INVESTMENT FEES: HOW MUCH IS YOUR ADVISOR CHARGING YOU?

It’s always a good idea to check exactly how and how much you are getting charged in fees from your investment advisor in relation to your wealth management strategies. If your advisor is on a Fee-Only basis, then they are getting paid only for the advice they give. They do not earn commissions by selling financial products such as life insurance or mutual funds. However, they tend to focus on only the assets under their control, which usually means ignoring your big financial picture.   Dual-registered advisors earn fees from advice and they may make commissions on some of the products they sell, while Commission-Based advisors make money only from the products sold. In these two areas, be aware of what the standard fee is when your advisor wants to make a purchase.   Many advisors hire other advisors to choose assets like mutual funds for them, which they then turn around and sell you. These means you are paying for your advisor, at least one more advisor you know nothing about, and the standard fees associated with the product you are buying.   In the long run, these stacked costs can have the negative effect of chipping away at your wealth accumulation. Talk to your advisor to see what fee-plan they utilize so you can get an idea of what to expect on your next statement, and possibly, what change in the investment plan you need to apply.   As a private investment group specializing in wealth management, Midwest Wealth Management, Inc. offers a proprietary trading platform, alternative investment offerings and dedicated advisory support for our clients. For more information, please visit www.midwest-wealth.com.
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The Macron Victory in France: Great News for US Investors

  “Catastrophe averted” were the words used by the French writer and filmmaker, Romuald Sciora, to describe Emmanuel Macron’s victory against right-wing nationalist, Marine Le Pen, in the recent French presidential election. And he wasn’t just referring to France, he meant for the whole world.   Elected at age 39, Macron is the youngest ever president in French history and the head of a party less than two years old. His presidency is calming the political and financial global seas and, while US investors are coping with recent market turbulence from domestic and foreign relations missteps, Macron is a shining beacon across the Atlantic guiding investors to European markets.   From Rags to Rogue   Somewhat of an anomaly, Macron began his career as a civil servant, quickly became a millionaire investment banker, and then donned the hat of a government minister. He had a privileged education at the Lycée Henry IV before entering the Ecole National d'Administration, where many of France’s political elite are formed.   In 2012, he joined the staff of President Francois Hollande and in two years became the economy minister. Economically, Macron favored liberal reforms that benefited businesses but were unpopular with his own party. Ultimately, the “Macron Law” had to be pushed through the National Assembly, which spurred Macron to change the system itself.   He resigned in August 2016 and launched his party En Marche!   Macron’s Manifesto   Macron's policies appeal to conservative voters. He plans to cut corporate taxes from 33 percent to 25 percent, cut payroll taxes that some economists believe keep companies from hiring, and simplify the tax and pension schemes.   However, he is also proposing ways to boost slow economic growth that appeal to the left. Macron plans to increase pay for teachers who work in poorer areas, for example, and introduce labor reforms to reduce unemployment.   Macron has pledged to reform France's welfare and pensions systems, boost defense spending, and to fight terrorism by hiring thousands more police officers and establishing a round-the-clock task force against ISIS. But his most beneficial policies as far as US investors are concerned are those that apply to trade.   Trade Tantrums   The EU has the second largest global GDP, and France has the 3rd highest GDP in Europe. Trade is paramount in “across-the-pond” relations.   A “Frexit” was a priority for Macron’s opponent, Le Pen, and was making many investors fractious leading up to the French elections. But a huge sigh of relief met Macron’s assumption of the Presidency because he is extremely pro-European. Macron intends to put France front and center of the EU and defend the single market.   The EU is a huge market for US goods and is the biggest single US trading partner. France’s support for the bloc has bolstered US investor confidence that was sorely downtrodden following the Brexit vote.   As far as Britain’s exit from the EU is concerned,  Macron is a deal-maker, and while he is not expected to give the UK a free pass, he is likely to seek a way to avoid a catastrophic outcome for the suffering Brits across the channel.   This all round positive news from Europe has US investors bullish on the French stock market as part of global portfolios. According to pundits, the French money supply and bank lending have already rebounded.   Diplomacy Conducive to Stability   Macron’s tact and diplomacy could also influence western approaches to global conflicts. The French president has reached out to the more politically volatile President Donald Trump and the leaders of Iran, Russia, Saudi Arabia, and Turkey to find a political solution to problems such as Syria and the refugee crisis.   Unlike Le Pen, Macron supports traditional defense structures such as NATO, continuing the efforts to defeat ISIS, and sharing intelligence with the US and European allies further stabilizing US and European relations.   As a newcomer, Macron attracted many first-time voters of all ages, and his party now has over 200,000 members. US investors could, arguably, be added to his list of supporters who appreciate his disdain for international isolationism and division and his stabilizing influence on trade, foreign relations, and the global economy.
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Robinhood Gold: What’s Under the Hood

Last year, stock-trading company Robinhood, a startup focused on providing free equity trading services, began the process of monetizing its business model. The company’s main target customers are younger, technologically skilled investors with less need for the more advanced, expensive services of traditional brokerages.   Robinhood encourages its investors to heavily trade accounts by offering free trades. A recently introduced premium feature, named Gold, is a monthly service with tiered levels of buying power in addition to offering new access to margin lending (debt) and after-hours trading sessions. We equate this to giving a loaded weapon to someone without any weapons training. By throwing in enhanced margin abilities and after hours trading, all you have done is give them more ammunition and turned off the lights. Robin Hood’s business model is monetized based around the fees they can generate from having investors utilize their margin program.   Event-Driven Trading   Much of the Robinhood growth model is based on higher trading and borrowing activity. They specifically detail the ability for their clients to play corporate earnings announcements by providing access to after-hours market trading sessions. This type of event driven trading is complicated even for the world’s most sophisticated hedge funds, let alone for young investors. When a company announces earnings or another event (i.e. M&A, divestitures, bankruptcy), its stock price may make a significant move, with minimal liquidity, creating major winners and losers in the process. New investors, without experience trading corporate events, may be enticed to these strategies by the large potential returns, but without understanding the risks involved.   Margin Trading   Margin trading is the financing of asset purchases with debt. That loan is typically secured by the assets, which typically include equities and fixed income securities, as collateral. If the assets’ value falls below the initial purchase price, which leaves the loan “underwater,” the margin lender may ask for cash or terminate the transaction altogether and sell the securities. The use of leverage in this type of transaction has the ability to both amplify the gains, but also to dramatically increase the loss potential. Trading on margin requires a great deal of experience not only with investing generally, but also with margin-specific concepts like collateral management.   Conclusion   The concept of low-cost, even free, trading is an important tool in educating young investors about public markets and companies. However, such a tool must not be corrupted by pushing more advanced, risky trading strategies that are not appropriate for the retail investor. Undermining its customer base with a set of products to which it is unaccustomed or unprepared for is not a long-term solution for its monetization model. As the brokerage world has started a race to the bottom when it comes to trade costs, Robin Hood has put in the floor at free.   If you are younger investor who feels you could use some guidance, visit Midwest Wealth Management at www.midwest-wealth.com or call us at 317-288-4989.
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Life after College: Discussing Finances with your College Graduate

Many of our client’s children and grandchildren are beginning to graduate college, and they could not be happier. After all the trials and tribulations that come with being a parent, this is one of the truly rewarding experiences. It is after this walk across the stage that clients start to experience a mix of emotions: their children permanently leave home, tuition payments cease and they become a spectator to the decisions that lie ahead.   This often times becomes an unfortunate scenario, because as parents you still have so much to offer. Being able to draw from your own personal experiences and mistakes you or your peers made are very valuable experiences to share as your children begin to enter the “real world.” As much as future generations love to argue that things are not the same as they use to be, many of the same actions happen on a very similar timeline (Ages 22-32). Regardless of what decade you were born in, these things have almost remained a constant:   o Beginning of Career (First, Second, Third Job) o Apartment Rental or Home Purchase o Wedding Funding & Marriage expenses o Children   These all become major events in the path towards adulthood and ultimately a successful future, but the one theme we as wealth managers point to is that they all have a big impact on your financial future. Done incorrectly or at an inopportune time, the effects can be lasting and ultimately alter lifestyle and retirement choices.   As clients would continue to voice their frustration with the lack of fiscal direction their children had or the inability to communicate with them on these subject matters, we saw it as a great opportunity to help be in intermediary in this area. The parents have trusted us with the family’s wealth and wanted the same level of support and fiscal education for their children- So we built a program helped to bridge this gap, knows as the YP Access Program.   The YP Access Program helps young investors establish a trusting, working relationship well before the discussions of investing for retirement happen. This is done by giving personalized planning advice, asset allocation, risk assessment and industry insight that many high-end professionals, entrepreneurs, and foundations have leveraged for years. Below are some of the best practices we have been able to assist clients with:   Emergency Fund– We normally recommend 3-6 months living expenses, set aside immediately. This is the first opportunity to prove independence, you do not want to have it short lived by not being prepared for life’s often unexpected expenses.   Budgeting- With a new paycheck bi-weekly, recent graduates can get caught up in the idea of being able to immediately replenish funds. Understand what your fixed overhead expenses and create your budget around that.   Savings- This is the most difficult conversation to have, because it is often tough for recent graduates to see the big picture. The first place we start is to make sure that contributions to an employer sponsor plan are being contributed at a minimum to what their employer will match. There is no other place that can guarantee you 100% return like the matching program in employer-sponsored plan.   Salary Negotiation- Just like in investing, the effect of compounding return can have a significant impact in regards to the salary at your job. Do not be afraid to ask early in your career (if warranted) for a raise. Employers expect this as part of the employer/employee relationship and one of the worst mistakes they can make it just settling for what the employer offers. Five or ten years down the road that 7% raise could be worth much more had it been compounded off of earlier incremental salary raises.   “Hedonic Treadmill”– This is a theory that states regardless of any major positive or negative events, we quickly return to the same level of happiness. The danger here is that the more we have, the more our expectations rise and temptation to splurge or expectations can rise. Young professionals need to realize that many of benefits their parents enjoy are not going to come immediately and it is a process to get to that point.   About Midwest Wealth Management, Inc.   Midwest Wealth Management, Inc. was formed by Greg Shields, a 30-year financial services veteran to offer sophisticated investors an alternative when looking for a more strategic path for long-term investing. As a private investment group, Midwest Wealth Management, Inc. offers a proprietary trading platform, alternative investment offerings and dedicated advisory support for a select audience. For more information, please visit www.midwest-wealth.com
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The Savings Struggle: How 7 out of 10 Americans are Broke

  While the U.S. economy continues to outperform those of other advanced countries, there is an acute threat to this trend moving forward: the lack of savings by large segments of the U.S. population.   To most observers, low savings would simply be a manifestation of low incomes.  But that is not the case, in fact the numbers are startling.  

Less than $1,000 in Savings by Houshold Earnings:

  $100k-150k:  44%  Greater than $150,000:  29%  Less than $25,000: 73%   In total, 7 out of 10 Americans have less than $1,000 in savings! The initial reaction is how is this possible? But looking at the underlying numbers of our economy help give clarity to the situation. Approximately 70% of America’s Gross Domestic Product is tied to the consumer, making the economy extraordinarily vulnerable to changes in purchasing power and levels of indebtedness. Indeed, at present, there is a significant probability that elevated levels of consumer borrowing, driven by the rise of credit cards and advanced payment platforms, will lead to greater defaults as many consumers find it much easier to spend money when they are not dealing with tangible cash.   According to investment bank UBS AG, the percentage of consumers who expect to default on their obligations has increased by a full five percentage points since September 2016: that nearly 17% of borrowers will miss a loan payment in the next twelve months.   Risks to Households and Economic Growth   The combination of a low savings rate and high levels of consumer indebtedness pose serious risks to households and the broader U.S. economy. Without a significant enough backstop, households can face serious problems in the case of unforeseen expenses, work disruptions or overall macroeconomic underperformance. Additionally, large debts to credit card issuers typically have dramatically higher interest rates than home or auto loans, making the cost of overconsumption even more difficult to handle in later years. Without a so-called “rainy day” fund of savings, households at the margins will become increasingly reliant on government transfer programs, such as Medicaid (health care) and Social Security. Without corresponding increases in taxes or deep spending cuts, the long-term fiscal viability of the U.S. government would be threatened.   Conclusion   While the savings/consumption matrix currently points negative, the situation is solvable. Further economic growth will help households by providing more cash with which to pay down debt, while also beginning to set aside more for a difficult time. Potential changes in public policy should also make the economics of saving dramatically more attractive. Current proposals to impose consumption-style taxation and reduce marginal tax rates would increase and decrease the cost of consumption and savings, respectively. If households do not take these risks seriously, however, the fallout from the resulting economic dislocation will require quick, decisive action.   If you have concerns about your savings and being able to fund your future goals, visit Midwest Wealth Management at www.midwest-wealth.com or call us at 317-288-4989.  
Source: https://www.usatoday.com/story/money/personalfinance/2016/10/09/savings-study/91083712/
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Investing at All-Time Highs

In the United States, the S&P 500 and the Dow Jones Industrial Average, the two most quoted equity indices, seemingly post new records daily. Driven by rallies in the financial services, industrial and technology sectors, U.S. equities are priced richly, both in comparison to historical averages and in terms of valuation multiples. Given these trends, where then do investors allocate capital? While conventional wisdom may lead investors to avoid equities, we believe there is still significant room for appreciation. Historically low retail investor participation means that a massive inflow of assets into equities may be coming. Slow rate increases mean that fixed income market returns will remain subdued in the intermediate term, making many bonds untenable for a large group of savers. Finally, macroeconomic and policy tailwinds should serve as a strong bedrock for future earnings growth.   As equity markets digest these factors, sectors that have not fully participated in the rally to date should benefit disproportionately. Health and biotech, negatively affected by rumors about drug price controls, should be able to manage any risks that arise from policy changes. The economically sensitive materials business will likely see share price increases as a result of economic growth and the prospect of higher infrastructure spending. Consumer staples, some of the highest dividend payers in the equity market, should remain attractive relative to still-low yields in sovereign and corporate bond markets.   Economic Outlook   Despite a weak economic outlook internationally, the United States economy continues to outperform. This is especially acute when weighed against weak growth expectations across other advanced economies in Europe and Asia that are mired in a sub-two percent growth range. With stronger consumer spending expectations, the comeback of some energy-related industrial production and a better demographic outlook, the U.S. economy should expand well above the two percent range in both 2017 and 2018. Additionally, while the Federal Reserve is expected to raise interest rates in congruence with the direction of the economy, these increases will likely be moderate in the short-term, reducing the risk of stunting growth.   Corporate Earnings Outlook   These macro trends are trickling down to U.S. corporations, which are projected to post the first consecutive quarterly revenue growth for the first time since the last quarter of 2014 and the first of 2015. This shows that companies are successfully monetizing higher incomes and capitalizing on new opportunities. Corporations are not just increasing sales without benefit to shareholders. Earnings per share (EPS) growth is expected to be above five percent, the highest since 2012, as businesses turn better sales into better profits. In past years, many companies have been unable to translate top line growth into earnings. Companies’ ability to transform revenue into profits is a reflection of improving productivity and cost restraint. Overall, the picture seems rosy for the U.S. economy and corporations alike.   Policy Outlook   In Washington, there is a significant expectation that the agenda of the White House and Congress will yield policies favorable to the equity market. First is the complex issue of tax reform, where Republicans want to reduce tax rates and incentivize companies to repatriate an estimated $2 trillion of overseas capital. This should provide tax relief to individuals, increasing their spending power and acting as a further benefit to an already growing economy. On the corporate side, the large pool of capital held overseas would presumably be used to finance more aggressive shareholder returns and/or capital investments. Both are beneficial to the broader equity market. While there is, of course, the chance that neither of these legislative proposals are enacted, the general environment in Washington seems more conducive to business growth and investor returns.   Forward-looking statements are not guarantees of future performance and involve certain risks and uncertainties, which are difficult to predict. Past performance is no guarantee of future results. Investments are subject to risk, including the loss of principal. Because investment return and principal value fluctuate, shares may be worth more or less than their original value. Some investments are not suitable for all investors, and there is no guarantee that any investing goal will be met. Talk to your financial advisor before making any investing decisions. All indices are unmanaged and investors cannot actually invest directly into an index. Unlike investments, indices do not incur management fees, charges, or expenses.
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Market Commentry: Snapchat Goes Public

  Snapchat made its highly anticipated publicly traded debut on March 2nd, under its parent company Snap Inc. (SNAP.) The initial public offering (IPO) of 200 million shares made noise from the investing world to teenagers all over the world. The listing on the New York Stock Exchange (NYSE) valued the social media company at more than $30 billion, making it the largest U.S-based technology offering since Facebook’s launch in 2012. This valuation was a very big contingency point for investors as it equates to a price-to-sales ratio of 80x, nearly 6x the valuation Facebook carries. It also became instantly more valuable than a handful of household companies such as: Snapchat   The valuation will be highly scrutinized and will only be able to play itself out over time, but some of the most interesting details have become public in their prospectus.   The Financials Snap currently has no earnings; in fact, it recorded a net loss of $514.6 million in 2016.   The revenue has increased from $58.7 million in 2015 to $404.6 million in 2016, but not enough to outpace its net revenue loss.   98% of Snap’s revenue is derived from advertising.   All shares listed on public exchange have zero voting rights; co-founders Evan Spiegel and Robert Murphy have an iron clad control of the company.   User Base The majority of its users fall into the 18-34 age category, a highly coveted advertising demographic.   These users visit the app more than 20x per day and spend more than 30 minutes’ total on the app.   With 158 million daily active users (DAU’s), an average of 2.5 billion snaps are sent every day.   The teen demographic is one of the least “brand loyal” bases and could shift attention to another platform.   Snap uses Alphabet Inc’s (GOOGL) Google Cloud for much of its computing storage, bandwidth and other needs. Snap said in its filing that if business would be “seriously harmed” if that relationship was disrupted.   About Midwest Wealth Management, Inc.   Midwest Wealth Management, Inc. was formed by Greg Shields, a 30-year financial services veteran committed to offering sophisticated investors an alternative when looking for a more strategic path for long-term investing. As a private investment group, Midwest Wealth Management, Inc. offers a proprietary trading platform, alternative investment offerings and dedicated advisory support for a select audience. For more information, please visit www.midwest-wealth.com.   Forward-looking statements are not guarantees of future performance and involve certain risks and uncertainties, which are difficult to predict.   All indices are unmanaged and investors cannot actually invest directly into an index. Unlike investments, indices do not incur management fees, charges, or expenses. Past performance does not guarantee future results. The S&P 500 Index is a broad-based measurement of changes in stock market conditions based on the average performance of 500 widely held common stocks. The Dow Jones Industrial Average is a price-weighted average of 30 actively traded blue-chip stocks.   VIX: trademarked symbol for the Chicago Board Options Exchange Market Volatility Index. Often referred to as the fear index or the fear gauge, it represents one measure of the market's expectation of stock market volatility over the next 30 day period.   https://techcrunch.com/2017/03/02/snapchat-is-already-more-valuable-than-these-9-companies/   http://www.marketwatch.com/story/snap-ipo-six-things-we-now-know-about-snapchat-parent-company-2017-02-02
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Our Market Commentary-Global Developments

U.S. Interest Rates: Bond & Currency Moves The Federal Reserve has started to surprise many observers by the number of potential interest rate hikes in 2017. The initial thought of two rate hikes may turn out to be three or four. The decision to raise rates pushed short-term bonds lower. The yield of the two-year U.S. Treasury rose to the highest level in 7 years. Rising U.S. rates can cause disturbances for markets and other countries’ currencies moves all over the globe.

     

  • China’s Yuan tumbled to lowest level against the dollar in more than 8 years
  • U.S. dollar is moving closer to 1:1 parity with the Euro, its highest level in nearly 15 years.

 

Bitcoin on the Move The most popular crypto currency, Bitcoin, has risen to record highs above $1,250. The currency has increased an impressive 76% since the U.S. Presidential election and is now worth more than an ounce of gold.

 

Volatility (VIX) Touches Multi-Year Low Dropping 20% over 2016, the VIX, a measure of market volatility, hit levels only previously seen in early 2007 and in summer of 2014.  
  • Indicates a lot of complacency in the market and that investors perceive minimal risk in equities.
  • This can lead to a lot more upside pressure, as retail investors are owning historically low percentage of stocks.
  • Could leave stocks susceptible to large and quick corrections on any news of a negative event.
  About Midwest Wealth Management, Inc. Midwest Wealth Management, Inc. was formed by Greg Shields, a 30-year financial services veteran committed to offering sophisticated investors an alternative when looking for a more strategic path for long-term investing. As a private investment group, Midwest Wealth Management, Inc. offers a proprietary trading platform, alternative investment offerings and dedicated advisory support for a select audience. For more information, please visit www.midwest-wealth.com. Securities and Advisory Services offered through Commonwealth Financial Network®. Member FINRA/SIPC a Registered Investment Adviser.
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U.S. at a Glance: Our Market Commentary

JOBS December: 156,000 jobs gained, slightly below expectations. January: 227,000 jobs added was largest increase since September 2016. February: 235,000 jobs gained were also paired with upward January revision and a drop in the unemployment rate to 4.7%.   U.S. MARKETS Aging Bull Market: The bull market turned 8 years old this past month, marking the longest run since 1987-2000. This bull has survived four corrections, or declines of 10% or more. Record Expansion: The U.S. economy has entered its 93rd consecutive month of growth, the third largest expansion in history. Consumer Optimism: University of Michigan’s consumer sentiment index reported that U.S. consumer are the most optimistic they have been in 13 years, highest level since January 2004. Amazing Amazon (AMZN): On the back of strong holiday sales numbers, Amazon (AMZN) captured 38% of all holiday online shopping sales. Its next closest competitor, Best Buy (BBY) had only 3.9% market share. About Midwest Wealth Management, Inc. Midwest Wealth Management, Inc. was formed by Greg Shields, a 30-year financial services veteran committed to offering sophisticated investors an alternative when looking for a more strategic path for long-term investing. As a private investment group, Midwest Wealth Management, Inc. offers a proprietary trading platform, alternative investment offerings and dedicated advisory support for a select audience. For more information, please visit www.midwest-wealth.com. Securities and Advisory Services offered through Commonwealth Financial Network®. Member FINRA/SIPC a Registered Investment Adviser.
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When Robos Aren’t Enough – Betterment Brings in the Humans

How will history judge this period in the financial services industry? Will it be looked at like the end of an era or the beginning of one? Will we laugh at the foibles of robots or at those of us humans trying to match them? Only time will tell, but recently the most prestigious and fame seeking of the Robo-Advisor platforms, Betterment, surrendered the AI high-ground and rolled out a program for its investors to connect with real, flesh and blood financial advisors.   According to a nicely spun press release, it appears this model is being offered by Betterment for additional fees and specific account minimums. Do we detect a bit of hypocrisy and an unflattering unraveling of the strong posture of the world’s foremost robo-platform?   For years us advisors of the human variety have been told that emotional investing and hidden fees have undermined our ability to serve well. We’ve been told that in order to be effective, we should strive to be less human, less prone to the frailties of emotion, market enthusiasm, or fear. Indeed, we’ve been told now for over a decade, that if we’d done our jobs better, the financial crisis would have been avoided. We’ve been instructed to sit back and let the cool, sophistication of algorithms do the work.   And then what happened?   It turns out they brought in the pros to attract and retain a more sophisticated investor. Why? Well, there’s a real motive here: Their model is collapsing. According to Morningstar senior equity analyst Michael Wong, Betterment’s average account size of $27,000 generates less than $100 per customer. And with a customer acquisition cost of over $1000 it will take them over a decade just to break even on each account. And while some investors may not care what or who manages their small investments; when it comes to discriminating investors seeking real value – they want to talk with someone who can listen, who can interpret emotion as well as fact. They want someone who can advise.   At Midwest Wealth Management, we’re proud to say this is the business we’ve been in all along and will be doing for a long time to come. Turns out humans still turn to one another when it comes to the important things, like financial advice.   About Midwest Wealth Management, Inc. Midwest Wealth Management, Inc. was formed by Greg Shields, a 30-year financial services veteran committed to offering sophisticated investors an alternative when looking for a more strategic path for long-term investing. As a private investment group, Midwest Wealth Management, Inc. offers a proprietary trading platform, alternative investment offerings and dedicated advisory support for a select audience. For more information, please visit www.midwest-wealth.com or call 877-243-4132 to speak to a representative.   Skinner, Liz. Betterment now offering human advice with its robo, Investment News, January 31, 2017.   Securities and Advisory Services offered through Commonwealth Financial Network®. Member FINRA/SIPC a Registered Investment Adviser.
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