Monthly Newsletter
An Introduction:
I'm starting this newsletter as a fun way to engage clients and those interested in keeping up with the firm and myself. With it - I aim to pass on financial news, tips, and insights in a personal and, hopefully, engaging manner. I'll take a closer look at a financial headline by connecting it with a drink that I enjoyed as a light-hearted way to make each topic more relatable because the best conversations are the ones enjoyed over a common denominator. Additionally, I hope to shine a small light on a local business, entrepreneur, or just someone out there making a difference in the community.
And of course, this newsletter would be nothing without pupdates from our Upbeat family. If you'd like your doggo to be featured, please send a picture for me to use!
Come for the personal finance literature, stay for the puppy content. Here we go!
Fill My Cup: Ghost in the Machine
This month, I filled up my cup with a Ghost in the Machine Double IPA from Parish Brewery in Broussard, LA. A must stop for me anytime I am in the area visiting my godson. The whole package is great from the hop-forward brewing, the smooth citrus flavor, the artwork, and of course the name. The phrase “ghost in the machine” had me thinking about the duality of the mind and the body. The times we program for one thing but find ourselves overpowered to the contrary. Like my recent trip to the grocery store with a list of nutritional food, and my car ride home with an empty bag of Zapp's chips.
As of last Thursday, Robinhood, a trading and investing app, is a publicly-traded company. If you are unfamiliar with the Robinhood app, it prides itself on ease of use and strives to “democratize finance for all”. Disclaimer: it’s not my place to ascribe intentions, good or bad, to their founders or the company. Simply, I am going off my experience, research, and what has been credibly discussed by people far smarter than me.
Earlier this year, the app exploded in popularity during the GameStop trading frenzy when users of a popular online message board sparked a huge jump in the stock prices of GameStop, AMC, Blackberry, Koss, and more. At one point in January, GameStop was up over 10,000% year-over-year. The story was remarkable, and new "investors" flooded to Robinhood for a piece of the action. As a reference, my account was created in 1 minute. Another 2 minutes to fund my account, and Robinhood had approved my account in equal time. If I deposited $2,000, I could begin trading on margin (borrowed money) - i.e. I could lose more money than I even had to trade. They even awarded me a free stock for signing up (come on, Clovis Oncology!).
Fast forward a couple of weeks and the Robinhood CEO was testifying on Capitol Hill after deciding to halt customer trading on various positions. Robinhood account holders were enflamed. This event became a catalyst for other perceived issues with the company such as the gamification of stock trading, their controversial advertising towards young, unsophisticated investors, and allowing those investors to make complex trades without fully understanding the implications. Tragically, a Robinhood user even took his own life after mistakenly believing he’d lost $750,000 on the platform.
One of the biggest points of contention with the app is the lack of fiduciary care the company exerts on behalf of its customers. A huge Robinhood selling point is the offering of “commission-free investing” but Robinhood, certainly, isn’t a non-profit. And as we have learned in the era of social media - if you are not paying for the product, you are the product. Over 50% of Robinhood’s revenue is derived from selling its customer’s orders at prices that the SEC claims “were inferior to other brokers’ prices”. So, while trades may be “commission-free”, customers are actually paying for them behind the scenes – they just don’t get the bill. Robinhood isn’t the only firm to collect revenue this way, they are just the most aggressive about it – especially considering their low barrier access to risky options trading which is a more lucrative type of customer trade to sell.
My two cents:
Robinhood does not need to take a fiduciary oath to better serve its clientele. Providing their young, inexperienced investors access to financial education is a much-needed start. Or simply, not allowing these same investors to access more capital than they could ever afford at the click of a button. Up until this point, they have latched onto a boisterous social media trend revolved around sharing “huge gains” off risky, leveraged option trades. Inexperience, trade envy, and uninhibited access to capital is a bad recipe for younger investors. Unfortunately, our regulators and rule-makers of the securities industry do not have a stellar record on consumer protection. I enjoyed reading attorney and creator of the AdvisorCounsel blog, Max Schatzow, tweet "Congrats to former @SECGov Commissioner Dan Gallagher for joining Robinhood at the perfect time, using his connections to grease the S-1, limiting civil penalties from SEC and FINRA, and earning $25mm in stock compensation in an extremely short period of time."
Applications that help us run our businesses, automate saving and investing, and handle our taxes are powerful tools. However, it’s extremely important to ensure these programs are working in your best interest and are actually supporting better habits. One way to accomplish this is having a fiduciary in your corner to lean on. A true fiduciary operates without a conflict of interest because their advice is portable and can be executed anywhere. It’s why my financial planning firm is independent and boasts a transparent fee-only structure and service model. It's often said that personal finance is part art, part science. With so many moving parts and variables, you can hardly count on solely achieving optimal outcomes. The backbone of sound financial planning revolves around preparing for the unexpected. True empowerment is having the tools and education necessary to wrangle control back from the ghost in the machine and remaining committed to fulfilling your personal goals, no matter the obstacles.
One for the Road:
Upon receiving a pay raise, you might feel inclined to increase your discretionary spending budget but that is a tough trend to reverse. Here are some small, tangible things that you can do before taking your lifestyle to infinity and beyond!
1) Evaluate your emergency fund. The rule of thumb is 6 months' expenses, but everyone's situation is unique. The important thing is making sure you are comfortable with your cash reserves and in the case of a partner, are on the same page.
2) Take advantage of tax-qualified retirement accounts, especially receiving the full employer’s match on your 401(k). Remember, more compensation = a bigger tax liability to manage.
3) Analyze your debt obligations and run the numbers! Even an incremental increase of say, $100/month, can take years off your loan and thousands of dollars off your payable interest.
4) Increase savings towards your more short and intermediate-term goals such as a vacation or a kitchen remodel. If there is an opportunity to realize these goals sooner and bring long-term memories or joy into your life, these are contributions worthwhile.
5) Celebrate your success. Enjoy having more money to do the things you love more frequently. While it's important to remain prudent about our spending, it's healthy to spend on the things you enjoy or added conveniences.
Up, Up and Away:
Pepps Pub
706 Franklin Ave. NOLA 70117
"Dog Friendly, People Tolerant" is the slogan of Pepps Pub, a true local watering hole located on Franklin Ave. at the edge of the Marigny Triangle. Named after their adorable dog, Pepper, the bar was opened by the husband and wife team of Sam & Kait after they purchased the space from the previous owners (formally Cutter's) in January of 2020. I could tell you about their great pricing, craft beer selection, and effective cocktails but Pepps is really about the people from the owners to the patrons (human and dogs alike). Nothing beats being greeted at the door by Pepper herself. And I thought they would make a great first selection as it was the first place that my hometeam ventured to after our covid vaccination. I found myself there again after a long dog walk contemplating starting Upbeat Wealth after handing in my two weeks' notice, only to be asked to clear my computer immediately. My dogs were thirsty when I delightfully wandered in on "Whiskey Thursday" as Sam was unboxing new whiskey finds for the bar collection. Generously, he let me in on the taste testing and showed me pictures of a recent birthday party they hosted for a regular's opossum. That's really Pepps Pub in a nutshell. Make sure to give them a look if you're in their neighborhood!
On the Pupbeat:
Smokey, wisely, beats the heat at City Bark! (not pictured: him, unwisely, drinking this water)
