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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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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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Retirement income and the significance of a wealth management strategy.

A good wealth management firm offers financial planning, investment portfolio management and a number of financial services to help clients create a wealth accumulation strategy that reduces risk and aligns with a client’s particular goals. Building and protecting an investment portfolio is key. At Midwest Wealth Management, our process is to quickly determine and identify sources of risks for our clients and then develop a plan for avoiding or minimizing undue exposure. Tax liability is another area we pay particular attention to, and part of any long-term strategy is to come up with a plan to minimize the negative effects of taxes on investments.

 

Allocating assets across various investments is another way we minimize risk and help ensure a successful wealth accumulation strategy, as a well-diversified portfolio means a poor performance from any one asset won’t jeopardize the overall strategy because its effects are balanced by other better-performing assets.

 

We also use our extensive knowledge with alternative investments as another way to diminish volatility and increase a portfolio’s durability due to an alternatives ability to offer performance that isn’t correlated to what you experience with typical stocks and bonds. So, a traditional drop in the market has little to no effect on an alternative investment. There are also some other simple strategies that can make a positive difference in the long run. For example, if your company has a matching contribution program, you should always put as high as a percentage as you can to maximize your company’s contribution and leverage that extra money toward your wealth accumulation goals.

 

Whatever the wealth accumulation strategy, the main point to remember is that a wealth advisor has a fiduciary responsibility to their clients, meaning they are legally bound to act in their client’s best interest. This is always the case at Midwest Wealth Management, where your voice carries the most weight in helping you achieve your vision of a well-invested future. We invite you to learn more at www.midwest-wealth.com. You can also call us if you have any questions or if you would like to schedule a private interview at 317.288.4989.

 

Diversification does not assure a profit or protect against loss in declining markets, and diversification cannot guarantee that any objective or goal will be achieved.

 

Investing in alternative investments may not be suitable for all investors and involves special risks, such as risk associated with leveraging the investment, adverse market forces, regulatory changes, and illiquidity. There is no assurance that the investment objective will be attained.   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.
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3 things to consider to minimize risk and build a wealth accumulation strategy.

Risk management is an important element of a well-balanced portfolio and once of the most considered areas when building a wealth accumulation strategy. An advisor’s role is to identify the potential for market loss and then take the appropriate action to minimize the possibility of loss based on the client’s risk tolerance level. Because in the end, the overall wealth accumulation strategy must align your investment portfolio with your overall financial goals. When developing these goals, it’s important to remember a few key points:

 

The Safeguarding of assets. Sec.gov states that the safeguarding of assets “provides reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of assets that could have a material effect on the financial statements." Internal controls are key, as well as ensuring compliance with applicable laws and following regulations. These elements are essential for a knowledgeable advisor who is bound by a fiduciary responsibility to build his or her clients’ wealth while minimizing unforeseen risks. The understanding of your limits. For investors, securing downside protection for the long term is becoming a very desirable alternative. Knowing your tolerance limits to market volatility sets the strategy when weighing out the risk to return ratio, as well as providing the ability to manage or reduce risks that cannot be diversified away. This can be especially true for alternative investments, which is one of many reasons why many investors turn Midwest Wealth Management. Our experience dealing with complex types of investments like alternatives can help educated clients and help them decide whether it’s right for them. The ability to minimize losses. A proactive risk management strategy can also help minimize losses by balancing investments with other assets. This is achieved by diminishing a portfolio’s volatility and increasing its durability with such things as alternative investments, which can have a non-correlated performance relative to stocks and bonds.

 

As a private Indianapolis investment group specializing in wealth management, Midwest Wealth Management features investments that may offer significant tax advantages over a standard allocation built with stocks and bonds, and a well-balanced approach between risk and return. For more information, visit us at www.midwest-wealth.com.

 

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.

 

Appendix C. Safeguarding of Assets. SEC.gov. https://www.sec.gov/rules/pcaob/34-49544-appendixc.pdf

 

Investing in alternative investments may not be suitable for all investors and involves special risks, such as risk associated with leveraging the investment, adverse market forces, regulatory changes, and illiquidity. There is no assurance that the investment objective will be attained. All investments are subject to risk, including the loss of principal. Talk to a financial advisor before making any investing decisions.
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Should the option to buy or sell be up to your Robo-advisor?

On Friday, June 24th the morning after Britain voted to leave the European Union (EU) – the markets were preparing to open up to with big losses and investors were gearing in for high volatility. The real outcome of the events was unknown in regards to the long-term effects it would have on any one market, sector or specific company. The only thing that was certain was the number of opinions for investors on what they should be doing: Buy right away? Sell while you can? Ride it out? With news stations and investment commentaries calling for the next big market crash or short-term volatility, what was an investor’s best game plan?

 

For investors using the robo-advisor Betterment platform, the option was simple – do nothing. And although it was completely within Betterment’s rights to use its own discretion in coming to this decision, (given the type of arrangement they have with their clients who aren’t looking to buy or sell instantaneously), it still caught many of their clients completely off guard —especially the ones that wanted to buy on Friday. It sends a bad message when your clients are desperate to adjust their positions and the system refuses to cooperate. Being told they could not do something with their own money was not well received.

 

To make matters worse, there were other digital advisers who thought it best not to touch their platforms at all. SigFig, among others, left their platform untouched. "Just because markets may be up or down doesn't mean we should suspend trading," said Mike Sha, chief executive of SigFig. He said trading halts should be made when trades are not being executed properly, which was not the case on Friday, despite prices being down.

 

These types of events are learning experiences because they help educate investors on how to determine what they really want out of any type of adviser, robo or not. It also brings clarity to what actions advisors can take, or in this case, prevent investors from taking, especially if they advisor determines that it is in the investors’ best interest. It has also brought up the question of why a company — who prides itself on not trying to time the market — is telling clients this is not a good day to buy or sell.

 

It is important to understand how your adviser is able to act under what kind of conditions. And in times of extreme uncertainty, what kinds of actions they are going to take on your behalf.

 

For more information on investing and other financial tips, visit Midwest Wealth Management at www.midwest-wealth.com, or call us at 877-243-4132.

 

Shilder, Lisa. Betterment explains why its Brexit-sparked trading halt on Friday wasn't 'suspended' trading. RAIBiz. 28, June 2016. http://www.riabiz.com/a/5062198653091840/betterment-explains-why-its-brexit-sparked-trading-halt-on-friday-wasnt-suspended-trading

 

Malito, Alessandra. Betterment's move to halt trading following Brexit vote sparks controversy. Investment News.28, June 2016. http://www.investmentnews.com/article/20160628/FREE/160629905/betterments-move-to-halt-trading-following-brexit-vote-sparks

 

http://thetrustadvisor.com/news/did-brexit-trading-glitches-doom-betterments-robo-ipo-hopes
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Financial Wealth Strategies in Zionsville

With the complexity and volatility of a fluctuating market, conventional wisdom regarding investment management is becoming unexceptional at best. So where does exceptional wisdom exist? Would it surprise you to learn that a very successful private wealth management group with unconventional strategies to maximize assets while minimizing risk is situated in the state of Indiana?

 

Located in the heart of Indianapolis, just miles away from Zionsville, Midwest Wealth Management offers sophisticated investors an alternative when looking for a more strategic path for long-term investing. Through a private investor platform featuring a 5-stage investment process called The Wealth Guide ™, Midwest Wealth Management provides an alternative route to wealth creation and the protection that appeals to a more sophisticated investor. Through our private investor platform, we offer a proprietary trading platform, alternative investment offerings, and dedicated advisory support. We believe that not every investor is created equal. For the discriminating few, the path less traveled to Midwest Wealth Management, Inc. is the path they prefer.

 

As a private Indiana investment group specializing in wealth management, 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. Midwest Wealth Management
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Why we sell and panic at the wrong times: advice from an Indiana Wealth Advisor.

Dalbar’s Quantitative analysis of investor behavior has become a popular resource for many Indiana wealth advisors in studying the psychology of investor’s decisions and how those decisions affect results. In the study, they talk about how behavioral biases that lead to poor investment decisions are the single largest contributor to underperformance over time.   It is these types of behaviors that can cause very smart and successful individuals to make choices they end up regretting — the type of emotional decisions that were made on a whim or formulated outside of the investor’s original plan.   The Dalbar study clearly illustrated just how poorly self-made investors perform relative to market benchmarks over an extended period. Granted taxes, trading costs and the internal dynamics of an index will affect the purchasing power of an investor against the index, but overall investors do underperform in the long run:  
    1. The average 2014 equity fund mutual fund investor underperformed the S&P 500 by a wide margin of 8.19% .(13.69% vs. 5.5%).
 
  1. In 2014, the 20-year annualized S&P return was 9.85% while the 20-year annualized return for the average equity mutual fund investor was only 5.19%, a gap of 4.66%.1
  Hiring an advisor to help manage these common pitfalls is where clients can take the emotional aspect out of the equation and rely on the advisors ability to look at the bigger picture. A good advisor will always ensure that the client has a highly diversified portfolio with a mix of traditional and alternative investments.  But most importantly, being able to build a comprehensive plan to manage the emotional side of the equation is showing to be just as important as the underlying investments themselves. To learn more about how you can achieve a successful investment strategy, visit Midwest Wealth Management at www.midwest-wealth.com, or call us at 317-288-4989. 1Roberts, Lance. Dalbar:Why Investors Suck and Tips For Advisors.  Advisor Perspectives. 8 April 2015 Midwest Wealth Management
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Finance and Wealth Management with a Midwest Heart and Wall Street Brain.

It may come as a surprise, but not all successful finance and wealth management firms are located in New York's Financial District. Those Wall Street firms may offer quality investment products however, it is likely they are chosen by advisors who don’t know you. They may not even have the heart to get to know you, your story or your vision for the future.   Further east in the Midwest, sits a firm that has abolished the high fees, pretentious attitudes and cookie-cutter investment advice. We have chosen to support busy, successful people who want and need personalized guidance.   Based in Indianapolis, Midwest Wealth Management is a private investment group. We have a specialized 5-stage process called THE WEALTH GUIDE™. It starts with listening to you and finding out where you want to go. The process provides the advice, resources, and active investment management to help you get there.   If you think you don’t have enough to need a financial plan or an advisor, you might be surprised. We work best with successful professionals who know something is keeping them from saving enough and who feel they aren’t maximizing what they’ve already saved. We want to hear your story, and help you create and achieve your vision of a well-invested future. To learn more, visit us at www.midwest-wealth.com   As a private investment group specializing in finance and wealth management, Midwest Wealth Management, Inc. offers a proprietary trading platform and dedicated advisory support for a select audience. For more information, please visit www.midwest-wealth.com. Midwest Wealth Management  
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INDIANA WEALTH MANAGEMENT … SERIOUSLY? SERIOUSLY.

Indiana wealth management? Not all successful wealth management firms are located on Wall Street. And the ones that are there may offer quality investment products — usually chosen by advisors who don’t know you. Or that don’t care to.   Located in the heart of Indianapolis, Midwest Wealth Management is a private investment group specializing in an alternative route to wealth creation designed for the sophisticated and independent-minded investor. It’s a place where your voice carries the most weight in helping you achieve your vision of a well-invested future. And it’s accomplished through a proprietary trading platform, alternative investment offerings, and dedicated advisory support for a select audience. It’s the heart of the Midwest with the brains of a seasoned Wall Street advisor. To learn more, visit us at www.midwest-wealth.com   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 a select audience. For more information, please visit www.midwest-wealth.com.   Indiana Wealth Management
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How to Identify Top-Notch Wealth Management Advisors.

Wealth management hinges on the collaborative relationship between an individual or family, and their Wealth Management Advisors. Naturally the best advisors share a similar set of core values. It’s valuable information you can use to identify and hire a firm to manage your portfolio.   Political, economic and social conditions are in a constant state of flux. This shifting landscape requires a great deal of flexibility from wealth management firms. Life circumstances, regulatory and tax environments change quickly. How quickly an investment advisor can respond to these trends is the key to realizing the best outcomes for you as a client.   A good client-advisor relationship is built on transparency. Accounting scandals and Ponzi schemes have left an undeniable blemish on the wealth management industry. With transparency comes credibility and security as you contemplate who will manage your next egg. Without appropriate due diligence, your financial security is in jeopardy. For high-net worth, and all individuals, for the matter, integrity and financial expertise are the cornerstones of wealth creation.   According to Forbes, optimal wealth management happens when products, services, investments and legal strategies all work together cohesively to the benefit of a client or clients. So, as the client, the best results are achieved when there’s an overarching understanding of what’s going on and integration between all the elements1 — That means your investment advisor is on the same page with you, understands your investment objectives, and can integrate them into a cohesive strategy. You can have the best investment team behind you, but if there is no consensus or coordination among everyone concerned, your wealth management strategy will miss the mark.   We’ve introduced a few characteristics of top-notch wealth management. If you are considering a wealth management firm, or have concerns about your current investment advisor, these touchstones will help you find, or maintain a bright relationship with your investment team. If you have any questions about wealth creation, we invite you to learn more at www.midwest-wealth.com.   Indiana Wealth Management   1. Prince, Russ Allan. “Three Characteristics of Top-of-the-Line Wealth Management,” Forbes Insights Blog, January 6, 2015.
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