investors on the platform.)
There’s been push-back to brokerages recently, especially the ‘gameification’ aspect. Are you worried about regulation?
It would be naive to say that’s not on our minds. It’s important to make sure that we avail ourselves of being part of thought leadership conversations as regulations are being formed. We think that at the end of the day, good regulation is a win-win for everyone. It allows everybody to play within a certain, known field and everybody knows the game in terms of how they’re supposed to act. So we’re not scared of regulation, but obviously knowing it and understanding it is going to be a nuanced process. And we’re eager to be part of that conversation as well.
Tell me more about the plans to IPO. Why now?
EToro is a fairly established company in terms of size and stature and so I think they thought that at this point that we were in the right stage of our maturity to be able to go public.
Anything else you want to mention?
We’re in this debate right now over, ‘Can the retail investor do it themselves? Will they get themselves in trouble? Will they shoot themselves in the foot? Do we need a sort of parental arm over them?’ One thing that is really important for us to bring into these conversations is to not think of it as an either/or equation. We’re committed to have an investment business that can one day also have things that people can follow, portfolios and strategies that they can track, but then also do things on their own as well. Having investment conversations be more nuanced is going to be very important for retail investors and the evolution of our industry.
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