Monday, April 3, 2017

Happy Birthday, Divvy!



HAPPY BIRTHDAY, DIVVY!!!
 
It has been 2 years since I walked away from the corporate world and started Divvy Investments.  Running a business is a delicate balance between excitement and terror.  I am truly grateful for everyone who has helped get us this far.
 
A lot has changed in the past 2 years.  We started out working with diy individuals (still work with a few) but quickly realized we were a better fit for advisors.  We have fine tuned our quasi robo advisor.  We have fine tuned our niche.  Now we even do a little bit of marketing consulting on the side to compliment the models.  Our focus is helping independent financial advisors spend more time building relationships with the right people and less time in front of their computers.  We have had opportunities to do a handful of other things but for us it just made sense to put a laser focus on the little box and take really good care of our customers.  A lot has changed and I have a few more grey hairs.  
 
Our values have remained the same:
 
  1. Be passionate:  about life, family, friends, and our awesome customers
  2. Evolve via education:  learn something new and teach someone else
  3. Make Mama proud:  do the right thing
 
Those are here to stay.  Cheers!

Tuesday, March 28, 2017

3 Reasons Why Your Startup Should Hire Kindergartners




Chance (my son):  “Dadda, we should add another letter in the alphabet.”

Me:  “Really?  Why?”

Chance:  “My Letterland character doesn’t sound right.  C is supposed to sound like Clever Cat.  We need a letter that makes the CH sound.  (pauses briefly) Can I have a snack?”  (casually walks away as if he didn’t just turn my entire world upside down)

Me:  (Mind blown.  Jaw drops to the floor.  #geniuschild!)
 
**note- www.letterland.com is an awesome resource to help kids learn how to read.**

I have been on this planet for almost 40 years.  I have had the opportunity to lead and follow some of the greatest minds in the country.  I have a graduate degree from a top tier university.  I try to surround myself with innovative thinkers in the startup community.  Not once have I heard a comment so obvious yet so outside of the box.  Not.  Once.

I was excited.  Motivated.  I immediately wanted to hire my son (who is in kindergarten) to review my business plan.  I had so many questions.  There had to be some things right in front of my face that I was missing.  LIGHT BULB!  Maybe I could do a focus group with the kids in the neighborhood?  And it would be cheap too, all I’d need would be a box of popsicles and a homemade bike ramp!

Well, the popsicles melted while I was trying to build the ramp.  Apparently that shiny orb in the sky produces a lot of heat and as it turns out I’m not very handy.  Epic fail on the focus group I guess.  However, I did come across a couple of other resources that reinforced the idea of trying to think about business like a kid.

Chris Heivly, cofounder of MapQuest, wrote a book called “Build the Fort” (check it out here).  In the book he relates the experiences he had as a kid to building a startup.  Simple, yet effective ways to think about building and growing a business.

Carl Nordgren, entrepreneur and professor, wrote a book about a class he used to teach at Duke called “Becoming a Creative Genius (again)” (check it out here).   It discusses how we are born creative and helps us find ways to get back into that way of thinking.

From those books and numerous follow up attempts on the focus group, I’ve come up with the top 3 reasons why your startup should hire kindergartners.

1       Creativity
      Kids just go outside and play.  They make up games and rules as they go.  The games constantly evolve.  As more kids come out to play, they find a role for them.  They are creatures of creative action.  Imagine if your startup did that.  

2       No boundaries
      Kids know right and wrong, but they don’t allow their minds to have boundaries.  They don’t know how to give their minds boundaries.  They are little explorers.  What’s over here?  What is this?  How does it work?  It looks like it could be a good addition to my rocket ship.  Our minds are trained to only go so far down the rabbit hole.  It’s a stick.  I will put it in the yard waste bag.  Kid brains are designed to chase things all the way down the rabbit hole and then to dig another series of tunnels to come home.  Imagine the possibilities in your company if there weren’t boundaries.

3       Lack of fear/embarrassment
      When kids are playing they share their ideas and build upon each other.  When they think of something that sounds fun or adds value to the game, they blurt it out.  No fear.  They are just having fun and trying to continue to do so.  Adults often get self-conscious about voicing ideas and opinions.  Imagine if the people in your organization didn’t hold back.
Imagine what could happen to your business if you looked at it like a kindergartner.  You take creative action.  You don’t allow yourself boundaries in thought.  You encourage the sharing of ideas.  

Now, before I get emails from every labor lawyer in the country, lighten up.  I’m not actually encouraging people to hire (or condone hiring) kindergartners.  After all, it’s not practical.  They take naps during prime productivity time…

Thursday, March 2, 2017

Robot Love



"What is the robot version of Bro-mance?" - Homer Simpson via "The Simpsons"
"Ro-mance." - Homer's robot friend, Bender
What if humans could coexist with robots? Gasp! (the nerve)
Relax. I’m not talking about creating little half-human, half-robot babies here. I’m talking about not viewing robots as competition, but rather as a tool to use for enhanced service.
There have been countless articles pitting robo-advisors against human advisors. The robo world says they can do things better, faster, cheaper. The advisors say that the human element is the most important piece of a comprehensive plan. It’s like the old Miller Lite ad: “Tastes great! Less filling!” You both like the same beer! Stop fighting!
At the end of the day, robo-advisors and human advisors are both trying to do the same thing, help the individual better prepare financially. Imagine the possibilities if they created a Ro-mance, as Bender says. I know there are some firms that have adopted this idea but it is largely still a competition. The logic is that if the two team up and each focus on what they are good at, then everyone wins…especially the client. 

What Is a Robo-Advisor?

A robo-advisor is an automated, algorithm-driven investment tool that focuses on asset allocation and rebalancing using low-cost index funds. It is largely based on modern portfolio theory and efficient market hypothesis (academic theories that have been around a long time; opponents say “But now is way different…” Check your Google machine for more info).

Why Use a Robo-Advisor?

The goal of a robo-advisor is to minimize fees and remove emotion from investing. The whole world knows buy low and sell high. Emotion says buy when the market is going up and sell when you start to panic as it crashes. Emotion is usually not good when investing. 

What Is a Financial Advisor?

That is a bit more difficult to define. In broad terms they could potentially advise on insurance, investments and/or taxes. For our purposes we will focus on investments. There are brokers, who earn commissions on products sold based on suitability of your needs. There are planners, who charge a fee for planning and advice (often times as a fiduciary, which means they have to act in your best interest). They are regulated and licensed by FINRA, the SEC, and/or states.

Why Use a Financial Advisor?

Financial advisors provide a human touch which can lead to a better understanding of your goals and guidance to help you achieve them. They can help you come up with a comprehensive plan which may help you prioritize multiple goals, address insurance needs, assist with estate planning, and deal with complex financial situations.

The Ro-mance

Oftentimes a financial advisor spends a significant amount of time creating and monitoring portfolios for clients. How much value are they really adding there? Their real value is in the relationship. After all, if he or she was the world’s greatest stock picker wouldn’t they be running a $10 billion hedge fund? Advisors should get out from behind the computers and in front of more clients building relationships. 
How awesome would it be if you found an advisor who used a robo-advisor to complement their services? The human would look at where you are compared to where you want to be and help figure out how to make it happen. One small piece of that puzzle could be the robo-advisor for your investments. 
What that would mean for you is an advisor who understands you and your goals and provides a comprehensive plan, all while minimizing fees on your investments.
Love is in the air. Robos and humans can complement each other. It could lead to a budding Ro-mance. 

Tuesday, February 28, 2017

Asset Allocation 101 Part 2



On multiple occasions, I’ve mentioned the financial services industry’s incredible ability to confuse everyone – seriously, everyone. My goal is to help make a little bit of sense out of the mumbo jumbo in hopes that it helps people make better decisions. In previous series, we discussed basic investing and financial planning.
We recently started an asset allocation series to build up the foundation of your financial literacy house. In Part One of the series, we discussed what asset allocation is and why it’s important, and provided an overview of some common asset allocation strategies (one of which was not a get-rich-quick scheme). Today we will do a deeper dive into each of the four most common asset allocation strategies: strategic, dynamic, tactical, and core-satellite.
Strategic Asset Allocation
Strategic asset allocation (SAA) is a long-term approach that is designed to minimize the impact of emotions on portfolios. The goal is to create an appropriate mix of investments that balance risk and long-term returns.
The concept suggests that investors will benefit by staying invested in the markets and adhering to target allocations that reflect characteristics of the investor, rather than the performance of specific investments.
When the market is volatile, are you a Snoopy Joe Cool type, or are you more of a doom and gloom Charlie Brown type? Target allocation percentages for various asset classes (e.g. bonds, U.S. stocks, international stocks…) are selected based on the investor’s comfort level with risk, time horizon, and investment objectives. As those items change, the allocations may change, as well. The portfolio allocations are monitored periodically. Then, as the allocation percentages drift from the targets – as the markets go up and down – the allocations are rebalanced back to the risk aligned target percentages. It’s a more passive strategy that doesn’t change based on economic conditions.
Dynamic Asset Allocation
Dynamic asset allocation (DAA) is similar to strategic asset allocation in that both set target allocation percentages of asset classes. However, dynamic allocations may have several short-term adjustments to those allocations based on current and expected market and economic conditions. When using DAA, the focus is typically on the absolute return, not on comparing to an index/benchmark. Investors and managers who use dynamic asset allocation can achieve high returns if they are right regarding their assumptions on what the market will do. Obviously that is easier said than done, especially in flat and down markets. Pay attention to trading costs if you (or your advisor) use DAA, as it can get expensive.
Tactical Asset Allocation
Tactical asset allocation (TAA) is a more active approach. It involves constantly evaluating specific investments, looking for opportunities to take advantage of undervalued or overvalued assets. Those who use this strategy are typically looking for shorter-term gains from market inefficiencies where the market overreacted to something, though the investments could be held longer.
TAA proponents essentially act as appraisers, using fundamental and technical analysis of the investment, markets, and economic conditions to evaluate the value of an investment. If it appears to be undervalued, they buy it. If it appears to be overvalued, they sell it. Use caution here – if you’re investing outside of a retirement account, you should be aware of the tax implications of the shorter-term gains. Most people who use TAA have significant investing experience, as well as access to a lot of economic data.
Core-Satellite Asset Allocation
Core-satellite asset allocation involves launching a satellite into space that will manage your money while simultaneously strengthening your core…
Ok, not true, but it would be epic if it were! One part Elon Musk, one part Warren Buffet, one part Arnold (I won’t even attempt to spell his last name). Shaken, not stirred. Epic, I say – epic! But I digress… again.
Core-satellite asset allocation is a hybrid approach. There is a fundamental core to your portfolio, which serves as the foundation. The core portion will be more long-term strategic asset allocation (potentially dynamic asset allocation) tied to your individual risk tolerance. The satellite portion of the portfolio will consist of shorter-term, more tactical allocations. The more seasoned the investor, the more she may lean towards a larger satellite allocation. The more novice investor should probably lean towards a larger core allocation.
Hopefully now you have a basic understanding of asset allocation. There are a lot of different strategies out there, and picking the right one for you comes down to your personality, how involved you want to be, and a good advisor guiding you.
As originally posted at http://centsai.com/investing-experts/asset-allocation-101-part-2-common-strategies/

Monday, February 6, 2017

Marine to Veteran to Entrepreneur


Ok. I'm far from Captain America. But being a Marine, then a veteran, then an entrepreneur is sort of the dream, right?
I’ve always been drawn towards challenges. One day after high school I woke up and decided to look for the biggest challenge I could find. I quit my job and enlisted in the Marine Corps infantry. That night during our family dinner I broke the news like this… “Mom, I quit my job, joined the Marines, and leave in two weeks. Can you pass the salt?”
In hindsight I probably should have softened the blow a bit, but my parents came around after a brief nervous breakdown.
I entered USMC boot camp in the late ‘90s weighing 115 pounds. This resulted in more than my fair share of quarterdeck time. Fast forward six months (bootcamp + school of infantry) and what seemed like 10 million pushups later, I weighed 165 pounds. The Marine Corps pushed me harder, mentally and physically, during that first six months than I knew I could go. But I liked it. Sure there was a lot of BS but I understood the bigger picture. They were breaking me down to build me up stronger. They were forcing me to rely on others. They were forcing others to rely on me. They were teaching us to rely on each other to move towards common goals.
I served four years and got out as a Sgt of Marines, the best job in the entire Marine Corps. Throughout my time in the Corps I was taught many life lessons. I became comfortable with calculated risk. I was confident in my ability to move forward on an 80% solution knowing that I’d be able to adapt and overcome whatever was thrown at me. I learned about perseverance. I experienced huge highs and lows filled with excitement and terror, ultimately figuring out how to remain calm in situations of uncertainty. I was exposed to some of the finest leaders on the planet, who provided exceptional examples of how to lead from the front.
Most of all, I quickly realized that the Marine Corps (and life) is what you make of it.
As I transitioned out, I didn’t know what the next chapter looked like. I worked full time while attending college 1-2 classes at a time. Because of my military experience (and the recruiter being a Navy guy) I was able to get a sales manager gig at a Fortune 100 company. The work was OK but not very fulfilling. Like many vets, I wandered aimlessly for a bit, searching for that camaraderie I had with my old unit. There were pockets of it, but certainly not the same.
Shortly after I graduated from college the world began to fall apart financially. 2008. Being a Marine, I saw smoke and ran towards it. If there was ever a time people needed help with their money it was then. I got licensed and jumped into the financial services industry as a financial advisor. People were afraid. Paralyzed with fear. I felt as though I could be a voice of reason for them and help them. It was very rewarding.
Unfortunately the industry is set up largely to take care of people with lots of money. They have armies of advisors flocking to them constantly. The people who needed the most help though were the middle class, and they weren’t getting the same level of service as the rich people. During that time I became interested in low cost index funds, asset allocation, and something called Modern Portfolio Theory. It was my way to address the problem.
That is when the idea for Divvy Investments was born.
I wasn’t in a position to start a company at the time. I went to grad school, spent a few years in consulting, and ended up back in the corporate world again. In the corporate world I was frustrated a lot. At one point I was actually told to care less about customers. That was the moment I knew I needed to work for myself. I quit my job and started a business (after getting the blessing from my wife, of course).
I was excited. I was scared. I had an idea that I thought could be a viable business, but I didn’t have all the answers. It was a calculated risk. I was confident in my ability to adapt and overcome with an 80% solution from my training in the Marines. I knew I could remain calm while being faced with the uncertainties of running a business. I had learned years prior that life was what you make of it and I was passionate about helping people simplify investing.
I started Divvy Investments in April 2015 with the goal of helping DIY investors make better decisions with their retirement savings. Since then I’ve added a co-founder, gotten to pitch/speak at events around the country, and stumbled into another market, selling our robo advisor tool to other financial advisors. Helping people while doing what I love is very fulfilling. We have a long ways to go with our company to achieve our mission, but we are bringing in more money than we are spending which is a good start.
Being an entrepreneur is not easy. You never know what situation you’re going to encounter. There are highs and lows every day. Most businesses fail. It is tough. I think what gives us, as veterans, an edge is understanding the parallels between our time in service and entrepreneurship. We know the value of a clear mission. We know how to assemble/train teams with talented people. We understand how important it is to lead by example. We are driven by a sense of mission accomplishment. We’ve persevered, adapted, and overcome strenuous situations many times before.
I’ve always been drawn towards challenges. I’ve added a few more pounds since my days on active duty. Probably from the salt… That’s my story and I’m sticking to it.
Semper fi!
Nick Bradfield
As originally posted at http://the-military-guide.com/marine-veteran-entrepreneur/

Friday, February 3, 2017

7 Tips to Prepare for Tax Season



“In this world, nothing can be said to be certain except death and taxes.” – Benjamin Franklin
It’s that time of year again. No, no. I’m not referring to the time of year when people abandon their New Year’s resolutions, though that is probably true also. I’m not referring to the time of year when a new season of "Game of Thrones" is beginning…wait, is it? If so, stop reading this and commence binge-watching. I digress…
It is the time of year when accountants excitedly say goodbye to their families and begin crunching numbers into the wee hours of the morning. It is the time of year when some begin to get excited about what to do with their tax refunds while others repeatedly tell them that they are loaning money to the government. It is the time of year when receipts fill shoeboxes. It is the time of year when we realize we should have saved receipts (Doh!). 
It is…TAX SEASON (insert horror film scream).
Don’t worry. The only thing to fear is fear itself…and perhaps going to jail for tax evasion…but mostly just fear itself. Instead, focus on these tax tips to help you get through the season.

7 Tax Season Tips

  1. Don’t wait until the last minute. Get a head start. It is much more relaxing and gives you time to adjust to surprises if needed. Procrastinating could lead to mistakes. Mistakes could lead to fines. Fines could lead to jail.
  2. Get organized. As with most things in life, the more organized you are the smoother things tend to go. Hopefully, you took a little bit of time periodically throughout the year to organize things. If not, just do it. Take a day and chalk it up as a loss. Get it done. Get organized yesterday. It will help clear your head and make your CPA happy (and probably save you money as a result). Remember to include all sources of income. Income, expenses, receipts…categorize them all. 
  3. Deductions. Take advantage of all the deductions you are allowed.
  4. Stay organized. You took the time to get organized. Now keep it that way.
  5. If you own a business, make sure to send out W2s and 1099s to your team. Here is a link to the IRS site which will help you figure out how to handle contractors. If you don’t own a business, gather all of your income statements for all of your income sources.
  6. To DIY or not to DIY? That is the question. You know your business. CPAs know theirs. If your situation is easy and you understand what you’re doing, give it a whirl. There are several software tools out there to help you do it yourself. If you are hesitant at all, it is probably best to hire an accountant. Ask people you trust who they use. Find someone you like and trust. If you own a business it would help if the accountant understood your industry and your business.
  7. Double-check your work or have your accountant walk you through it before submitting. It takes a little bit of extra time, but a lot less time than having to file an amendment.
“This is a question too difficult for a mathematician. It should be asked of a philosopher" (when asked about completing his income tax form) – Albert Einstein
Full disclosure: I am not a CPAEA, or any other tax professional. In fact, I can barely spell tax. Asking me a tax question will prompt the response of a blank stare. I’m just an organized guy who likes to keep things simple. I’m also friends with a lot of CPAs and recovering CPAs. I’ve heard them complain and seen them stress out when people don’t do the things above. Raise a glass to a healthy and happy CPA and a less stressful tax season for all! (For more from this author, see: How to Deal With the Stress of a Small Business.

Tuesday, December 20, 2016

A Holiday Reminder: Harvest Your Tax Losses

Another year has come and (almost) gone. While your spirits may be full of holiday cheer (and egg nog), this is no time to forget about your financial goals. Depending on what part of the year you did your investing, you could have some losses in your taxable accounts that you can harvest for a tax break. (For related reading, see: Tax-Loss Harvesting: Reduce Investment Losses.)

Take Advantage of Tax-Loss Harvesting

When you sell a stock, bond or mutual fund, the difference between what you paid to purchase it and your net earnings is considered a gain if the amount is positive or a loss if the amount is negative. In most cases, you would certainly hope for gains, not losses. However, some investors strategically use losses to negate the effects of capital gains taxes. Capital gains are taxed at 15% on long-term gains (anything held over one year); short-term gains (held less than one year) are taxed at your ordinary income tax rate. (For related reading, see: What You Need to Know About Capital Gains and Taxes.)
Any gains realized during the year can be offset by selling losers. This is what we call tax-loss harvesting. Regardless of whether the gain is short-term or long-term, the loss will counteract the gain. What’s more, if you are able to realize more losses than gains this year, you are able to carry forward up to $3,000 of losses to next year, which can save you on taxes. Note: if you are planning on doing this, please consult your CPA or a tax professional to make sure this strategy makes sense in your specific situation.
During the year, perhaps you sold a security to have the extra cash to replace your hot water heater, for example. Often when the money is needed, capitals gains are disregarded, which is why the holidays are a perfect time to review all transactions from the year and see where you stand on gains taxes. Most brokerages offer a convenient way to view this: in your accounts, there should be a tab that shows “Realized Gains/Losses.” Make sure to look at the “Realized” tab rather than “Unrealized.” That ensures you’re looking at the investments you sold during the year instead the “what ifs.” (For related reading, see: How Are Realized Profits Different From Unrealized or So-Called "Paper" Profits?)
So, what do you do after you sell, you may be wondering?


Be Aware of the Wash Sale Rule

There are a few options, depending on whether you plan to re-deploy the capital elsewhere or hold it in cash. For example, it is possible to use the newly freed funds to re-balance back into underperforming funds according to your asset allocation. However, what you certainly want to keep in mind is something called the wash sale rule. If you sell securities at a loss, in order to get a tax benefit from that loss, you cannot invest in a substantially similar investment for at least 31 subsequent days. 
The keywords are "substantially similar." Arguably, there are funds that perform similarly, but are not exactly the same, where you can park the money for a bit. You don’t have to re-invest the money at all (you could leave it in cash), but some investors like to keep their money working for them in the market for as long as possible. Each situation is unique, and what’s important to know are the different options you have.
Regardless of what you decide, be aware of how you classify any tax-advantaged dividends, as reinvesting of any kind back into the fund you sold out of at a loss will flag it as a “wash sale.” It doesn’t matter if you sold VTSAX in your taxable account and accidentally had dividends reinvested in your VTSAX holding in your 401(k) within 30 days. That will negate the tax benefits of harvesting the loss.
At the end of the day, there are plenty of things to do around the holiday season. Most of them cost money. Why not add something to your list that could potentially save you money? (For related reading, see: Wash Sales and Substantially Identical Securities.)

As originally seen at http://www.investopedia.com/advisor-network/articles/121216/holiday-reminder-harvest-your-tax-losses/#ixzz4Swg1EgkO