Before I begin, I want to thank everyone out there reading. I’m sure your time is scarce, so I’ll keep each of these posts interesting…please excuse the length on this first post, but I think an introduction is vital here.
Back in college, I took a creative writing class. My professor was pretty lenient when it came to the creative process, but she had one golden rule, “Show, don’t tell.” I learned to “paint a picture” with my words and not just state the facts. “It will keep the readers wanting more”, she would say. After giving it some thought, I think I’m going to completely disregard her advice on this forum. From what I can tell, nobody wants to leave their life savings up to the imagination, so we’ll keep it strictly business here (I apologize if a couple jokes fall through the cracks).
I am Steven Gasparini, Financial Analyst and Chief Operating Officer of WealthNGen, LLC. I’m from a small town in Pennsylvania. I was an economics major at Clemson my freshman year before transferring and finishing my degree at Duke. If you don’t like either of those schools, please feel free to not tell me about it and check the scoreboard.
What is WealthNGen and why do you care?
As you’re about to see, that’s a very loaded question. In wealth management, there are a couple routes investors seem to be taking (key word: Investors. Many people aren’t saving any of their current income for retirement at all, which is a huge problem).
The Traditional Route
1. Financial advisor – For an annual 1-3% of the assets they manage for you, you get to speak with a real person with some real experience.
The good: Not only do they help you properly allocate your investment accounts, but they have the ability and credentials to help investors map out their entire financial life. The right advisor can be an investor’s most valuable asset, best friend, and psychiatrist.
The bad: At the end of the day, time is money. At no fault of their own, the financial advisor can’t afford to be everyone’s best friend and sometimes has to turn down clients if they can’t keep up with their growing book of business.
The ugly: Advisors don’t usually take a client with less than a certain amount to manage. I won’t get into specifics, but to me it’s one of those “if you have to ask, you can’t afford it” type deals.
Okay, well most people don’t have that kind of money, so what does the other 99% of the population do? Where do they start? Recently, a couple companies have come up with a solution, the “robo” advisor.
The Modern Band-Aid
2. Robo advisor – This is a completely automated service offered by companies such as Betterment and Wealthfront. Charles Schwab and Vanguard have their own versions as well (amongst others). Basically, a potential client will answer a couple questions online about their level of comfort in the investment world and how long they plan to have this pool of money invested in the market. Without discussion, a portfolio allocation will be selected for them and if the client approves, an account will be established in the client’s name and the portfolio allocation will be put in place.
The good: Robo advisors offer a much lower minimum investment (anywhere from $0- 50,000). They also offer their services at a much lower fee than the traditional advisor. Some don’t charge at all if you’re under a certain amount managed. This allows the average Joe to be an investor. They cut costs to the client further by using low-cost, no commission, no transaction fee ETF investments. ETFs use algorithms to track various market indexes (for example the S&P 500) and hope to replicate their performance. For more detail on ETFs, check out our twitter feed (@wealth_n) where we’ve been posting some more detail on what ETFs are.
The bad: Most robo advisors don’t offer active portfolio management and they don’t offer any advice outside of the particular account an investor has opened with them. They do not see (nor do they care) about your bigger picture.
The ugly: The client’s entire pool of money (in most cases a client’s life savings) is subject to the will of a computer algorithm that can’t react until after something drastic happens in the market. Perfect example, if you’ve watched the news recently, you’ve seen the Federal Reserve System (the guys in charge of USA’s money) has raised interest rates and rates will continue to hike up in the near future. This calls for a protective stance in an investor’s portfolio allocation. You and I see it, a computer does not. The computer algorithm wouldn’t react to this change in the market until it’s already happened. To simplify, that’s a big miss for any investor involved.
The NGen Solution
WealthNGen is our hybrid version of the two investment vehicles described. We offer the low minimum investment ($5,000), low-cost (0.55%), and full online access like the robo advisor, but we also provide the bigger picture financial planning and human interaction of the traditional financial advisor.
For the price of a cup of Starbucks coffee every 3 months (assuming $5,000 minimum), our clients (and potential clients at no cost) have the ability to create their own financial and retirement plans (with a little help from us). They can see if they are on track to meet their financial goals by creating a projection to look into the future and see where they are likely to end up. If they don’t like where they might end up, we tell them how they can change their investment parameters to attain the financial peace of mind they’ve been looking for. Clients are allocated based on their investment comfort levels, but we are actively researching and monitoring our portfolios daily and are not afraid to make changes if we see the need (yes, we were ready for rising interest rates). If they have questions, our clients can call us up and you will speak with one of our financial professionals. We’re more than happy to discuss our investment philosophy with you personally.
We offer Individual, Joint, Traditional IRA, ROTH IRA, and Rollover IRA account registrations (check out our Twitter account: @wealth_n or earlier posts from our blog for an explanation of these account types) and clients have the ability to transfer in any account they currently hold. Most importantly, the client has access to whatever they invest in just a couple days should a financial emergency present itself.
WealthNGen is here because we know you know investing is important, but it’s hard to get your foot in the door. I think robo advisors are playing the “it’s better than nothing” card, but who in their right mind would settle for that when their life savings is on the line? Wealth NGen wants more than a cookie cutter beginning for your retirement; we want a full scale attack on it.
Tinker around and make your own financial plan. It’s totally free and, honestly, pretty fun to play with. I think you’ll like what you see. The site will ask you for your name and email address, but we won’t use that info to bother you with annoying emails. Feel free to shoot me an email if you have any questions about anything I’ve covered. I always do my best to respond within 24 hours.
Thanks again for reading. Now that we’re caught up on WealthNGen, please keep tuning in to hear about our take on pertinent investment questions or relevant current events. Friends and family often ask us financially-related questions and we hope to give our two cents here for your entertainment and expanded knowledge.