Wayne Connors is an Air Force veteran who went on to become a registered fiduciary and work in private wealth management before he set out to create a new business model centered on helping do-it-yourself investors go it alone.
An expert in asset allocation, Connors launched a Web-based service called Retirement Investor, where he offers model portfolios anyone can replicate for a monthly subscription fee. In its first three months in business, Retirement Investor counts “a couple hundred” investors as members—a number Connors and his three-person team—hope will grow tenfold in 12 months. ETF.com caught up with Connors to learn more about his way of helping clients invest for retirement.
ETF.com: Tell me about Retirement Investor. When and why did you start this business?
Wayne Connors: About two years ago, I started building the website, which went live this past October. I got the idea for it when I was managing money as an investment advisor. I would normally charge a fee, just like other advisors—the 1%-a-year type of thing—and I had someone ask me, “Can you just tell me what to do so I can do it on my own, and I'll pay you a monthly fee instead? And then whenever you make changes, let me know, and I will do the changes on my own.”
That's when I started looking around to see if there's anything out there like that, where a do-it-yourself investor can get guidance by following a professionally managed model portfolio of ETFs, but not have to pay a financial advisor for it. That’s how Retirement Investor came to be.
ETF.com: Is cost the main consideration for DIY investors? They don't want to pay advisory fees, so they choose to go it alone?
Connors: I would say there're two things. The first is definitely cost. If they do it themselves, they could save money by not having to pay an advisory fee, which becomes larger as their account gets bigger. If they're paying 1% a year and they have $200,000, they're paying $2,000 a year. But as it grows to $400,000, now they're paying $4,000 a year. Over time, that 1% a year adds up.
Another driver, though, is simply trust. With everything going on in the financial industry—the Madoffs out there—a lot of people have just become distrustful of financial advisors and they think, at the end of the day, no one cares more about their money than they do. It really comes down to who you're going to trust.
ETF.com: Your business model is that the investor pays you a monthly membership fee for the roadmap to portfolio construction and management, right?
Connors: Exactly. It could be either $19.99 a month or $199 a year.
ETF.com: How do you compete with robo advisors who charge, say, $25 on $10,000 invested, and they do all the portfolio management for you; it's all automated? What's your value proposition relative to that model?
Connors: It seems to me that the bigger robo advisors, like Betterment and Wealthfront, are charging a fee based on the size of your account. They're still looking for assets under management. Their goal is to get you to open an account with them, because they want the assets under management so they can make their stake.
And consider that, to many DIY investors, it’s hard enough going at it with a face-to-face advisor; now they've got to do it with a faceless advisor, a robo advisor. That’s not an easy sell, particularly for older people.
But where we are really different is on education. Our goal is to help investors do it on their own, and for that, we offer a lot of educational videos on do-it-yourself investing and a monthly video newsletter, plus loads of information on the site.
People who come to use our site are looking to get educated. They want to take more ownership and responsibility over their account. Someone who uses a robo advisor just wants to basically turn their account over to someone else and not have to worry about it.
ETF.com: Retirement Investor offers five ETF model portfolios. But investors don't buy in to them; they simply replicate these portfolios on their own online brokerage accounts, right? So you don’t actually manage assets?
Connors: That's correct. We do not manage assets. We do not revenue-share with any of the ETFs' fund managers that we recommend in our models. Our sole source of revenue is our membership fee.