Huddlestock – My view – Focus on scalability

In my last “My view” article about Huddlestock I focused on the overview and the overall concept that I see within Huddlestock. Now the Q2 report has been released and I want to address some details about how I view the operation.

My focus is always on scalability. I would much rather have a business that can automatically onboard customers and have a good margin on each customer than to hold out for a big deal every now and then to save the day.

In my opinion, Huddlestock has exactly what it needs to do just that. It has the software from Bricknode and the regulatory permission in Norway with passports into other countries like Sweden and many more.

The big idea

When we started Bricknode our big idea was to create a B2B focused online brokerage firm which had full control of its software and had its own regulatory license so it could act as the broker/bank for customers. Financial advisors would be able to onboard themselves to Bricknode as their broker and as their administrative tool to run their business.

They could then direct their own customers to a sign-up link where they would be onboarded to Bricknode and linked directly to their financial advisor. The advisor could set up their fee structures which would be automatically handled by Bricknode, and the fees would be automatically transferred to their Bricknode account.

Model portfolios could be designed for both individuals and groups of customers while at the same time the customers could have other accounts which they direct themselves, all within Bricknode.

The network effect

Eventually we would be able to build networks between many financial advisors, FinTech companies with alternate investment offerings and the end customers to become the primary platform and broker/bank for both B2B and B2C. We would finally end up organizing finance 😊.

I was a financial advisor for several years and experienced the need for a B2B focused broker like this. Me and many of my peers tried to find a solution but we always had to do a lot of administrative work ourselves and all the online brokers were heavily focused on B2C and not B2B.

When we started Bricknode we did not have the capital to do this as a big-bang approach, so we had to first think SaaS and at least partially finance the creation by offering other financial institutions the opportunity to use our platform as it was being created.

This slowed us down a bit but also forced us into building the software so that others could use it and to create configurations and to build it very generic.

Since we did not have our own brokerage license, we could not offer to take on customers in our own custody so instead we had to charge software fees and the customers had to have their own permissions to hold assets, process orders and have their own relationships with fund trading networks etc. Bricknode became only a software supplier and not a real provider of the whole solution.

The complete solution

Now with Huddlestock this is different. For the first time ever, Bricknode, together with the brokerage license of Huddlestock, can act as the real solution provider with a completely different business model. This removes the hurdle for the customer of having to pay software fees and then having to solve a lot of problems themselves.

To me, self-onboarding of B2B customers like, for example, financial advisors and their end customers is something that is extremely valuable. As an investor I am focused on what can be done today and repeated over and over again to absurdum. Sure, a large deal here and there can help to push things forward but that is not where I see the potential multiple coming from. It is what can be done now and how it can be scaled rapidly!

This is how I perceive value and why I continue to be extremely excited about what I do on a day-to-day basis in the “code cave” and in the structuring of automated processes to take care of administration. This is how you build scalability from the ground up, not the other way around!

How to build financial freedom from an early age

Lately I have been getting some questions from young people who are just starting out their investment career and also from parents. Parents are wondering how to set their children up for financial stability given that it seems unlikely that you should put all your trust in the public pension systems to take care of you.

I must say that I really enjoy answering these types of questions and I learn a lot from interacting with young people about finances and investing.

Compounding of interest

I usually start by showing a chart that illustrates the power of compounding interest. If you start saving 1,000 SEK (100 USD) or 2,000 SEK (200 USD) each month from when your child was born and you get an average of 10% return each year, how much money would that end up being?

The chart below shows this calculation for 1,000 SEK per month with the bottom axis showing number of years.

If you instead invest 2,000 SEK per month the results are as follows.

This is nothing short of amazing, with only 1,000 SEK per month invested, at the time the person turns 40, the person will have more than 5 million SEK in their account. If you muster to invest 2,000 SEK per month the person will reach 5 million SEK at the age of 33 and at age 40 the amount will be over 10 million SEK.

This of course assumes that all returns are re-invested into the portfolio and not used for any living expenses. Now let’s look at the annual returns.

Annual returns

With 1,000 SEK down per month the annual returns would be according to the chart below.

At age 40 that would mean over 500,000 SEK per year. If the investment would be 2,000 SEK instead the return would look as follows.

This would mean over 1 million SEK per year in returns at age 40. At age 65 with 2,000 SEK invested per month the annual return would be almost 12 million SEK per year and total capital of around 120 million SEK!

How to get returns?

Now on to the hard part, getting 10% return every year over a period of 65 years is hard, but not impossible. Some years you will get a higher return and some years you will end up with a loss depending on what you have invested in. You will also have years when your portfolio of investments overperforms the general market and some years when it underperforms.

Here is an example of one of my own portfolios that I started just in February this year.

It is up 33% since then and including the dividends that I have received it is up almost 40% this year. This is a very conservative strategy that is designed to invest in dividend generating stocks which are undervalued. During this period the Swedish market index called OMXS30 is only up 7.19% so currently this strategy is widely overperforming. Over time though it is designed to generate around 8 – 10% per year.

From when I was 22 years old, in the year 2000, until 2006 I was a money manager. I had a hedge fund based in Chicago and I was investing and trading other peoples money including my own. This was a great experience but I also realized that I liked building companies and managing my own investments more than managing other peoples money.

The bucket system

I developed a philosophy that I call “The Bucket System” and that is what I now teach to people that are interested. More on the bucket system in my next article so stay tuned!

33% growth in 8 months!

In my recent article about Huddlestock I included a section about Investments as a Service (IaaS). In my opinion, the most valuable part of this service (IaaS) is the Brokerage part where both technology and the regulatory license of Huddlestock is combined into one package.

One of the most important leading indicators is Assets under Administration (“AuA”). AuA means how much value (cash and other assets like securities) is being administered in the custody accounts of a brokerage firm or bank.

Huddlestock just announced in this press release that its AuA had grown 33% since September 2023 and now surpasses NOK 5 billion.

More AuA means more business and more customers with accounts so this is really great news. Getting to the first billion is usually very difficult and Huddlestock has now reached a very meaningful milestone.

Market update – a look at inflation

Inflation

Last time I wrote about this it was 2022 and inflation was going wild. Now some time has passed and first let’s have a look at the indicators that I watch.

Starting with the CRB Index in SEK it has consolidated at these high levels and the average is still rising. Commodity prices has definitely not broken down yet so this is an area of worry for me.

Next up is the annual consumer price index for Sweden. This has come off considerably and is continuing to drop. I am a bit concerned that the continued strength in the commodities will result in the CPI drop stalling and not approaching the target level of 2% though.🚩

Now looking at the gold prices compared to the Swedish Krona. Gold has had a monster run for sure while the Swedish Krona has been weak. I exited my Gold positions way to early obviously.😭

Finally here is the real interest rate in Sweden where I adjust the 10 year interest using the consumer price index as the inflation rate. The real interest rate is still negative but has approached the levels where it has been historically.

Of my four inflation indicators in Sweden there are still three that are negative which is rather alarming.

The stock market

My overall stock market indicators are still positive, except for the PE ratio valuations. They are still not outrageous though so I feel rather good about continuing to hold some stocks.

I have a dividend producing portfolio of stocks that is producing very good results with main holdings in Bahnhof, Nordnet and Tele2. All of them have gone through some multiple expansion so they are not that attractive for new investments as they were a couple of months ago though.

How about savings accounts?

There are still a lot of good savings accounts paying a nice interest rate. SLANTAR.se has good comparisons for both individuals and companies. You might even consider entering into some agreements where you secure certain interest rates on your savings accounts for a year or two at this stage if you know that you will not need that cash for other purposes during that time.

Should I do anything about my house loans?

That is a tough nut to crack. The rates are currently not very low, nor extremely high. There is room for them to both go up and to go down. I don’t think that there are any great deals to be had so if loans are up for renewal I would simply let them run with the standard 3-month renewal rate and wait for better opportunities!

Huddlestock – My view – The Overview

What is My view?

“My view” is my way of expressing my own personal opinion of things that engages me. It gives me the opportunity to be candid, transparent and open. I am a person who likes to focus on things and if I get engaged in something as an entrepreneur I will always give it my all. Currently my absolute largest engagement is Huddlestock!

I love to share and talk about what I am doing to keep as many stakeholders as possible engaged and to stay open to feedback and suggestions. I will always have an opinion on things but I can also change my view on a dime if someone suggests something better.

People are reaching out to me with questions regarding my various posts in social media and this is where I will post my longer answers.

I have spent most of my adult life learning the ins and outs of the financial markets. First as an analyst, trader and money manager at my own fund and later as a creator of financial administrative systems. After creating numerous fintech applications between 2004 – 2009, way too early 😂, I came to the conclusion that I wanted to create a core platform that others could use as a base when creating their fintech initiatives. I found some old images of services that we created between 2004 and 2009 😊, enjoy!

I also wanted to help traditional financial institutions to join the new era of APIs and real time communication as opposed to file transfers and batching to create a better experience for consumers of financial services.

Because of this I founded the company Bricknode to create the core platform and offer it as Software as a Service. Before Bricknode I created a company which offered real time trading on global financial markets where a lot of focus was on the front ends to support online trading without latency. With Bricknode the challenge was instead to deal with the logistical problems with administering financial transactions, accounts and financial instruments.

What is Huddlestock to me?

When I and my fellow shareholders in Bricknode decided to join Huddlestock and combine our two companies into something that would complement each other, there were two things that attracted us.

  1. Cash generating consultancy operations
  2. Regulatory permissions

We viewed Huddlestock as an investment company within fintech with a diversified portfolio of fintech related companies that could explore synergies together.

I have always liked the story of the Swedish investment company Kinnevik which used stable cash flow from traditional industries to invest in new technologies and making bold bets for the future.

Even the name, Huddlestock Fintech suggested to me that this was a company where a powerhouse investment company could be built with diverse Fintech holdings in its portfolio. It would be able to leverage the synergies between the portfolio companies and invest in the future while generating positive cash flow along the way.

As an investment company, Huddlestock Fintech can offer a lot more than just financial help to its portfolio companies. Managerial tasks can be centralized like for example financial reporting and accounting, market communication, Human Relations activities and much more.

Assets like technology, regulatory permissions, operational knowledge and domain know-how could also be shared between the portfolio holdings. Mistakes and detours can be avoided by sharing “lessons learned” and experiences across the group.

The image below illustrates how I view Huddlestock Fintech AS.

Visigon

Visigon is a great financial consultancy firm with awesome possibilities to expand its business while contributing with positive cash flow for the Huddlestock-group. As a shareholder of Huddlestock Fintech I hope to see a lot of focus on Visigon which I think can grow into a leading specialty financial technology consulting firm based in the Nordic region and then expand into the rest of Europe and maybe US in due course.

There are a lot of complex financial software out there and highly specialized consultants will continue to be in great demand. I hope to see a lot of focus on building an awesome team environment within Visigon and a growing number of team members.

Investments as a Service

Like Kinnevik built Tele2 with cash flow from Korsnäs, Huddlestock is taking a bet that Investments as a Service will be big. There are very few players in this field. Why? Because it is very complex and requires a lot of capital to get started.

We founded Bricknode 14 years ago with this long term goal in mind. Through bootstrapping and some capital raises we have arrived where we are today, with a great platform that can be scaled up!

Investments as a Service is a new word for combining institutional brokerage with technology and within this service you can provide both pure software and software bundled with brokerage services. This can be both a B2B offering, where Huddlestock takes care of all the “boring” stuff under the hood, and a B2C offering, where Huddlestock can use its own technology in B2C brands.

When pure software is provided then Huddlestock is providing the core software platform, applications for tax reporting, government transaction reporting, white label front ends, portfolio management features etc.

When the software is bundled with the brokerage service, Huddlestock acts as a broker to the B2B customer and the B2B customer uses the various software tools to manage their end clients and onboard more end customers who open accounts with Huddlestock as the underlying broker. Huddlestock is the one legally carrying the end customer accounts and work in its own software to provide the brokerage service to its B2B customers.

What then are the pros and cons of the two services?

Software

Pros
  • Requires no regulatory permissions
  • New tenants of the software can be created instantly
  • As long as What-You-See-Is-What-You-Get is sold to the customer nothing new has to be built
  • No capital requirements and no balance sheet impact
  • Almost 100% recurring revenues
  • Sticky business with long term customers
  • A Marketplace (“App Store”) with applications from 3rd parties generates income without Huddlestock being responsible for maintenance and support
Cons
  • Complex enterprise software requires a lot of education for customers to use properly even if an extensive wiki with guides and best practices are available
  • Even if the software can be launched instantly the sales cycles are long and discussions can be ongoing for 6 – 12 months before closing
  • Generates support and maintenance (more if not enough quality is delivered)

Brokerage

Pros
  • Customers are basically just opening an institutional brokerage account and does not have to learn how to use the full administrative software to operate their business
  • Instead of discussing features and functionality, discussions are usually centered around what types of financial instruments that will be available
  • Sales cycles are typically much shorter than the long enterprise software cycles
  • Each new end customer that the B2B customer onboards means a new customer account is opened with Huddlestock
  • Income can grow fast if B2B customers onboards many end customers
Cons
  • Almost no guaranteed income, income is dependent on the B2B customer finding enough end customers
  • Each new country where Huddlestock wants to be able to onboard end customers requires adding government reporting capabilities to the software for that country
  • Capital requirement increases when the business grows so the balance sheet is important
  • The income is not as “recurring” as software income

?

In the box labeled ? new companies within the fintech space could be acquired, wholly or in part, to gain new synergies and income opportunities.

Summary

As a shareholder of Huddlestock I would like to see a clear focus on the parent company as the investment company that I assumed that it was and a complete focus for each subsidiary initiative as a silo while exploring synergies through partnerships within the portfolio companies of Huddlestock Fintech.

The way I see it right now there are two subsidiary initiatives which are high end financial technology consultancy services and Investments as a Service.

The parent company, Huddlestock Fintech AS, has to work on allocating available capital and cash flow between the portfolio holdings to create the best possible return for its shareholders.

How I built two new FinTech applications this weekend using Bricknode

Since 14 years I am spending my time developing the Bricknode platform as a core software system for finance. It covers everything from banking, brokerage, financial advisory, corporate finance and much more.

From time to time I am asking myself if it is worth doing it the hard way to keep it soo generic and configurable.

Today I can say that it was worth every hour that has been spent building and architecting it. New functionality can now be built upon it with lightning speed both by the in-house team and by external users.

I just built two new apps this weekend!

I just spent the weekend building two completely new add-on applications for the Norwegian market which has been entered in full force.

To describe the strengths of the platform for other software developers I like to look at examples.

One of the apps that I built was to conduct monthly holding reporting to the Norwegian government entity Statistisk sentralbyrå. They track various types of statistics in Norway.

Financial instruments are put into specific categories and the holdings of each account that has positions in those are then reported in a monthly file.

Instrument categorization to the rescue

Bricknode has a very neat framework built for custom categorization which I could use to its fullest.

I simply added a new category group related to Statistisk sentralbyrå. I can even define the label of this group in multiple languages.

Next I added the relevant categories that I wanted to support.

For each instrument I then added one or more categories. My new application could immediately access all this via the API and start generating the report.

No new code was needed in Bricknode

Not a single line of code had to be written in the core application. Everything was magically available right away in both the GUI and via API.

I have developed many applications on top of Bricknode, both ones of low complexity like this which can be done in a few hours and more complex ones which are complete platforms of their own.

Are you looking to start a new FinTech development project?

If you are considering starting new software projects within FinTech and would like to get some advise to see if the Bricknode platform could make your life easier. Then just contact me through any of my channels or via the contact form on this page.

I have never been able to develop financial software as fast as I can do now. This was one of the goals that I had with the Bricknode software from the start. Extremely nice to finally have reached it! 😃

How to configure and re-configure Yoast for WordPress

This post actually does not have much to do with financial programming unless you are using WordPress as one of your tools, as I do 😃.

I have a nice setup where I am developing locally using Docker and then I have Actions configured in GitHub where my pull requests trigger a deployment to an Azure Container App.

I am using JWT Authentication for WordPress to secure some of my routes and I am using a theme in WordPress that we have developed in-house.

Every time I want to install and active a new plugin I do that first locally and then I deploy the code into production which is the Container App.

This time I was going to add Yoast SEO so I did the same thing as usual and everything worked locally so I deployed the code and then were going to conduct the Yoast first time configuration in the production environment.

This is when I started to have problems!

When I opened my production website I had the following error message:

Warning: include(/var/www/html/wp-content/plugins/wordpress-seo/vendor/composer/../../vendor_prefixed/psr/log/Psr/Log/LoggerTrait.php): Failed to open stream: No such file or directory in /var/www/html/wp-content/plugins/jwt-authentication-for-wp-rest-api/includes/vendor/composer/ClassLoader.php….

I had to revert my commit and go back to the old state and tried to de-activate Yoast to try to install it again but fully from the production environment, this did not work though.

I found this article https://wordpress.org/support/topic/remove-all-data-for-yoast-seo-plugin-from-database/ which explained what I should remove from the database which I followed and then I could remove the plugin.

My idea was to install the plugin locally and not activate it, then deploy the code and do the activation in the production environment which should make the database changes. You see, everything had worked both locally and in production while the Yoast plugin was de-activated.

When I then tried to activate he plugin I instead got a bunch of errors that looked like this:

WordPress database error: [Table ‘wordpress.wp_yoast_indexable’ doesn’t exist]
SELECT * FROM wp_yoast_indexable WHERE object_id = ’44’ AND object_type = ‘post’ LIMIT 1

WordPress database error: [Table ‘wordpress.wp_yoast_indexable’ doesn’t exist]
SELECT * FROM wp_yoast_indexable WHERE object_id = ’44’ AND object_type = ‘post’ LIMIT 1

Looking in the database the Yoast tables were missing. I started to look deeper into the wp_options table where I had deleted all content with wpseo in it using the following query:

DELETE FROM wordpress.wp_options WHERE option_name LIKE “%wpseo%”;

I saw a few entries that had the name yoast in them, which was not mentioned by the wordpress.org article so I ran the following query too:

DELETE FROM wordpress.wp_options WHERE option_name LIKE “%yoast%”;

This removed the entry in the database that stored what database migration my system had for the Yoast tables and that was the last thing that was needed. Now when I activated the plugin again the tables were created.

Now the activation of Yoast worked but I did get an error message after activation saying:

Deprecated: strip_tags(): passing null to parameter #1 ($string) of type string is deprecated in /var/www/html/wp-admin/admin-header.php on line 36

This was a non fatal error though and the site worked as it should from this point forward.

It took me some time to figure out what more to delete from the database table wp_options so I thought that I might be able to save a few hours of searching for other people that might end up in the same dead end 😊

APIs are for machines and GUIs for humans

There is an overwhelming number of software services being presented, and sometimes launched, within the financial industry which promotes APIs as the ONLY user interface and that it is some kind of magic pill.

Don’t get me wrong, I love APIs, that is one of the main reasons why I started Bricknode in 2010 (now part of Huddlestock). There is a lot of misunderstanding going around though. In 2010, talking about API-first was cool and new, talking about API-first today is just lame 😂 because it is assumed.

The image below shows how a typical application is structured.

An API is the interface that is used by other applications that would like to communicate programmatically with an application. A Graphical User Interface typically uses an API to communicate with the business logic and eventually the database of its own application.

The API is a pre-cursor to the Graphical User Interfaces. If you are building an application for other developers then having an API as your only interface is fine but if you are building an application for humans then you also need a Graphical User Interface but that is hard work and takes time!

It is much easier to just knock up an API and then say that you are done with it 😊and other developers have to do the hard work with building the interface for other humans to interact with your application.

Generally, even if you are just doing an API as your interface there is usually a need for some sort of GUI too so that a developer can make some types of configurations.

At Bricknode (now Huddlestock) we spent many years building up multiple GUIs and lots of API functionality while at the same time serving real customers and putting our products to practice. By doing it that way we made sure that what we built could be used both by machines and humans which I think is key!

Bridging the gap between old tech and new tech in finance

When we created Bricknode in 2010, 14 years ago, I thought that the financial world would switch to using APIs from file communication over night 😂. OMG, was I ever naive!

Bricknode is now part of Huddlestock where the journey continues where we call the service Investment-as-a-Service (IaaS).

There are two legs to IaaS and they are as follows:

The last couple of days I have done a few postings on X and LinkedIn regarding the awesome work that we are doing within Huddlestock like these:

Huddlestock is constantly integrating with new services, like for example AvtaleGiro, Nets, Bambora etc. I am always surprised by the old tech that is used by these companies and the likes of Huddlestock is building integrations to these so that customers of for example Huddlestock don’t have to deal with those old formats. Instead customers of Huddlestock can use the Huddlestock API to do their thing and Huddlestock takes care of all the heavy lifting that needs to happen under the hood.

So, what do I mean by old tech? A typical thing is communication with Flat Files. Flat Files were popularized during the 1970s by IBM and simply means that in a text file you have one line which contains a single entity of data. Maybe you have heard about CSV-files and those are Flat Files where each value is separated by a comma or semicolon.

The worst of them all are position based files where you need to get an instruction on what positions in the file means what, look at the example below:

I have entered some red dividers in the file for illustration, between position 1 to 11 there is one number, between position 12 to 23 there is another number etc.

This is extremely limiting and is not as easy to read by a human and you have a fixed number of characters that you can deal with in the file. There is no hierarchy within the data so it is all bad!

This is however how a lot of the financial companies communicate today, even in 2024!!, and that is why a company like Huddlestock brings soo much value to the market because it integrates with all these services and wrap them in a completely new system like Bricknode which then the users can interact with through many graphical user interfaces or via API.

My goal is to get every company and entrepreneur who is looking to develop a new financial service to first reach out to Huddlestock and see how it could help cut down the road to market and make tech less costly!