By Leslie Hughes, California Business Journal.
Saira Suleman, Wall Street all-star, financial guru, and founder and creator of YourCapital, isn’t afraid to state a fact that many others in the financial industry are not willing to say outright: no matter what way you try to spin it, brokerages are not your advisors.
While many do-it-yourself people turn to brokerage firms such as Merrill Lynch, Fidelity or Charles Schwab to get free help investing their money in mutual funds, you, according to Suleman, “cannot expect them to show you the cheapest funds that are right for your needs.”
Rather, they are your go-to guys and gals to gain access to products. Essentially, they are sales people.
In fact, at the bottom of the paperwork you’ll sign upon opening an account at one of these brokerage firms will read some jargon that can be simplified as “Brokers are not fiduciaries. They are sales people who get compensation on commission.”
The bottom line is “the brokerage gets compensated quite a bit, so it is in their best interest to show you products that have very high fees. You cannot expect them to show you the cheapest funds that are right for your needs,” Suleman says.
Prior to the creation of YourCapital, Suleman created customized portfolios for wealthy investors at Morgan Stanley. She noticed during this time that average investors who self-direct their investments really didn’t have anyone to help them analyze their portfolio. “People would come to meet and say, ‘What do you think about my portfolio?’” she says.
“The average investors are doing their best to go about investing in the right products, but their limited knowledge simply isn’t cutting it and they are not putting their money to the best use. The problem is so common, and I felt there was something I could do.”
Suleman likened this to her experience back home in Pakistan of purchasing clothes. In her home country, it is customary to purchase material for clothing from a market to then be taken to a seamstress to be constructed. When purchasing the material, it is up to the buyer to notice any defects in the fabric. You can never expect the salesman to point them out. But if you don’t know to look out for faulty fabric, then how you can ever get quality products?
You have to know what to look out as well when investing. You can get “advice” from your brokerage firm, but that “advice” cannot really be trusted, since it does come with commission and fees in mind.
Thus, to help guide the average investor, Suleman created YourCapital — a financial service firm that offers holistic and transparent guidance. And YourCapital does this for free.
Targeted towards individuals who self-invest, who don’t want to pay for advice, and who want to remain in control, YourCapital was formed to help ensure people don’t fall into what Suleman deems the three most common investing mistakes.
- Staying in cash. “The most common mistake is that they will have cash, but don’t know what to do with it,” she says. “There are so many products out there — an immense amount of choice.” So much choice that people end up feeling overwhelmed and simply staying in cash.
- Investing in high-fee products. This is what happens when investors trust brokerage firms to make decisions for them. In fact, the $17 billion annually that is spent on fees served as the impetus for the proposal of the fiduciary rule. This rule states that brokerage firms must give honest advice and cannot take advantage of honest people. Fiduciary rule was reversed by the Fifth Circuit Court and is officially dead.
- Not performing a retirement analysis. According to a CNBC report, 81% of people in the United States have no idea how much money they need to retire. “When 81% of the people don’t know how much they need, how are they going to know whether to save more, to spend less, etc.?” Suleman says. On top of that, the average 401k in Fidelity is $100,000. “No one can survive at $100,000 if they retire at age 65, even if you think you’re going to get some money from social security.”
“These are the problems we are trying to solve,” Suleman says. “YourCapital gives a holistic view of all the investments. If you have a 401K, you have a spouse with one, and you want to get a complete picture of your investments, you can do that securely with YourCapital,” Suleman says.
Upon uploading or manually entering your information in YourCapital, you get a portfolio analysis that shows you what is working, what is not. And, the best part? Everything is catered to you.
“Our service uses metadata intelligence — intelligence built around the data the customer shares. If you have an all-cash portfolio, we only show you things that are relevant to you. No mutual funds,” Suleman says. “If we find out you are sitting in cash, we make you aware of inflation and also use best techniques to create a well-diversified portfolio for you. ‘Here is how you can invest your money if you want to grow it.’”
YourCapital also attacks the issues regarding retirement via a retirement analysis. Suleman ensures that YourCapital’s service is connected to actuarial tables provided by social security in order to come up with estimates for people.
“You start getting an idea for what you would need, so that should address this issue of an average balance of $100,000 in Fidelity 401Ks,” she points out.
Suleman’s main goal is to “intelligently display these elements to the customer without overwhelming them.” That includes monthly retirement reports, as well as weekly portfolio performance summaries. “Otherwise, out of sight, out of mind,” she says.
While Suleman is thrilled with where YourCapital currently stands, she is very eager for the future. Similar to Netflix’s “based on what you watched, here’s what else you’ll like” concept, YourCapital will use “the same AI and machine learning to create a next generation of financial product platform,” she predicts.
“What I envision is that by using people’s data we will be able to predict when someone has changed jobs. We will send them a text message and do an automatic rollover of their 401K.”
Regardless of where technology takes YourCapital, the bottom line is this: the advice is simply advice. “We are not in control of people’s money,” assures Suleman. “They can take it or leave it. Amazon gives you a suggestion — you can decide, “I want it, or no.’”
YourCapital aims to do the same.
And, unlike brokerage firms, YourCapital currently bears no conflict of interest. The products that they suggest on their website provide no compensation to the company. However, Suleman sees that changing in the future, but in a very transparent way.
“We want to eventually become a platform where people can buy products.” But, unlike brokerage firms, the objective of YourCapital will be to lower fees, and the fees that are involved will be spelled out very clearly.
“Our objective is to come up with this tailored advice that is in your best interest, but you are still in control. You can go and buy that high-end, high-fee product if you want. Maybe you got some advice from someone you trust to do so.”
However, you do not have a brokerage firm guiding you to high-fee funds, but rather YourCapital who has your best interest at heart.
Coming from the male-dominated country of Pakistan, Suleman had hurdles to overcome. Though the entrepreneurial spirit has always been alive in her, that is far from customary in her culture. “My father’s family was in business, but I was always told, ‘You are a girl. You are never going to run a business.’”
However, that didn’t stop Suleman from dreaming. “From the time that I have memories of remembering, I thought of businesses. I would think about selling stupid things like grass. I mean who would sell grass? I even thought about cutting and selling wood.”
Suleman would always wonder why she was holding a job for someone else instead of creating something. And so, she decided to go against the norm in Pakistan and created her financial firm. “I was the wrong gender according to my country and my parents, but otherwise I had that innate desire to create something.”And thankfully, Suleman refused to put that desire to rest. “Talent is just given to people . . . go with the child that has the passion, rather than apply preconceived notions.”
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