A Flat Fee, Customized Global Portfolio Built Specifically for Your Life Goals

Have you ever thought to yourself “Self, there has to be a better way for me to invest my money than in mutual funds with investment advisors who are making a percentage of what I invest, regardless of the performance of my portfolio.” If this is you, allow us to introduce you to Randy Cass with NestWealth. Randy believes there is a better way to invest and has built a company around that belief.

Using leading edge technology and industry-tested investment rules, Nest Wealth gives you a smarter and quicker way to reach your financial goals.


Jackson: Jackson Middleton

Kyle: Kyle Prevost

Sandi: Sandi Martin

Randy: Randy Cass

Jackson: Here we go, we’re live. Hey everybody, welcome to another episode of the Because Money Podcast. I’m Jackson Middleton, joined by Kyle Prevost and Sandi Martin.

Tonight we’ve got a very special guest, Randy Cass with NestWealth—wow, that’s a tongue-twister. Sandi’s going to introduce Randy, and we’re probably going to have to talk to someone else with the first name ending in the letter Y. Sandi, why don’t you go for it, right now.

Sandi: Well, thanks Jackson. So of course, here’s Randy Cass of NestWealth. NestWealth is one of the—I’ll say robo-advisors, because I know everybody out there knows what I mean. We can talk a little bit about whether we’re actually going to use that term or now. And Randy is the founder of NestWealth, which is operating here in Ontario.

It’s a slightly different value proposition from some of the others out there, but in general I think, Randy, we’ll let you tell us what NestWealth does for regular, ordinary Canadians.

Randy: Thanks guys, it’s a lot of fun to be here today. What we do is not dramatically different from how the largest and the best and the smartest institutions invest their own money, except we give that access to all Canadians and all investors. And that means that there’s a certain way to invest properly, and this industry hasn’t always supported it. It is figure out what your risk tolerance is, minimize your fees, you get properly diversified, stick to the plan, rebalance when necessary, and then you come out with what is possibly the best outcome that you could get to.

And a lot of what happens in Canada right now is the exact opposite. It is buy high fee products, chase whatever’s hot, trying to outperform the market. And we are the exact opposite of that. So using what we feel is the best-in-breed technology, we give the diversified and customized aspect of portfolio creation available to everybody, and for instead of a percentage of the funds, we do it a single flat monthly fee ranging anywhere from $20 to $80 a month.

Sandi: Okay, so that is pretty different. Why the flat fee?

Randy: Well, I mean, a lot of people talk about this as a debate between what’s good and what’s evil, and what’s old and what’s new, and we just think this is a debate between whose money is this anyway. And a lot of what is the tradition in this industry is that where you invest your money, the goal is to really extract as much of it as they possibly can. And we just don’t think that’s the right way to do it.

We think the proper way to do it is to buy the service and to charge a fair fee for that. And the only way you can charge a fair fee for that is to make it a flat fee. There’s no other industry in the world where people will give up a percentage of their money based on how well they’ve done for the exact same service as someone else. You don’t pay more for car if you’re very wealthy, if it’s the same car as someone else is buying. You don’t pay more for a house if it’s the same house. Anywhere else, being charged based on how well you’ve done is call a tax.

Did you guys see the Usual Suspects? Everybody’s seen that. But there’s a line at the end of it where Keyser Söze or Kevin Spacey says—oops, spoiler alert— [laughs] says “the greatest work the devil ever did was convincing people that he didn’t exist”. And he didn’t know the mutual fund industry, because the greatest trick that this industry’s ever done is convincing people that they should be charged a percentage of their assets. And in an environment where you’re expecting 5, or 6, or 7 percent a year on a good balanced portfolio, at best, if you’re paying 2-1/2% a year, which is the average Canadian mutual fund fee, if you’re paying that a year, you’re not just given up 2-1/2% a year, you’re giving up to 40-50% of what your lifetime increase in wealth could be.

Canadians just can’t afford to do that anymore. And until NestWealth came along, unless they wanted to do it themselves and no one really does, they didn’t have a choice. And we represent a choice that allows them not give up 40% of their fees, but to keep about 95% of their wealth.

Kyle: But wait, Randy. You’re talking about it’s going to cost me, and it’s $20 a month, and all this stuff about fees. My financial advisor didn’t tell me any of that. My financial advisor said I was getting the advice for free, that it was free. They told free four times in our conversation, and they made sure to emphasize that it was all free. So what do you mean that this costs less than free?

Randy: Well, you shouldn’t be telling me about that conversation with your financial advisor, you should be talking to the regulators, because there is a misperception that exists in Canada that financial advice and services are free, and they’re not. They’re opaque, they’re hidden. They’re everything but transparent, which is not the same as free.

Do you remember that I said 2-1/2% on the average equity mutual fund in Canada. If you break that down, the way it works is there’s about a trillion dollars invested in Canadian mutual funds. Most of them are sold through advisory channels or through banks. That 2-1/2%, in most cases, will include something called a “trailer fee”. That trailer fee is usually 1% percent. So of a trillion dollars, we’re talking ten billion dollars. That ten billion dollars is coming out investors’ pockets and going to compensate people like the advisor you had the conversation with for selling you that product.

Now, here’s the rub. You think that he sold you that product because it was the best possible product for you, and that would be true–

Kyle: –that’s what he told me.

Randy: Yeah, it would be true if there was something called a fiduciary obligation that exists in Canada. Which means that the advisor has to put their interests behind your interests. They have to put your best interest always first. It exists in the law profession, it exists in directors. It exists all over the place, but it doesn’t exist in the financial services industry, which means that all an adviser has to do is sell you a “suitable” product. And a suitable product can be something that fits your needs, but it’s not the best product for you. And that means that if you have a mutual fund that charges 2-1/2%, or you have an ETF, an Exchange Traded Fund, that does almost exactly the same, but charges 95% less in fees. They can still sell you the mutual fund because it is a suitable product. And that’s one of the problems in this industry right now.

It is not that advisors are bad, and not that advisors don’t have best interests at heart, it’s that in many cases the only way they get compensated is by selling high-fee products to clients, and that’s not in anyone’s best interest.

Kyle: Your advice must be much less thorough, then. You’re paying so much less for it, so it obviously must be not nearly as good. Because I’m sure when I go to my hypothetical financial advisor, I’m sure he’s going tell me yeah, yeah, yeah, those online guys. “Listen I’m here. I’m giving you personal advice. I’m taking care of your specific situation. I guarantee you, they’re not going to put as much time into it as I am.”

Of course I tend to think differently. I’m sort of secretly with you. I’m playing devil’s advocate here, but what would you say to that hypothetical financial advisor?

Randy: There are some families and some individuals, many Canadians, actually, where the value brought by a relationship with an advisor who is actually  looking out for your best interest, will be invaluable. They’ll either have complexity in their financial situation or they have multiple priorities that they need to look after, or things like estate planning with taxes, or the rest of it.

But when it comes to wealth management, when it comes to asset allocation, when it comes to investing your money, the objective data—time and time again—has shown that the best way to get performance is to just say, “I want to get the same return as the market and I’m gonna stop trying to beat the market”. And study after study after study has demonstrated that is the way you end up coming out ahead.

There’s something called SPIVA study that compares active management, which are funds run by portfolio managers who are hired just to outperform a passive mentor. And it shows year after year, about 2/3 to 3/4 of those funds will not outperform an ETF, an S&P TSX 60, an S&P 500—a benchmark that they were hired solely to outperform, each year 2/3 to 3/4 won’t. Over 5 years it gets up to 90%. Over 10-plus years it gets up close to 100%. It’s like, if 3 out of 4 computers didn’t turn on, 3 out of 4 cars didn’t start.

This industry has an incredible amount of brainpower showing up for work every day and doing nothing, but actually destroying value. And the reason is because of the fees. And if you got rid of the fees, then you would actually allow people to keep a vast more proportion of their money, and at the same time what we’re doing then is not only cheaper for the individual, but it is constructing an actually objectively better portfolio for them. Do you want me to find you an advisor?

Kyle: No, I agree. In addition to the SPIVA study, I think I’ve referenced on here before, I’m a huge index proponent as well. I’ve read a bunch of stuff, and whether you’re taking about Andrew Hallam or some of the other guys out there that have done the index investing research. I mean, there’s been Dalbar studies. All these studies where if you take out survivorship bias, it’s less than 2% over 10-year stretches, of those actively managed funds. And many of them are switching managers. There’s just no way. I’m probably like the most vehemently anti-mutual fund person left.

I actually look over my shoulder all the time, because I’m afraid, like there’s so much money tied up in mutual funds that someone’s going to come for me, that I’m destroying the business model.

Randy: I mean, here’s the thing that’s not really well understood about the mutual fund industry. It was set up for a very noble purpose. It was set up because diversification, investing in a lot of stocks, got rid of risks but was bloody expensive back in the 20s and 30s when the first mutual funds came out. And so they kind of said look, if you want diversification, we’ll pool the money together, we’ll take a cut, we’ll take some transaction fees. But it was much better than the alternative.

It was only in the 70s when Vanguard came out with the first index fund and said we’ll give you the same diversification, but we’re not going to try and hire someone to outperform the market. The mutual fund industry went to Madison Avenue and Fifth Avenue and they said to those guys, we need a marketing strategy to counter the index funds.

Kyle: And now, to the truth.

Randy: Yeah, and well, no one knew it was the truth at that point, but they said we’ve been selling ourselves on diversification, and now there are these rugrats down the street, in a state over from us, it says they can do it much cheaper. And one of the very first campaigns they came out with was if you were sick, would you want an average doctor, if you were in trouble with the law, would you want an average lawyer. And they implied it was essentially un-American to want to have average returns.

And the logical conclusion of that was overnight the mutual fund industry went from being a purpose of diversification, to we will do better than average returns for you. The only problem is it’s never been objectively shown that as a whole they can, and they’ve built up in Canada a trillion dollars on the back of marketing that says we will do better than average, when we just talked about it—90+% over an extended period of time—do no such thing.

Sandi: I’m not entirely convinced that people walking into a bank branch are really—I mean, I think outperformance is it just kind of back there, bubbling away as one of the many things they’re looking for–but I don’t think that they necessarily walk in and say “this person is going to manage my portfolio for me.” I think they’re walking in and saying “I hope they’re going help me in some way. They know about money. They’ll do that. Plus they’ll do the portfolio, plus they’ll answer whether it should be an RRSP or TFSA. I mean, I never seem to be able to pay down my credit cards. Maybe I can talk to them about that.” All of that is paid for, essentially—depending on the model—is often paid for by the trailing commissions that you were talking about at the beginning.

When people call in at NestWealth, and they have questions that they would ask the bank person—we can debate the relative quality of the answers that they get from the bank—what kind of answers are they getting from you when they ask those questions?

Randy: So, it depends what questions are. Everything you just spoke of: the desire to pay down credit cards, the need for answers on why it’s hard to save, or the other areas that you spoke of, those should never be paid for as a percentage of assets under management. Those are services. Those are people with high sets of skills. Those will be fee-only financial planners or accountants, or lawyers, or experts in each area.

You should never be paying for that stuff based on how much you’re willing to invest. And Sandi, I would argue a bit that qualified advice in those areas is even accessible as a trailer or a flat fee in the investment industry, to people that have less than probably half a million dollars. It’s scaling up to a million now at many places. And that’s the entry fee. That’s the door fee to cross a threshold at a high-service high-quality financial advisor, who I readily admit can help you in all sorts of areas that NestWealth won’t.

We don’t answer questions about tax planning or estate planning. We will help you with what type of account we think you should maybe be set up and where your money should go initially. But beyond that, we prefer to route you to an expert; someone who in that particular area will give you the best possible unconflicted advice. Because what you spoke of, Sandi, what credit card I should switch to, what accounts I should open, how I should pay my bills. All those things are income sources for the place where you’re sitting down to discuss them with the expert across the desk at the bank, and that is the wrong place to get advice. Your advice should be unbiased, it should be unconflicted, it should come from someone who has no products to sell you.

And one of the real puzzles of the mutual fund industry in Canada is how all this stuff got jumbled into the MER ball. And the vast majority of people have no complexity or need to take advantage of it. The vast majority of people don’t need to worry about a legacy estate planning for their $10 million dollars, or which tax shelter they should take advantage of. The vast majority of Canadians would just be happy knowing that their money was being put in a place that was going to let them reach their goals with the highest likelihood. And that’s so hard to find in Canada right now.

So my counter to you is, if you have access to that quality of information that’s going to let you come out ahead, then go for it. All the power to you. But NestWealth has been set up because the gap between those who have access to it and the millions of Canadians that are being defaulted by banks and others into 2-1/2% mutual funds is too high. It’s just too much now. Something has to be done take the 20-odd billion in fees that’s getting paid through this complex every year, and shrink it down to nothing.

We don’t need a solution that some great new pension plan or some forced savings plan; although they all might have aspects and end up being positive. What we need is to engage the Canadian marketplace and let them know that they finally have a choice. And you don’t want to do it yourself, and I get it. And you don’t want to give 40-50% of your potential wealth and fees and lost compounding, and I get it.

So we have created the best use of technology, the best professionals in the industry, and a flat fee that doesn’t believe in taking a cut, a chance for you to have your answers answered. If you need that expert advice, I mean, there’s the three of you.

Kyle: Why, thank you.

Randy: There are taxes and all sorts of areas where you should be able to get fair, unconflicted advice at a reasonable fee. The notion that I should be paying for that advice based on how successful I’ve been in the past and how much money I have, is just ludicrous.

Kyle: So, when we talked about the one end of the spectrum and compared to someone with a million dollars that wants a full service type plan set up for them, how do you convince guys on the other end of the spectrum, Randy? Obviously, for folks like me who are geeky about this and want to read books on it and go into depth, you know, the discount brokerages where we set up our own ETFs, are a relatively good solution.

So what type of person is probably better off with the do-it-yourself thing, shaving off those little bits of fees, and what sort of people are you guys perfect for?

Randy: Well, if this is your passion and this is your love, and this is play money and not your savings, then all the power to you. Be a do-it-yourselfer, enjoy life, enjoy what you get out of playing with the stocks and the markets because it adds value to you. But don’t for a second think that you have put yourself in a position to come out in the best possible outcome, because there are certain things that are just boring as heck, that people get tired of. Forced rebalancing, having to figure out what an efficient frontier looks like, having to optimize the risk in your portfolio so it’s appropriate, picking the best ETF, not getting sidetracked so you double-down on split sixes, for some reason at the blackjack table, just because you’re bored.

There is an incredibly slow, methodical, boring way to make sure that you’re doing the best possible job you can, for you savings. And doing it yourself, just because of the way we’re wired, just because we chase things that look shiny, just because we sell things for psychological reasons that are down and buy things that are up. Doing it yourself is a very challenging way to come out ahead. But no one’s going to tell you not to.

What we would challenge you to is to say keep a portion of it to do-it-yourself, put a portion of it with a service like NestWealth that gives you the lowest cost ETFs from providers like Vanguard and iShares. The perfect allocated optimized portfolio for your risk tolerance. Customized, we have no buckets, so it takes care of rebalancing, the gives you full transparency and a fixed fee so that we don’t take an increased amount of money every time you do well.

And then at the end of the year, look at the two of them and decide which one did better. And at the end of three years, look at the two of them and decide which one did better. And every year ask yourself, is your time worth $20, $40, $80 dollars a month. And if at any point you say, “Yes, I think it is” and “Yes, they keep doing better than I’m doing”, then you’ve given yourself the answer.

But there are some people that will never want to hand over control, and there are others that look at hiring a service, like NestWealth, as the alternate in taking control. And that is the group we’re looking for. Those that just say, “There’s nothing there for me right now that’s not going to cost me a fortune. I don’t want to really take all of the responsibility on myself, but I want to go to bed at night and I want to know that this is being handled professionally, it’s being handled in a way that I can trust, that’s smart, that’s protected, and that I’m doing the best job I possibly can for my family”.

And the vast majority of our clients are professionals with kids and grandkids, large account size. This is not, as many people think, just a play for Millennials and young people. This is a play for anyone who has exhibited frustration with what they’ve gone through in the financial services industry, felt alienated by the financial services industry, or just really wants a chance to come out ahead and doesn’t feel that the playing field’s been levelled until now.

Jackson: Wow, Randy. Okay, convinced, you got me, perfect. So what is the next step? What is the next step for a service like NestWealth? What are some of the objections you’re going to hit? Like what are your obstacles, where you going, and how are you going to get there?

Randy: So, I think when you do any company—and this is my second company that I started up. The first was in the same space. It was coming called First Coverage. We raised $15 million for it, and then we sold it to a UK company back in 2011. I have been in financial services, managing portfolios in a quantitative fashion for almost 15 years now. So this is my industry. This is everything I know.

And money isn’t like other startups. It’s not like taking photographs or scrapbooking, or ordering food online. This is a serious issue. And the biggest thing we need to get people comfortable with is two facts. One, that they can be doing a heck of lot better than they’re doing right now, when it comes to how much of their wealth they’re able to keep and what it’s costing them. And two, that the alternative solution that we’re providing is safe and secure and reputable, particularly to Canadians, who have real needs to get to the sense of trust, and as you understand, security when it comes to anything to do with money.

So we’ve taken a couple of approaches to this. One, we’ve made it absolutely clear that as our company exists, we never actually touch your money. All our accounts, all our clients have their accounts residing at NBCN, which is a 100% owned subsidiary of National Bank. It is their custodial clearing house arm. It’s in our client’s name. All the cheques and accounts are opened in their name. We take care of all. It’s all open digitally, if you go to join.NetWeath.com, the entire process is digital, it’s encrypted. There’s never a need to print anything else. We can go all the way start to finish.

We take care of helping them open their account, but the account is in their name, under the umbrella one of the largest banks in Canada. We sign an investment management agreement with them, that only gives us the ability to actually manage in alignment with the KYC that they took, so we personalize and customize everybody’s portfolio. We take responsibility for rebalancing it. We give them full transparency into the account. We have no locking-ins or tie-ups. If at any point anyone wants to take control and terminate their relationship with NestWealth, it can be done at 24-48 hours.

Then the other thing is we make sure that they understand, we are the exact opposite of everything that exists on Wall Street and Bay Street right now. We do not believe that we have come up with a better mousetrap or a faster wheel, or anything that’s so special that no one else has discovered it. Every portfolio is put together using the same Nobel prize-winning theories that the large institutions use. Every portfolio is properly diversified using industry-wide best practices and formulas. The asset classes we use are the ones that David Swenson, who runs Yale’s endowment fund, suggested with the modifications that we add exposure to Canadian equities.

There is nothing that we do here that suggests that we’re going to add value to your portfolio by figuring out something that no one else has ever figured out in outperforming the market, because we know that’s not true. The way we’re going to add value to you is by minimizing your fees, making sure that you’re in the appropriate risk-adjusted portfolio for your tolerance, keeping on top of it, and making sure that we’re using the best low-cost ETFs for you. So that regardless, no one can promise you which way the market’s going to go—up, sideways or down. And if anyone does, they’re flat-out lying to you.

But what we can say is that because we can guarantee you that the amount you’re going to pay us is going to be so much less than the amount you going to pay alternatives that exist, like 2-1/2% mutual funds. Regardless of which way the market’s going to go, you’re going to end up better off because of that incredible difference of the amount of money that you get to keep.

Kyle: I’m just picturing Matthew McConaughey right now in the Wolf of Wall Street, was like, “Fugayzi, Fugawzi. No one knows…” and all that good stuff. But yeah, basically you’re the anti-Matthew McConaughey, is what you’re saying.

Randy: A lot of people have said it. You can choose to be one of two types of companies in the investment industry. You can choose to be portfolio managers, or you can choose to be a marketing company. [Kyle laughs]

And if you are going to make money on the sole basis of how much your assets are, and you’re going to bring assets in based on the sole basis of how well your marketing is, then you’ve made your choice. We believe that it’s the exact opposite that Canadians need right now, and that is, how do you give them the best chance of reaching whatever their choice of financial independence is, whatever their goal is at the end of the day.

And it’s a very simple answer. You let them keep as much of their money as they possibly can, and there hasn’t been a company that’s come around in Canada yet that said that is our goal, to keep your money in your pocket.

You know, when I was setting up NestWealth about a year-a-half ago, we were looking for software providers and we were looking for partners, and we were looking for all sorts of people to act as either custodians or middleware or fill out the parts and services that we needed back then. And when we sat down and had conversations with them, so many people in the industry would look at us and say, “Do you guys understand that if you price it where you’re going to price it, how much money you’re leaving on the table?”

And we couldn’t quite figure out that they didn’t get it. That we didn’t think this was money being left on the table. We thought this was money being left where it should be, which is in the account holder’s pocket. And when we told them that, “No-no-no, we’re not going to charge a percentage of their fees. We’re not going to take a cut at the end of the day. We’re going to cap it. Eight bucks a month, starting at 20; 80 bucks a month matter how big their accounts get”. And not per account, but in total. That’s just in total. You can have multiple accounts, but still 80 bucks a month for you.

When we told them that, many companies didn’t even have a way to incorporate with our software because they had no process by which not to take a percentage of someone else’s fees, or someone else’s account.

So this is, like I said at the beginning, it is a debate and the debate is solely about whose money is at the end of the day, and companies like NestWealth have taken a very firm stance that it is the account holder’s money.

Sandi: [laughs] So, can you project us? What’s happening in the future? [laughs] I get super-excited about things like this. The comments that I read, and Kyle you probably read this, and Jackson, I’m sure you’ve read it before. I hear it all the time, “Well we have to give the robos a little bit of time because it’s pretty new”. So project us 3-4 years down the road. What does this landscape look like?

Randy: Okay, so anyone who says we have to give the robos a bit of time because they’re pretty new, is kind of like saying “let’s see how the stock markets play out. That seems like a pretty new mechanism”. [laughs] We are not going to be blown away by directions in the market. We are not going to be capsized because things happen that we’re uncertain about. Everybody’s account is at an insured place, in their names, separate. We don’t actually mingle the accounts, ever, under the NestWealth umbrella. This is an ETF that is plain vanilla, no derivatives, no synthetics.

We are about as boring as an investment management company can get. This is not a question of how the robo advisors do. This is a question of how people react when the market turns down for the very first time in their experience. And one of the greatest services that an advisor can provide is being a buffer between an individual and their inclination at the wrong moment to sell everything in their account, only to see it go back up.

When we had extreme volatility in the markets a month or so ago, we had no calls into NestWealth. And it was because we set the expectations of the account holders at a level with the risks that they were willing to accept, in the portfolio that we created for them, was in-line with the exactly what happened. We are so much better able to let people understand what they’re getting into. To let them understand what the risk to the upside and the downside looks like, based on historic volatility of their portfolio. To give them the transparency, to let them know that the money’s actually there, in their account, when they want it, and to see how it’s doing.

That we don’t believe that this is something just waiting for a bear market to capsize. We believe this is something where if a bear market actually comes, there are going to be so many people that are frustrated with their performance and the amount of fees that they’re paying, that the search for alternatives, like a NestWealth or a robo advisor as they so call it, will go to a level we haven’t seen yet.

For every person that is upset because they can’t reach someone, to personally having a long conversation and hold their hand, there are 50 that will be upset that the person who they are dealing with wasn’t there to protect them or create a properly diversified portfolio.

And the other misconception that does exist, is that from a regulatory point of view and from a practical point of view, every client that uses NestWealth actually has a portfolio manager assigned to them. A regulated person who can speak to them, pick up the phone, engage in dialogue with them. But the subject matter that’s going to be covered is of such a subset of what could be covered that it means that we can scale efficiently.

No one is going to ask us why we were in a particular stock, or why we didn’t buy Apple, or why we held onto Blackberry. Everybody’s going to have a clear understanding of their portfolio before any single trade is done. Everybody has a conversation with the portfolio manager to make sure they’re comfortable with what we’re suggesting, and that they agree that this is the asset allocation that makes sense to them.

And once they understand the risks that they’re taking on and the portfolio diversification, and they can see it on a day-to-day basis, their real questions that they’ll call about, circulate around the things that really should be entertained on a phone call: my risk tolerance has changed; I have another situation; I need your advice about my time horizon; I’ve lost my password—these are the things that we will have conversations about with our clients, and we can help them with.

But because no one’s calling us about stocks, and we’re not calling them about hot stock picks—for whatever conflicted reason we might have—it really does ratchet down on the number of conversations that we’re going to have with our client base. But we are always here to talk to them, whenever they want to have a conversation about their portfolio.

Kyle: The other thing that I would tell listeners is that robos are new in Canada, someone new. But they have been in other markets for a long time now, and the business model is proven, and companies like NestWealth and some of the others in Canada, have learned from any initial mistakes; and there weren’t many, from what I’ve read.

It’s a very simple business model, so there wasn’t a lot to change or do. The other question I had for you, Randy, is when I call in and I ask the person for my password, or maybe to ask just some questions about what exactly is an ETF—stuff that you guys would answer. What type of credential people am I talking to? Or what sort of folks do you hire to answer questions there at NestWealth?

Randy: So we have a great customer support/customer experience team, and we also have the portfolio manager. And so if your question deals with an area that isn’t under regulated activity–if it is a question about where can I find this on the site or can you send me a list of ETFs that are currently being used in my portfolio, or anything that’s covered in a marketing piece that is just common information,those types of conversations can be had with someone who’s not a portfolio manager under the OSC.

But any conversation you have that would be an activity or a conversation in furtherance of a trade: change in the portfolio, adjusting the risk tolerance, making changes to your horizon because of specific reasons. Every single one of those conversations is had with a regulated individual. And these regulated individuals all have a fiduciary obligation. Unlike the traditional advisors, there is a legal and fiduciary obligation to put the best interests of the client of NestWealth ahead of them, in all instances.

So not only did we get rid of a conflicted advice channel, not only do we have no products to sell, not only do we not make any money as your account grows from $250K to $1M or encourage you to take on greater risks than you should, not only have we gotten rid of what most of the conflicts, like trailer fees and opaqueness, would exhibit themselves to be in an industry like ours, the truth is, every time we do something, every time we make a transaction, every time we give advice, every time we select an ETF, it is done with a fiduciary obligation. And in my opinion, that’s the way this entire industry should be.

Speaking of which, there was the second part of a question, which was how will this industry look five years from now.

I think the greatest thing that has happened is that whether we end up being the great market leader or one of the companies in this States is a great market leader down there. Whatever happens, there’s finally been a clear and transparent value put on what is essentially a plain vanilla commodity action. I’m going to create a diversified portfolio. I’m going to build it with ETFs. I’m going to rebalance and monitor it, and I’m going to do all this for you on a consistent basis. That is table stakes in asset allocation wealth management right now.

And if you want to know how much it costs, it costs anywhere from 20 to 80 bucks a month—that’s it. [Kyle laughs] If you are having a conversation with an advisor now, and when CRM2 comes out in July 2016—it’s already out, but when the final stages come out in July 2016— and everybody gets a statement, and that statement it’s going to say the amount of money you have been paying in commissions to advisors. And it’s going to be a big number for some people. It’s going to be $5,000, $10,000, $20,000.

The conversation now is no longer, “Huh, that’s a big number. Not much I can do about it”. The conversation now has to be, “Explain to me why I’m paying you twenty times as much as I can pay NestWealth to do the exact same plain vanilla portfolio allocation that you’re doing for me?” And in many instances, the advisor will be able to turn around and say well here’s all the different ways that we add value. And great for them if that’s the answer to that question. But in lot of instances there’s going to be no answer. There’s going to be silence. And the ability to overcharge for plain vanilla asset allocation now, and to get a percentage of someone’s future wealth, just for doing something that can be done through NestWealth at a fraction of the cost—that’s gone. And the winner of that is going to be the client.

And so however this industry shakes out over the next five years, I can guarantee you that the end investor is going to be better served because of NestWealth.

Sandi: There is so much more we could talk about this. I could just get lost in this conversation, but we won’t. We’ll wrap it up here. I am so happy that you came on the show Randy.

Randy: I’m happy to be here.

Sandi: I’m very glad. I think all of us are watching this unfold with great interest.

Randy: Absolutely. We should have some pretty nice announcement coming out in the next month or two, and I encourage everybody. If you’re wondering what the impact of fees are on you, go to join.nestwealth.com. There’s a little calculator/storyteller/scenario builder that you can play with there. And you will find out exactly how much these fees might be taking out of your potential wealth.

Sandi: That’s great, thanks Randy.

Randy: All right. Thanks guys. Take care.

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