A little financial knowledge and the right tools can help you manage your own wealth

The first thing I learned in retirement was that they don’t make backpacks like they used to. In 2013, when I officially retired after 25 years as a professor of finance and 15 years as director of research and co-director of investment management at an institutional investment firm, one of my first stops was at outdoor retailer, REI.

I created for myself the kind of retreat that is often talked about or that we often see in books and movies. I would do a few wish list items including hiking near my retirement home in Colorado and on the Appalachian Trail. I would benefit from my adult children and, over time, their children. I would create a home near the outdoors that I love and relax.

And for a while, it went as planned.

But you can’t withdraw from who you are or what you know. As a finance expert, I’ve always been on the receiving end of questions about investments and portfolios from friends and family, and now I have more time than ever to respond to those inquiries.

Their wallets troubled me. Often the principles I knew about the market and the rich details I knew about my friends, family members and their retirement goals, were not evident in the poorly constructed portfolios their advisors had designed for them. In short, I saw many nest eggs in risky positions and costing their owners far too much in fees for far too little in return.

A conversation with my family members

Not everyone understands the intricacies of money management, but some basics of critical thinking and math — like tax implications, interest rates, and even when your advisor earns more on your account than they earn — are accessible to all. Too often people don’t trust themselves to manage their own wealth or financial situation and what I saw when I retired was how much that had to change.

In 2016, I was having a multi-generational discussion with my family about the complexities of managing investments for a two-earner family in their 30s and 40s with kids. The discussion moved from buying their first home to saving for their children’s education and funding a satisfying retirement.

Each family had at least two 401(k)s with investment restrictions, two IRA rollovers, two brokerage accounts and two custodial accounts. How to manage the risk dimensions and tax implications in all of these accounts is not obvious.

This is what prompted me to explore how to advance my knowledge so that my children, Rachel, the eldest and the first to bring me her wallet, Josh and David, can be empowered to manage their accounts , those of their children and our current and future savings of the family.

Two other things have changed over the past decade besides my professional status. First, we’ve had nearly a decade of incredibly low interest rates. This is important for your managed portfolio because a stock advisor charges a percentage fee to manage your money, but these fees are often higher than the interest your accounts could earn.

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How Data Access Impacts

Yet, in an economy with historically low interest rates, advisor fees have not changed. The account charges/interest ratio was no longer satisfactory. In the portfolios I studied, clients lost the value of their portfolio just to have it managed by someone else.

The reasons why the investment advisory business has been able to maintain this fee structure are comparative advantages in knowledge, access to data, expensive technology infrastructure, and economies of scale. Yet their model of providing the masses with cookie-cutter, expensive portfolio strategies is not in the best interests of their clients.

The second major change of the last decade is the availability and inexpensive access to data. Today we can measure everything, store it in the cloud and access it in real time. The advisory activity no longer has the predominance of knowledge of the markets or the real-time state of the portfolios it manages. Each of us can have access to enough information if only we wanted to have a stronger hand on our own wealth picture.

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The usual complaint I hear from people is that the combination of acquiring knowledge about financial markets, collecting data and the effort involved in managing an investment portfolio is too complex and time consuming. time. This no longer needs to be true – access to data simplifies work and our current technology creates the impetus and drive to redefine “too complex”.

The value of financial health

When I went to get ready for my hiking adventure, it was clear that things had changed in the past 30 years since I had put on new hiking and backpacking gear, much of it related to new technology. and innovation. I realized the same must be true for financial management and as I continued to talk to my family about it, we started to get closer and closer to developing a marketable solution.

Josh, software engineer, and David, chief data officer, both had a clear vision of the power of data and the capabilities the technology could offer. Together we formed Ripsaw LLC, named after the iconic Black Diamond ski hill near our Colorado home.

I know I’m not the only one worried about my family’s situation while I’m gone. And it was important to me that we make that accessible and valuable to everyone. That’s why it’s an independent service – the only interest at stake is that of our members, we don’t profit from their asset choices. I would say, however, that we all benefit when more of us get a true picture of our wealth and teach ourselves and our families about financial wellness.

I am proud to say that from the beginning our entrepreneurial spirit was not built like Dr. Stanley Kon and son. On the contrary, we are three equal co-founders in the company, and I learn as much from them and their ambition in the company as they learned from me. Each of us has a distinct skill set that brings rigor and value to what Ripsaw offers.

It is also important to me that our business contributes to my goal of enabling my children and grandchildren to have a platform to manage their standard of living throughout their lives.

Good financial decision making is a life skill. Just like your physical health, your financial health is a major contributor to your lifetime standard of living. Financial education is the only way to alleviate financial stress. Only you can make decisions in your own interest. Even if you pay someone for advice, you are still responsible for monitoring them. The mission to make this possible for multiple generations is a worthy goal.

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Today, nearly eight years after my first retirement adventure, I am once again working as the co-founder of a wealth management system that is built on the principles that got me there: financial education as that empowerment. I can do the best for my family by helping them take care of their savings.

Stanley J. Kon is editor of the Journal of Fixed Income (since 2001) and president of Ripsaw LLC. He has taught at the University of Michigan, NYU, University of Chicago and Duke. He has also served on the board of directors of several banks and holding companies and has also been a consultant to government, commercial and financial institutions.

This article is reproduced with permission from NextAvenue.org© 2022 Twin Cities Public Television, Inc. All rights reserved.

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