Millennials are jumping into the stock market in greater numbers. However, there’s still a sizable segment of Millennials who are afraid of or do not understand investing, therefore they keep their money out of the market. The missed monetary gains of these uninvolved Millennials could mean the difference between retiring or not retiring at all. Instead, this fearful segment of the Millennial generation keep their money safe in a checking account. Neel Ganu realized the money sitting in a checking account should be put to work earning you money, since the interest returns from a bank are nil compared to stock market returns. He and his team created Finch. Finch is a consumer fintech company providing financial accounts to invest your checking account balance on your behalf. The startup is located in Cambridge, Massachusetts.
Frederick Daso: What was the idea’s genesis to invest a portion of one’s checking balance into the stock market?
Neel Ganu: Typically, people keep money in up to three accounts: a checking account that is easy to use provides instant access but virtually no returns, a savings account that provides relatively easy, yet limited access, but earns minimal returns and an investment account that holds and grows your money, but provides limited access with several restrictions.
These accounts each have rigid and defined roles. It’s how people have been managing money for a long time, but that’s because it’s been the only option.
The few individuals that optimize their finances utilize a combination of these accounts. Individuals must manage the flow of money between their funds through an ongoing manual process to put their money to work. This friction helps to explain why 86% of Americans do not invest outside of their retirement accounts.
Daso: How did you come to realize that cash sitting in checking accounts was an untapped resource for everyday Americans?
Ganu: This means that a massive part of the population is missing out on the opportunity to build long-term wealth. We know it’s not without reason. For the majority, investing is overwhelming and intimidating. Plus, it means their hard-earned money is out of their immediate reach during moments of need. But by keeping their money idle in a traditional checking account, they could be missing out on up to 50% of their wealth every ten years!
The good news is that the last ten years have seen fintech innovators’ advent challenging the status quo. By introducing commission-free trading, fractional investing, and removing account minimums, they have helped democratize investing. These innovations have made it easier than ever to start investing today. Despite this, an overwhelming number of people still stay on the sidelines, signaling that an even simpler solution is needed.
We knew that to help transform the way people manage their money, we needed to create a solution where customers could unlock the benefits of investing without changing their behavior significantly—the process required to be as frictionless as possible.
Daso: The combination of returns of an investment account and a standard bank account liquidity seems to imply a certain level of risk. How did you assess the everyday person’s appetite to accept that risk and develop a related financial product to meet their needs?
Ganu: Our investment options are carefully curated to reflect the level of risk we consider appropriate for an everyday account. We only offer large, low-cost, diversified exchange-traded funds (ETFs) created by some of the largest asset managers in the market on our platform.
We take the time to better understand people’s risk tolerance and investing experience. Using this approach, we provide personalized investment recommendations to our customers based on their risk profiles and needs.
Finch offers two types of portfolios: Stable and Growth.
The Stable portfolio consists of cash and a mix of ETFs that invest in short-term government and corporate bonds. The goal of this portfolio is to allow you to dip your toes into investing while aiming to preserve your capital. This portfolio gives you the potential to earn a return marginally greater than, but comparable to, what you would make in a high yield savings account. Over the past ten years, if you had kept your money in Finch’s Stable portfolio, you would have earned 9.0x more than a checking version and 1.8x more than a high yield savings account.
The Growth portfolio consists of cash and a mix of ETFs that invest in US large stocks and bonds. The goal of this portfolio is to help you to unlock the benefits of investing and build long term wealth. Over the past ten years, if you had kept your money in Finch’s Growth portfolio, you would have increased your wealth by 33%.
As a reflection of our values, and growing importance to Millennials, we also offer a sustainable version of both portfolios that invest in companies with a positive environmental impact, are socially responsible, and commit to high governance standards. Within these portfolios, we also help you customize your portfolio mix based on your unique risk profile.
Daso: Why did you pick your first customer segment as individuals who are not active, but financially focused users?
Ganu: When I came up with Finch’s idea, what I knew was that I had a great innovative product, and it solved a personal problem that many of my peers and I faced. Our customer research validated that this problem resonated throughout my generation.
Our target customers are millennials who know that investing is right for them, but various reasons may not have taken the first steps to get started. Three out of five millennials do not invest today, and the two main reasons we hear is that they find the process complex and that they can’t afford to have their money locked away. Finch addresses both these challenges.
Millennials have been frequently overlooked when it comes to managing their money. They have less flexibility to save than other generations, with 62% of them living paycheck to paycheck. Millennials are investing less than before, with almost 20% fewer investing today compared to 2008. Adding to this, Millennials need more retirement funds than other generations due to longer lifespans and reduced Social Security. The good news is that retirement is still a long way off, and they have time to get back on track. We picked this group because we believe they stand to benefit the most from what we offer at Finch.
Daso: How did you focus on building your team to address each portion of Finch’s business’s key risks?
Ganu: Finch has three significant areas where we needed to build the team to set ourselves up for success.
The first was marketing. Being able to articulate our purpose, create a strong narrative and community, identify our target audience, and develop a go-to-market strategy for this group was a massive task our marketing team was tasked with. Hiring our Head of Marketing and our Digital Content Manager helped address these key marketing initiatives.
The second was customer service. Being a digital-only account, superior customer experience and support is a must. The only time we will ever interact with customers in person (over the phone/chat) is through our customer service team. We have a strong focus on having customer service and experience in house to ensure that our customers get the best service and we can help them when it comes to their money as fast as possible. Hiring our Customer Success Manager to design our support program from the ground floor helped address this necessity, and we will look at scaling this team as we grow our customer base.
The third was product and operations. Being able to execute our plan and have our product closely integrated with operations ensures that customers have a seamless experience regardless of how they interact with us. Managing this ensures that we are building a product and platform that our customers love. Hiring our Head of Operations and our Product Manager has played an essential role in execution and ensuring we are aligned with regulatory and compliance requirements.
Our team members help address core risks and develop growth, service support playbooks for critical parts of what we are building, and have allowed taking our product from zero to one.
Daso: What personally drew you to working on this problem?
Ganu: I was always perplexed by why investing was so hard.
Despite spending the majority of my career leading financial institutions through their investment decisions, when it came to managing my own money, I always felt I could do better – but I didn’t, and ended up holding my balance in cash.
Having discovered that a staggering three in five Millennials do not invest at all in the US, I realized I was not alone in my inertia. Compounding this with the growing financial debt among Millennials, with 62% living paycheck to paycheck, opened my eyes to how significant this issue is.
Many people express that investing is too complex, while others feel they have very little financial flexibility to think about investing and other economic opportunities. But by keeping their money idle in a traditional checking account, they could be missing out on up to 50% of their wealth every ten years.
Determined to empower younger generations and help close the wealth gap financially, I set out to find a more straightforward and more impactful way to support financial growth while pursuing my studies at MIT.
What if investing was less intimidating, unlike choosing a wine at a fancy restaurant? What if people could earn investment returns directly on their checking balance rather than needing to sweep their money all over the place? What if it were possible for people to spend their invested balance whenever they wanted?
These “what if’s” led to the creation of Finch (formerly Trio), your new productive everyday account that integrates the benefits of investing and the flexibility of checking into a seamless all-in-one account.
Feedback Isn’t Just A Gift-It’s An Investment – Forbes
It’s often said that feedback is a gift. But the truth is—feedback is an investment.
A colleague and I recently received feedback from a client about a session we had facilitated that did not meet their expectations. The client reported that participants were not adequately engaged by the content and that we didn’t leave enough room for discussion. They even complained about our choice of closing music. (I guess not everyone appreciates Kelly Clarkson.) The feedback was thoughtfully delivered, but it still hit hard. I took a few deep breaths, thanked the client and discussed how to improve the next session. My colleague and I incorporated the feedback into our next workshop plan, and they loved it. Their critical feedback was key to our success.
If someone cares enough about you to give you feedback, it is a sign that they care about the relationship. Our client was able to deliver important critical feedback to us because we had built a foundation of trust. We had been working with them for more than a year, conducting workshops, having frequent calls, getting to know one another as professionals and as human beings. We had also invested in the relationship in big and small ways. This meant that when we stumbled, our client did not see us as just another vendor who could be easily replaced. Instead, they came to us and shared their concerns. And though the feedback was a bit painful, it helped us grow and strengthen the relationship.
For many people, the investment of giving critical feedback feels risky. A 2017 study of managers, whose job it is to give feedback, found that 44% report discomfort giving negative feedback and 21% avoid it. Why? In my experience conducting feedback trainings, many professionals express fear that they will encounter defensiveness, worry that the feedback will damage the relationship, and hopelessness about people’s ability to change. These perceived risks are a lot to overcome.
So if someone who is not required to give you feedback takes the risk of offering you what Warren Buffet calls the “very expensive gift” of honesty and gives you critical feedback, they are signaling that (1) the issue matters to them, (2) the relationship matters to them, and (3) they believe—or at least hope—that improvement is possible. That is good news.
Getting critical feedback stings. When someone tells you that something you did harmed them or bugged them or didn’t work for them, it is natural to feel embarrassed, hurt or defensive. But there is something even worse than getting critical feedback about a blind spot: when someone withholds important feedback, denying you the opportunity to learn, improve and repair. So the next time someone gives you critical feedback, even if it stings, remember that it signals that they are investing some of their personal capital in you. Really listen with curiosity. How can you make their investment pay off for both of you?
Investment regulator accuses Gary Ng of fraud – The Globe and Mail
The former owner of Vancouver-based investment bank PI Financial Corp. is facing accusations of fraud after allegedly falsifying documents and creating fake brokerage accounts to borrow approximately $172-million, part of which he used to purchase PI Financial.
Gary Ng, co-founder of Winnipeg-based broker Chippingham Financial Group Ltd., acquired PI Financial for $100-million in 2018 through a personal holding company. He financed the all-cash deal with a pair of loans – worth $80-million and $20-million – that were supposedly secured against assets he claimed he held in his own investment accounts. He borrowed an additional $72-million in 2019 and 2020 for separate deals.
According to a statement of allegations filed by the Investment Industry Regulatory Organization ahead of a disciplinary hearing, Mr. Ng greatly inflated his net worth to fool three lenders: an unnamed U.S. “investment firm,” an unnamed Canadian “asset management firm,” and an unnamed Canadian “private company.”
He altered documents to put his name on corporate client accounts that he did not own and created other fake accounts and account balances, which were used as collateral for the loans, IIROC alleges. Mr. Ng’s business partner Donald Metcalfe assisted in the ruse, IIROC alleges.
At one point, Mr. Ng e-mailed an account balance to a lender that purported to show $90-million worth of marketable securities. In reality there was only $4 in the account, IIROC alleges.
“Mr. Ng and Metcalfe perpetrated a fraudulent scheme by deceiving lenders into providing them with millions of dollars in loans in reliance on falsified and fictitious documentation purportedly evidencing substantial financial assets as security when this was not true,” IIROC said in the statement of allegations.
When reached by phone, Mr. Ng declined to comment. The Globe was unable to reach Mr. Metcalfe for comment.
The IIROC hearing against Mr. Ng and Mr. Metcalfe is scheduled to begin in January. The pair face fines of up to $5-million per offence and a permanent ban from participation in the Canadian securities market, among other potential penalties. The allegations have not been proven.
PI Financial, a mid-sized investment bank with more than 300 employees, is no longer owned by Mr. Ng. In July the company announced that its ownership was being transferred to a joint venture controlled by H.I.G. Capital and RCM Capital Management. The company did not give any explanation for the sale at the time.
IIROC says that PI Financial reported Mr. Ng and Mr. Metcalfe’s fraudulent behaviour after becoming aware of it in late January, 2020.
“We identified unusual correspondence during an unrelated document request,” PI Financial said in a statement about the allegations.
“[We] immediately alerted our regulators, and have been co-operating with IIROC on its investigation. None of the alleged misconduct was related to the firm’s capital or client accounts, and throughout this entire period we have been serving our clients as usual – there has been no impact on our operations whatsoever,” the firm said.
Mr. Ng and Mr. Metcalfe, who served as chairman and vice-chairman of PI Financial, respectively, resigned from the company in February. Both have since failed to show up for scheduled interviews with IIROC and face additional counts of failing to co-operate with investigators.
Over the past several years, 36-year-old Mr. Ng had presented himself to investors and the media as a financial prodigy. As IIROC puts it: “[he] represented himself to others as an extremely successful businessperson who created enormous personal wealth through highly successful technology, real estate and manufacturing investments in Canada and China.”
Mr. Ng co-founded Chippingham Financial in Winnipeg in 2012. In 2018, he began acquiring other financial services firms through his holding company, Ng Group, including Montreal-based Rothenberg Capital Management Inc. and PI Financial.
During its investigation, IIROC found no evidence that PI Financial clients had suffered losses as a result of the alleged fraud.
“There has been no suggestion that PI was remiss in its procedures, however, in light of the issues raised in this investigation we undertook a review of our internal controls,” PI said in a statement. “That review concluded that PI’s controls and governance were and are not deficient. We continue to cooperate with regulators in this matter.”
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How To Invest Money Based On Advice From Warren Buffett – Forbes
How to invest money for beginners can be confusing at best. It’s an important decision with long-term consequences, and everybody seems to have an opinion on the “best” approach. In this article we’ll turn down the noise and listen to the one voice we can trust—Warren Buffett.
Wall Street is noisy. It’s like a craps table in Las Vegas surrounded by conference attendees who have lost count of how many drinks they’ve had.
You’ve got investing apps designed to do one thing—get you to trade. Trade anything. Options, crypto, gold, stocks. They don’t care. As long as you keep trading, the app owners get one step closer to a BDB—a billion-dollar buyout.
You’ve got the media designed to do one thing—get you to watch, listen or click. From pretending that the daily stock market news matters to honking horns or flashing the ticker, they’ll do anything to keep your attention. It keeps the advertising dollars flowing.
You’ve got advisors designed to do one thing—manage your money for a “small” fee. To justify their costs, they’ll create a Rube Goldberg portfolio so complex it makes fluid dynamics seem like child’s play. Add in a little fear-mongering about the next stock market crash, and they’ve convinced you to fork over a percentage of your wealth for the rest of your life.
Warren Buffett on Investing
And then you have Warren Buffett. He eats at McDonalds and drinks Cherry Coke every day. He lives in the same house he bought during the Eisenhower administration. Here’s what he has to say about how both institutions and individuals should invest:
“Most investors, both institutional and individual, will find that the best way to own common stocks is through an index fund that charges minimal fees. Those following this path are sure to beat the net results (after fees and expenses) delivered by the great majority of investment professionals.”
This advice is not exactly the kind of thing to make drunken craps players cheer. It’s hard to imagine a stock prognosticator blaring a horn on TV after repeating Mr. Buffett’s advice.
On the other hand, it is the best advice you’ll ever get if your goal is to build wealth. And the good news for new investors is that it’s extremely easy to implement.
Here are a few simple investing strategies that anybody can use to implement Mr. Buffett’s investing advice.
In his 2013 letter to Berkshire Hathaway shareholders, Mr. Buffett described how he has advised trustees to manage the money he will leave to his wife: “Put 10% of the cash in short-term government bonds and 90% in a very low-cost S&P 500 index fund. (I suggest Vanguard’s.) I believe the trust’s long-term results from this policy will be superior to those attained by most investors – whether pension funds, institutions or individuals – who employ high-fee managers.”
As Steve Jobs believed, simplicity is the ultimate sophistication. Investors can implement the above portfolio with just two Vanguard funds:
- Vanguard 500 Index Fund Admiral Shares (VFIAX)
- Vanguard Short-Term Treasury Index Fund Admiral Shares (VSBSX)
The one thing missing from the 2-Fund Portfolio is direct exposure to international stocks. Some might argue that such exposure is unnecessary. Most of the companies in the S&P 500 index do business all over the world. For those, like myself, who prefer to have more investment in international markets, the 3-Fund Portfolio is a good option.
It’s a simple asset allocation plan consisting of just three asset classes, U.S. stocks, foreign stocks, and U.S. bonds. This portfolio can easily be implemented with just three mutual funds.
As an example, one could implement this investment plan at Vanguard with the following funds:
- Vanguard Total Stock Market Index Fund (VTSMX)
- Vanguard Total International Stock Index Fund (VGTSX)
- Vanguard Total Bond Market Fund (VBMFX)
You can find an excellent description of this simple investment plan at Bogleheads.org.
Target Date Retirement Funds
A target date retirement fund enables investors to get instant diversification with just one mutual fund. These funds take your contributions and split them among multiple stock and bond mutual funds. In addition, there is no need to rebalance your investments as you get closer to retirement. Target date retirement funds adjust the allocation between stocks and bonds as the investor nears retirement.
These types of funds are readily available in most 401(k) and other workplace retirement accounts. They are not all created equal, however. Some cost more than others, and the investment strategies vary from one fund family to the next. As a result, it’s important to check the expense ratio of the fund before investing.
Final Thoughts on How to Invest
As one gains more investing experience, he or she may choose to move away from the above options. Some like to take a more active role, particularly as they study and learn more.
The above options, however, are an excellent way to get started as an investor. And these strategies will also serve well those that chose to stick with them over a lifetime of investing.
There is more to investing than just picking a few funds. First, there’s the question of whether to invest in a taxable account or retirement account. And if one chooses a retirement account, there’s still the question of which type of retirement account. There’s also the question of how much to invest and where to open an investment account.
You’ll find these questions covered in detail in this video:
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