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For our Fintech Spotlight segment this month, we are featuring qplum, a company that is bringing AI, data-driven strategies, and affordability to the world of investing. I’ve invited the co-founder and CEO of qplum, Mansi Singhal, to tell us more about the company today.
We’re also going to discuss why monitoring our investment portfolio might actually be a really bad idea.
Andy Hill: The markets have been up and down a lot lately, and I’ve been checking my portfolio a lot more frequently. Why is that not a good idea?
Mansi Singhal: That’s definitely not a good idea. And this is not just me telling you this. This is also research that has been written by many economists. In fact, Richard Thaler, the 2017 Nobel prize winner in economics, he actually suggests that one should be lazy. And this is very serious advice because it’s natural.
All of us are guilty of watching the news, seeing so much about the stock going down, things happening in the stock market, and then we’re like, “Oh, information is on your smartphone. It’s instant. It’s free.” It’s hard to weed it out.
And it’s a really bad idea because if you monitor it too much, you are prone to stress. And stress means you make knee-jerk reactions which can result in poor returns for you in the long term, and it also means high trading costs for you which might go unnoticed and you might lose on your long term capital gains.
Why is being a lazy investor a good thing?
Being lazy is good.
The reason it’s good it’s because you’re trying to be an investor and not a trader, and it’s very important to make that distinction. Traders think short-term. They are concerned about the here and the now. They would monitor their markets, they would act on their portfolios multiple times in a day. That’s not the business you and I are in.
Investing is not supposed to be this stressful. Investing is different from trading. Typically, we recommend investors to still monitor their portfolio once a year maybe. Of course, if there’s a life event change or there is any big change, then they should revisit it. But there’s really no reason to go back and check it multiple times just because now you have a smartphone app on your phone and you can. It’s not a social media account. It’s your investing account.
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How do we weed out all of the noise from 24-hour news telling us to buy, sell, panic and hold?
The thing is that it’s not investors faults because you are being flooded with all this information, right? The media is flooding you.
The brokers really want you to do more trading so that they can get their trading commissions. And the easiest thing to do is just change the channel. Just turn the show off.
Like anyone else, I’m also guilty on acting on a bit of the news that I saw, and then I’m like, “Oh, maybe we should put this trade on.” And then you feel bad, “Oh, maybe I shouldn’t have.” And really the only way to tackle that is if you have a plan before you need one.
And by that, what I mean is if you have a plan to deal with drawdowns. If you or your advisor have discussed what would you do or what would your portfolio do if things go sour, if things go down 5% or 10%.
If you’ve had this discussion with your family or your adviser beforehand, and you have set a plan in place, disciplined investing creates wealth.
Irrespective of market conditions, you need a plan. And that’s kind of the only way to mute all that noise.
How is qplum helping the average investor with this issue?
qplum is a registered investment advisory firm, and we typically help individuals and families with all kinds of issues.
Our youngest client is a 19-year-old. He’s going into undergrad, and he saves during his internships. And I’m really so impressed by him. He’s saying, “Oh, I don’t want my parents to take any loans for me, and they took such a big student loan for me and I really want to be independent very early in life.” I was flattered when I heard that.
And our oldest client is above 70 taking his distributions from his IRA. So we do help a very wide range of clients.
We’re really helping you with making these decisions depending on what phase of life you’re in. You may be a young parent, and all you’re thinking about is your child and not looking at your retirement account. Maybe you are a tech executive or in financial industry, and you’re getting these big bonuses but you’re not being very smart about investing them and being very conservative because now you’re more concerned about losing wealth rather than returns.
The first step always is to get on a call with one of our advisors. And we take the time to understand what’s important for you and then lead you in the right direction for the 5-year or 10-year plan.
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How do you differentiate yourself from other brokerages or investment partners?
I think there’s a little bit interlinked with Gaurav (Chakravorty) and my background. Both Gaurav and I are computer science engineers by education, and when I came to the US as a student, really I learned a lot.
And what we really learned is that the systematic way of doing things is not something that has been made accessible to an everyday investor.
The everyday investor has either been given a lot of choices, which are very hard to parse even for a Wall Street bank. If I give you thousands of products to choose from, it’s too much research for you to do. They’re sold a lot of products, not strategies, and everybody’s out there just trying for them to either trade too much or charging hidden fees.
It’s supposed to be much more simple, and you only have to make a few right decisions to be able to invest for the long term. That’s really the goal of qplum. I’ve traded at banks, traded at hedge funds. I’m trying to take that, put that in qplum and then offer it to investors like you and myself.
How does the AI help out the situation?
AI works very much behind the scenes. The AI is like that toolkit that we have through which we’re able to offer all of this at a very affordable cost.
And we get this question a lot. “Why do you guys use AI?” or, “What’s the point?” Really where we’re using it is as a way to reduce costs. And I’ll give you a very simple example.
Active management is typically associated with high costs because the moment I utter the word active, people say, “Oh, you’re going to trade a lot and you’re going to charge my account and you’re going to charge me a lot of money.” We built an automated system that end to end is completely systematic and yet we are able to charge our clients just a flat fee. The reason we’re able to do that is through use of AI.
If I were to build the same system using manual processes than obviously I’d need a much bigger task force. That’s one of the ways we use AI.
Another way is dynamic allocation. By that I mean, markets are changing, there’s so much data. You need super computers and full time quants to be analyzing this for you. Obviously, not everybody can hire those people or those systems. That’s where we come in and are able to create this pipeline, bring down the cost for everybody, and then offer it to an online platform. That way your allocation is changing over time and you’re not stuck in a static allocation no matter markets are going up or down.
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You said “affordable”. What should somebody expect to pay with qplum?
To get on a call with an advisor you don’t have to pay anything. The first consultation is free. You can just walk away with that plan and go to another advisor. Or you can execute it and do it yourself if you feel comfortable doing it.
For clients who invest assets with us we charge a flat fee of 50 basis points (0.5%). So for every $10,000 it means $50 a year or just roughly speaking $4.17 a month. We charge for the month that we serviced, not in future.
You don’t pay any trading costs. You don’t pay anything to the broker. We take care of all those charges because we have been able to negotiate all that with the broker. That’s all you pay, just the 50 basis points.
How does that compare in the industry?
I would say we are very competitive given the amount of active management and oversight that is involved in the process. You always have zero fee index funds and you always have legacy robo-advisors who are offering zero fee or very low fee but then you also have to look at the quality of service that comes with it.
For the quality of the service that comes with it which is unlimited consultations with advisors (human advisors), a lot of oversight, a risk management for handling downturns, all that included, I think we are very competitive compared to any high end asset management firms that typically start at one percent.
Do you see people moving away from the high cost partners and moving towards lower cost, effective, technology driven solutions?
We definitely see a lot more interest in the younger generation. We also see a lot of interest in high net worth individuals who are probably just sick and tired of paying so much in fees and not seeing much of a result.
I do want to just make a distinction and it’s probably a little nuanced. We get thrown into this debate of passive versus active a lot. It’s because people normally associate passive with low fees and less maintenance and active with high fees and a lot more monitoring and a lot more knee jerk reactions. That’s kind of the thing that we’re trying to change.
We all need moderate amount of active management because life events happen. You buy your first house then you may need to liquidate something. If you have a child, you will probably need to liquidate something. You are already in some sort of moderate (very moderate) active management in your portfolio. We just have to kind of balance it.
However, that’s somewhat of an educational challenge that we’re facing with investors because they say, “Oh, passive means low fee. I don’t have to do anything. I can just set it and forget it.” And the truth is you never set it and forget it. So you do need some moderate active management, but you shouldn’t have to pay an arm and a leg for it.
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When was the company founded?
We were founded in late 2014, and our product was launched in February of 2016.
How’s the adoption been so far?
In our early days, we attracted a lot of professionals in financial services for some reason because they thought, “Oh, you guys look really smart. You guys have cracked the code of doing active trading at a very low cost, so I really, really like you guys.” But now, of course, as the firm has matured, we have clients from probably every kind of field.
We manage roughly about $81 million in assets, and we service more than 500 families.
We also believe in this huge amount of oversight and human connections. Technology’s great, but technology’s written by humans, and it affects humans. So you definitely need that channel of communication to be open.
We highly encourage our clients to be engaged with us as their schedule permits. A lot of them are very busy professionals so we understand.
But yes, we seem to be growing pretty fast, and we’ve also launched our institutional side of the business earlier this year where we announced sub-advising other investment advisers and other asset managers, so they can take our strategies and share it with their clients.
With all of the bigger players out there, why should someone invest their money with qplum?
And that’s an excellent question. And really, for any investor, you have a lot of choices these days. I don’t need to start naming them. You have more than 100 choices if you start going around and shopping around.
I think the key to pick any advisor– and I’m not going to sell Qplum here — is really what’s going to be your process with them. If you are comfortable picking a big player who’s just going to give an 800 number, and they’re more of broker and not going to take any decisions with you, and you’re very comfortable investing, then go for it.
But then I see a lot of lawyers, doctors, successful business owners who are genuinely lost because this is just not their area of expertise, right? We all are good at some things. It’s just not the same thing every time. So if you need more hands-on help and if you feel like you need somebody– you’re just starting your journey, and you need somebody to kind of walk you through that, then we might be the right partner for you.
Or if you’re already a high net-worth individual or family and you’ve accumulated a lot of assets but you feel like you’re paying too much of fees, then we might be the right partner for you.
If you’re interested in learning more about qplum or taking advantage of their free consultation, click here to learn more.