Arthur Levitt joins board of stock-picking startup

February 15, 2013, 1:55 AM UTC

FORTUNE — Arthur Levitt has largely avoided joining boards of directors since stepping down as chairman of the Securities and Exchange Commission in 2001, on the advice of his lawyers. So when he got involved last year with a stock brokerage startup called Motif Investing, he did so in an advisory role. But he ended up so impressed with the company that he decided to break his own rule.

“I became a fairly active advisor, and my fascination and interest in what Motif was doing just continued to grow,” Levitt tells Fortune. “So I began recruiting people for his board and sitting in on board meetings and, eventually, felt that it was time to make things more formal.”

Motif is basically trying to reinvent stock-picking for ordinary investors, most of whom have neither the time nor the knowledge to trade effectively. It also wants to do so at a lower cost than traditional brokers or mutual funds.

Users of Motif’s online platform can choose from a variety of “motifs” — which range from titles like “Couch Commerce” to “Housing Recovery” to “Rising Interest Rates.” Each one includes a portfolio of stocks that relate to the headline theme, although users can customize (and soon share ideas via a social platform). Then they pay just a single commission of $9.95 for the entire motif, rather than a separate charge for each stock in the portfolio. And, unlike a mutual fund, there are no additional or ongoing fees.

“Most retail investors don’t know what their broker is telling them, and don’t understand the statements they receive,” Levitt explains. “They don’t have the first idea of what re-balancing or diversification are and, most importantly, they don’t understand how expenses can negate their entire expected return… What Motif has done is a response to all of those problems.”

To date, Motif has raised $26 million in venture capital funding from Foundation Capital, Ignition Partners and Norwest Venture Partners. Co-founder and CEO Hardeep Walia, a former Microsoft (MSFT) business development executive, says that there are no current plans to raise more, although he certainly will listen if a strategic investor comes knocking.

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