Vise with Runik Mehrotra & Samir Vasavada | E140

Hello, and welcome to FinTech Impact. I'm your host, Jason Pereira. Today on the show, I have Samir Vasavada and Roonik Mahurta of Vise. Vise is a next-generation asset management platform that allows for the development, tracking, monitoring, and testing of portfolios made up of individual stocks. And with that, here's my interview with Samir and Roonik. Samir and Roonik, thanks for taking time today.

Of course.

Thank you. Really excited. Thanks for having us.

Samir and Roonik at Vise, tell us about Vise.

Essentially what Vise is, is we're using AI to automate investment management for financial advisors. So vast majority of financial advisors really struggle to differentiate. They provide their clients the same generic portfolios of mutual funds, ETFs, investments that aren't really personalized to their clients' needs. They're expensive, they're hard to manage, they just don't give their clients much of a reason to succeed. So we've essentially built this AI where we can analyze the client's investment needs, money they have to invest, goals, what net worth, needs, career risks, private holdings to build a highly personalized portfolio of individual stocks, bonds, other assets on the individual client level. We then provide the tools to automate the management of the portfolio, so active rebalancing, tax loss harvesting with the icing on the cake, as we call portfolio intelligence or otherwise intelligence that tells the story of the portfolio. So the story, the justifications, the why, so the advisor can not only look smarter to their client but better educate their client on the why behind their portfolio. So the thesis behind the company is the advisor is the relationship with their client, and we do everything else in an automated yet personalized way.

I am all for people who do everything else in my world.

All right.

So let's, let's dive into the history here. So what was the origin of Vize? What led you to say something's broken, let's fix it?

Of course. So the two of us have this machine learning background, not necessarily a finance background. We got, after a prior startup, got introduced to an opportunity to consult in the investment management space, namely in artificial intelligence. And it ended up being on artificial intelligence in money management. And we started consulting with firms like Deutsche Bank, and MassMutual, and RBC Royal, like all the big bulge bracket banks. And what we realized was two important things. First, the wealth management industry was a huge part of the financial services space, made up 50% of revenues for Morgan Stanley, 30% of revenues for Goldman Sachs, absolutely massive. But most wealth managers were salespeople. They were relationship managers. They weren't necessarily that financial analysts you believe them to be, or most clients, I guess, do, with all the market wisdom. They were great relationship managers. And then second—

We can debate the value of market wisdom later. The academics don't debate it. It's pretty clear-cut, but continue.

But there's also this other trend, which is really interesting, which was breakaway advisors. More and more advisors every year were breaking away and bringing billions and billions of dollars with them, saying, hey, I don't want to work at Morgan Stanley anymore. It doesn't make sense for me. I want to go independent. We realized was there was no Shopify-esque system. There was no kind of system that built the rails for the independent advisor and kind of enabled them to compete against the big players. So we realized that there was an opportunity for us to build the platform that the independents sit on top of, that will allow them to focus on their greatest superpower, relationship management, so we could focus on building the best portfolios for their clients.

Trey Lockerbie As a Canadian, I always get a little giddy when someone mentions Shopify or any other Canadian player doing the right thing. Not when they mention a Canadian bank like Royal, different story. So you basically went in and you looked at the situation and probably, you know, shocked and abject horror of the current state of affairs and technology. Maybe not, but let's— let's— so you went in there and what did you see though? Is— so you're missing the kind of turnkey simple experience for the breakaways, the guys who are turning probably to the RAA channel in general to basically simply provide a high level of customization. Does that pretty much sum it up?

Yeah, I think what we saw is, first of all, like you had said, like wealth technology hadn't been updated in 20 years. Most of these large institutional players, let alone the technology platforms available for independent, were archaic, old, hard to manage. We've interacted with, and I won't name specific names, but we've interacted with independent advisors who've been using a specific technology platform for 10, 15 years and still can't use it properly and had to go through like a week's worth of seminars just to better understand what is everything that that platform does. The second is almost like this request that we got from institutions when consulting around customization. Everyone saw the last trend in the wealth management space has actually just been trying to get wealth management to the masses, whether that's through robo-advice or model portfolios as a way to expand book of businesses for independent advisors. We think the next big trend, and we saw from institutions, is personalization. And now that you have all of these models, how do you personalize and customize them in a way that is better for that client over the long term and accounts for all of their specific needs?

Yeah, I mean, personalization, it's interesting because like, we'll call it in the old school approach in the current systems in a lot of places is that, and I've met countless advisors who think they're doing a wonderful job for people and they'll hold like 30 different funds and there's so much overlap and so much nonsense going on there. It's hard to get that, like the current systems just don't support the ability to personalize. And that's why the current paradigm model portfolios make so much sense. 'Cause can someone monitor a dozen to two dozen portfolios and make sure that they're accurate and they're doing the job they're supposed to? Yeah. But what you're talking about is now using technology to go back a step but in the right way, which is to basically tinker and twist and play with the portfolio such that it meets the unique specific needs of that client.

[Speaker:SAMIR_VASAVADA] Exactly. It's interesting. You got a ton of different funds. You don't know what your client's exposed to. Your client doesn't understand what they're invested in, why they're invested in it, and more importantly, where their exposure sits, right? If they work at Facebook, they work at Google or any major tech company or any company with stock options, They could be overexposed to their industry and overexposed to their specific securities in their public market portfolio. The advisor and the client would probably be none the wiser.

[Speaker:SAMIR_VASAVADA] Just really quick, yeah, it's interesting to see how the industry is built on this idea of a group of managers being blended. That's kind of where the trend has kind of moved towards. What's really interesting is managers don't interact with each other at all, and so in most cases, you have pretty significant overexposure because One manager thinks securities like Apple, etc., are value securities, while the other manager may think they're growth securities. And so if you have both value and growth exposure, you're actually overexposed to the intersection of the two.

[Speaker:SAMIR_VASAVADA] Yeah.

I mean, that's further compounded if a client decides to deal with more than one financial planner or financial advisor, whatever it is, because yeah, you have no idea what portfolio that other person is putting them in. And even if they both— or risk tolerance. I mean, you can go down the rabbit hole of how many layers here. It's the advisor, it's the manager of the fund, it's the ETF, whatever it is, that there could be multiple layers of overlap. So talk to me about your solution. Okay. So you develop customized portfolios. Now you're taking them through a workflow. So we mentioned a couple of the data points you were looking at. Tell me what the core data points in this customization process are and how you implement them, how they affect the underlying portfolio.

Yeah. So the way you can think about it is, so imagine a client walks into your office and they say, hey, I've got $1 million to invest. I'm relatively risk-averse. I want to say send my kids to college in 10 years. I care a lot about the environment, so I only want to invest in environmentally friendly companies. I work at Facebook, so I have Facebook stock in my portfolio. My wife works at United in the airline industry. I have private real estate holdings in San Francisco, and we have private biotech investments. All of those different things factor into the client's kind of financial story. And so it's important— so the advisor would basically enter that into our system as a question in a questionnaire format and we would factor in all of these different approaches. And then lastly, the strategies the advisor might want to take. So this is where it gets really interesting. We can customize strategies around the advisor. So if they say, "Hey, I have a special strategy," like we had one advisor that wanted twice the dividend to the S&P 500 as a strategy or customized value strategy, we can allow them to overlay that on specific portfolios. Take all of that into account, click build portfolio, 30 seconds later, they've got their portfolio. Here are the 50 stocks you're investing in. Facebook exposure has been reduced to zero. You've gotten reduced exposure to technology replaced by consumer discretionary or some more volatility asset class. Here's how the portfolio has performed over the last, say, 20 years during times like 2000, 2008, COVID-19, whatever it might be. And here's how it's projected to perform over the next 20 in order to hit your financial goals. And then lastly, and kind of most importantly, the story, the talking points. So here's why this position is in your portfolio. Here's why your portfolio is built the way it was. And the overall talking points for the advisor to deliver to their client to explain this is why this portfolio is tailored to you. So the client has some idea.

Interesting. So you mentioned United as an example earlier. So you're just looking— are you looking at them solely if they hold securities positions within that company, or are you looking at their employment as a risk factor as well?

So employment's a really interesting risk factor. It would really suck to, you know, get furloughed from your job and also have exposure to the airline industry. It's a double whammy right there.

Yeah. So the way we think about that, those types of decisions are really interesting. We make suggestions and the advisor decides whether or not they want to take the risk. So we give them the trade-offs. So we'd say, hey, we'd suggest if this prospective client's wife works at United and we suggest restricting United, the advisor can decide whether they want to accept that suggestion or not. And really the benefits to that is United has like restricted trading windows or any public company, honestly, as well as, you know, the career risk that comes with losing your primary source of income and having your portfolio go down at the same time. You don't want to correlate your primary income performance with the performance of your assets in your portfolio. That's why we make that suggestion.

[Speaker:MORGAN_HOUSEL] 100%. Let me commend you on that. I think you're the first trading platform I've seen that's taken into consideration human capital and the risk factors to that capital into consideration in the portfolio. There's a couple academics who are going to be very excited when I tell them that. Anyway, it's interesting. We're talking about a number of things here. You've talked about various screening criteria, right? So employers, ESG screens, which are probably— you're probably taking overlay data from various other service providers. So you basically use various screening criteria. You tilt, it sounds like there's some degree to tilting towards factors that either the advisor or the client wants to.

Is that about right? [Speaker:IAN_CASSEL] Yeah. So the strategy piece is also really interesting. The way that we think about management today, it's a spectrum. You have active management on one end and passive management on the other, but there's not a whole lot in the middle right now. There are factor-based strategies that exist somewhere in the middle. There are some separate managed account strategies that exist somewhere in the middle. But really, you have to pick or choose. You either manage a portfolio on your own, or you passively manage it or give it to a fund manager. And so this is somewhere in the middle where the advisor is able to determine their strategies. So we had an advisor who is really concerned with the liquidity that the Fed was providing in the repo markets. And based on that liquidity and the increasing size of the Fed balance sheet, was fairly confident that there would be long-term inflation, and because of that, wants to put his clients in inflationary protected asset classes or hard assets, and wanted to tilt towards those asset classes in every portfolio he creates. Today, beyond creating a portfolio on his own, there is no way to do that. He would enter that strategy in Vize, and then it would exist as a strategy he'd see, and he'd be able to overlay that on top of all of his client portfolios. Then because of that, we would tilt, exposure to hard assets.

So interesting. It seems like this is all very advisor-driven from this standpoint. Any thought towards event-driven data being fed into the system to trigger those changes automatically?

So we did consider that. Our initial impression here was that we want to marry what technology is really good at and what advisors are great at. And today there isn't a ton of data that supports sentiment-driven or event-driven changes or responses to a portfolio, like predicting long-term expected return. And as an advisor, my biggest value add may be that I invest in momentum securities or growth securities, et cetera. And I don't want to adopt a platform that no longer allows me to use that same talk track I've been using for 15 years. And so in a lot of these cases, we allow the advisor to drive some of these decisions, We see ourselves as the infrastructure and workflow platform that executes on these decisions. No advisor thinks that they're the best person to determine the right trades to correctly tax loss harvest, but an advisor might be better to determine how strict we want to be with tax loss harvesting. Do we want to harvest $5,000 worth of losses or $10,000 worth of losses to potentially even offset $3,000 worth of income? So we let the advisor make those decisions, and we like to think of ourselves as the executioner on those types of things.

Fair enough. So when this is all done, I've gone through this questionnaire, I have, let's say, $500,000 to invest, what does a conventional portfolio look like for you guys in terms of number of positions altogether?

Yeah, it's a good question. And so another one of those things that we have a suggestion and then drive advisor decisions. So portfolio can be as few as 30 positions, 25 to 30 positions, 30 individual stocks, or as many as about 100 individual securities. And the advisor can almost change those preferences. The other thing is, you know, you'll have your, your average US equities asset allocation. You'll have an international exposure, bond exposure. So we come for every asset class. We handle the more esoteric ones via liquid ETFs, things like MLPs, commodities, non-traded REITs, like that. But the more broad asset classes like US equities, we actually invest in individual names. And we think the benefit of individual names is full transparency into a portfolio. Clients understand them better than a mix of 20, 30 funds, and you know exactly what you're exposed to comparatively to a set of managers or funds. And so that's the approach we take. I think that diverges from model portfolios and other managers that have trended towards. We've diverged. We've kind of gone back to the gold standard, individual securities. And then you kind of see this really interesting explanation on why we chose what we did and how this is the best for the clients. Samir, if you want to talk about that.

Yeah, I actually like to know that. So when you actually drill down to pick those number of securities, you've picked your factor weights, your filters, whatever else, how do you— are you coming up with a cell matching formula? What are you doing to basically implement the right number of securities in the right space?

So that's a good question. So that one's pretty easy. The additive value, like the marginal value of diversification, is diminishing. And so if you have 6 companies in a portfolio and you add a 7th, adding that 7th company provides a lot more risk mitigation than if you have 100 companies and you're adding the 101st. So we're pretty confident that the value of diversification between 30 to 40 securities and 75 to 100 securities is fairly low. And, you know, we kind of show that to our prospects via, like, correlation to the index. And now if we add securities, it's not actually changing the long-term performance of this portfolio that significantly. And so it's just an input. So in our optimization via our machine learning algorithm, we'll determine the groups of securities. Every portfolio could consist of anywhere between 30 and 100 securities, and it doesn't have a long-term impact on the expected return in terms of the way that we construct securities and our portfolios. Excuse me. And so it's really an advisor input, and it goes into our optimization in terms of the number of names we'd like to include.

Yeah, I get that. I mean, there's a known diversification chart that basically charts like number of positions versus actual trade-off on systematic risk. And yeah, so once we get to 30 securities, you start to see a law of diminishing returns come into play and that tail gets very long. So yeah, that totally holds. So that's number of pieces. So currently you're confident you can execute this. Any thought towards the newer trend in direct indexing? Is that something you guys are interested in or just saying, you know, we think we can pull this off without it?

Yeah, so we are like— the way that we think about it is there weren't a lot of direct indexing providers when we started. I think that's become more— aren't— it's much more recent. We actually think that we started a lot of that back when we were initially building this platform, initially selling this research tool. Individual securities, investing in individual companies was very scary for advisors. Today, I think with commissions being at zero, and the technology to help make a lot of those decisions, it's a lot less scary. The way we think about direct indexing is we like building clients their own customized index based on their needs, the advisor's factors, et cetera. If you don't have any customizations, then we can perfectly directly index the S&P, but we think every client has customizations. They all have things they care about. They all have esoteric idiosyncratic risks, and the advisor always has preferences on where they think the market's headed as well. It's very easy for us to directly index them, the S&P or NASDAQ or anything like that, but much better for us to actually customize that index to that client's needs.

Yeah, and I get that. I mean, I've played heavily in the ESG space for a long time, and I often say almost ESG is almost a bit of a misnomer. Like, the reality is it's just respecting the client's values and wishes, right? If they don't want to invest in fossil fuel-free companies because they're big on the environment, so be it, right? If they don't like labor relations that Walmart has, so be it. We should be able— we should respect that, right? And we should try to respect that while simultaneously still giving them the outcome they're looking for. I've even said so far as like, if you don't like, you know, company XYZ because you worked at company XYZ and they fired you, you know, you shouldn't be forced to invest in them in an index if you don't want to. However, with the current set of tools, it's difficult.

Yeah, exactly. We allow clients to easily restrict securities. So the client's like, I don't want to invest in Apple. You don't have to invest in Apple.

It'd be a pretty hardcore Microsoft guy to say that.

But yeah, I think what's interesting there is, uh, is we also try to show the trade-offs of some of those restrictions as well. If to me, climate-neutral companies is really important to me, I'd only like to invest in those companies, we can show you what the risk-return trade-offs of that decision looks like. And so you give the advisor the talk track to potentially convince their client otherwise as well. A lot of advisors are skeptical on some of these ESG decisions, especially when they're very strong. And so you give the advisor the talk track of, hey, are you willing to trade off 3% or 3.5% a year in expected returns for the decisions that you're making here, and the clients are okay with that, you now set the expectation that the returns of this portfolio are lower, but you're investing in companies that you care about. That's the trade-off. I'm willing to pay 2% or 3% in returns to make my money work in the right place. It's interesting that there's this interesting trend of make your money work for you, but a lot of people would never work at an ExxonMobil or at a Chevron. And so why would you put your money there?

Yeah, I get that. I mean, the reality is, yeah, and that's for the trade-offs. I mean, there's plenty of debate. We're not going to get into that. But I mean, quite simply, it's about informed consent at all times. And they are informed as to what they're owning. They are informed as to what they're exposed to. They feel so strongly about 2 or 3 different companies and so strongly about 2 or 3 different industries that they literally want no exposure to it. Here's what this would have meant over the last 10 years. Here's what this— we don't know what it means going forward because it's anything. But this is the trade-off. If they are willing to accept that, so be it. But no, it stops being about, oh, you're going to perform. Show them if they would.

Yeah, exactly.

Yeah, fantastic. So in terms of feedback, I'm curious. So advisor feedback, positive and negative, tell me what's keeping people from using your platform and what the people who've dived in feet first have said about why they want to use your platform.

Great question. I think, you know, we'll start with the negatives. I think the biggest negative, I think there's only really one, It's, I've been doing the same thing for the last 20 years. It's worked for me fine. Usually, these are with older advisors. I'm not trying to discriminate, but it's a mental shift in how they think about investing, which is really important. We're trying to change that.

Yeah, I think you said it really well earlier. It was like there's this existing paradigm of model portfolios, and we're almost shifting that paradigm a little bit. In terms of this new approach of invest in individual securities, don't bet on 6 or 7 managers who don't interact with each other, where you don't really understand the exposures. It takes time, I think, to shift that. A lot of the pushback we get are from advisors who might not necessarily be in that early majority of the adoption curve. The benefit is there are enough in the early majority that we can build a pretty big company, and then the later majority will continue to get excited once you have, you know, a 10-year track record, etc., etc.

Given who just funded you, yeah, you can. But Samir, further to your comment, it's not discriminatory to say that because young advisors do not have 20 years in the business, so they can't get that stuck. But you're right. I mean, it's, uh, I often say sometimes the biggest problem with this industry is the actual advisors themselves because the lack of willingness to innovate, adopt, and change their own practice and evolve with the times. It is what it is. So maybe what they're having, what they have is working good and working well, uh, but is it going to Is it necessarily, as we discussed, respecting the client's different unique circumstances and their, some cases, moral wishes, right?

Yeah. And I think differentiation is so important in this space as well with more and more independent advisors, the advent of robo-advice. You can't be scared of robo-advice potentially taking your job away and not look for future solutions at the same time, right? So it's important to kind of look at, even if what exists today works well for your existing business, a new platform might help you grow that business or spend more time with your family so you can automate some of that business or help make your existing business happier and retain it better. And so those are kind of our core KPIs with our clients is like 3 exact things. Like, can we save you time that you can spend with your clients or, you know, with your family? Can we help you retain your existing clients better, make them happier? And then can we help you win new business, right? Those are the 3 things that advisors care the most about. Other than that, around like investment performance or better research, all these different things, I think they come secondary to those like 3 asks from your average advisor.

Yeah. I mean, I'm always, I like the other financial planning heavy people basically say that that's where the real value gets added. And this is about execution, but if we can custom tailor the execution more to their actual preference, and that's, that's definitely a positive. So the people who've dived in feet first, we haven't covered that yet. Right. So like the people who absolutely are your raving fanatics, What is their feedback? Why do they love what you do?

There's 3 things Vyze really helps them with. The first is we enable the advisors to differentiate themselves. If every advisor is doing the same thing and you are doing this differentiated personalized approach to wealth management, it allows you to use that almost as a sales tool to help you acquire new business. The best advisors on the Vyze platform have been able to double their business using the platform just as a sales tool.

Wait a minute, how long have you guys been around?

Not even that long. We've been, we've been out, I would say, with our first pilot users since November. And now we're—

And in that time they've doubled. So, okay, well, I'm assuming they weren't at a billion dollars, but nevertheless, it works very well with some of these breakaway advisors.

The second is like from a time savings aspect, we enabled advisors to kind of spend like— so the average advisor on Vyze prior to using us was spending around 2 hours per portfolio they built. So average client has 4 or 5 portfolios, 100 clients, you know, it's a lot of time they're spending on portfolios. And we're able to bring that time spent down to like, I would say, net zero. So we're giving the advisor kind of time back to spend on what they care about, whether that's asset gathering, the golf course, hanging out with their family.

The golf course. That's a stereotype.

Surprisingly, I would say 1 out of every 3 conversations, golf is at least 10 minutes of the conversation.

Got it. It will never be that with me because if you saw me swing a golf club, you know, it would never be a part of point of conversation. I'd like to say I play games.

Sorry, I'm not biasing against Canadian advisors. You're a Canadian advisor.

We play golf up here too, okay? But that's, you know, it's not just hockey and donuts, all right, man? Uh, and KD. But like, yeah, as I always joke, I play something that approximates golf. There's more swearing and the scores are a lot higher.

It's just like golf.

Yeah, excellent. All right, so before we wrap up, there's 3 questions that I ask everybody to get them thinking, and I'm gonna ask them of both of you so you can decide which one's gonna go first for each of them. If you had one wish for something you could change in your company or the industry as a whole, what would it be?

I can go first. Mine's probably more diversity. I think like what's really important in this space is like diversity of opinion. I think like diversity of like background, diversity skin color, all these things are important, but they all lead to one thing, which is diversity of opinion. The long-term value of diversity is innovation because you have different thoughts, different opinions that come to mind. So I think more people who haven't spent the last 15 years in investment management should spend time in this industry. More people who aren't 10-year, 20-year financial planners should become financial planners because it creates more innovation, and honestly just provides a better value add to clients. And so I get the most excited when I meet young financial planners or young financial advisors who jumped into this and have a ton of interesting thoughts and an interesting background.

Sometimes a substandard background.

Yeah, I mean, honestly, and you're right, I mean, I often say like, even with the pushback, there's a nice diversity. It's like, look, you can't— all you're doing is providing more life experiences that are diverse into a community's conversation, and you can only benefit from that. And unfortunately, this industry industry, and I've seen the numbers from the CFP Board on the diversity of the financial planning industry, and it ain't good. Getting better on the female side, not getting better on the ethnicity side, unfortunately. So that's a major concern because frankly, I mean, especially when you work within certain cultural communities, you better understand if you're from that community, right? Like, it's just, it's, you should have a shared experience.

Exactly. And I think that's like, you know, the other thing is, is a diversity of people who are providing the financial advice also leads to a diversity of people who receive financial advice, which is almost more important than the former, right? Of like making sure every community has access to good financial advice, which I think is just a better thing to optimize for than making the wealthy population increase their returns by 7% year on year.

You're saying that's not important? I'm kidding. All right. So, All right. Samir, what's your answer?

That was a good answer. You can—

we want to copy it?

I would have copied it, but I think more willingness to adopt technology. We're already starting to see that. That would have been my answer 2 years ago. But now, as advisors have started to adopt even CRM platforms, are willing to adopt technology and other aspects of their practice, and just the continued growth there is really important.

Yeah. I mean, it's a lot better down there than it is up here, but yeah, the resistance is still crazy. I mean, the great thing is that I think that the current generation in particular is so much more time-saving than the older software ever was in a lot of ways, not all of them. I mean, there's some great time savers out there, but especially the newer stuff I see coming out and like, wow, that just took this giant chunk of time and shrunk it to 20 minutes or shrunk it to 15 minutes. Like, how much do you want for this? Because like I get my life back or I get to expand my business and it'll pay for itself. So yes, resistance to technology. I'm a guy who hosts a FinTech podcast largely because there is resistance business and technology. So there needs to be a balance there. Second question for you, what has been the biggest challenge in getting the company to where it is today?

Samir, why don't you go first on this one?

Yeah, I mean, I think it would—

Throw him under the bus. There you go. Yeah.

The biggest challenge is like Riddhika and I don't have a financial services background. And people had thought like, hey, why are you guys building this company? There are people, there are old 50-year-old white guys that have been doing this for a long time. They're the ones that have the advantage. And our argument was always like, experience doesn't always mean a better product. Oftentimes, it means the same product. A new perspective is what builds the best products. We're bringing this new perspective to the table. And it took a while for people to really think like— for the longest time, people were like, that's a dumb idea. Now everyone thinks it's the greatest idea and we're getting all the funding and everyone's working. For the longest time, it was us beating down the table saying like, hey, this is the way things should be done. We're in essence like the new generation and this is how we would want our finances managed. So this is how it should be managed for everyone.

For the record, that is a common theme amongst people I interview, is there is a disproportion of the founders that literally come from outside the industry. And frankly, I always say to people, and I even wrote an article about this one time, is you should stop fearing fintech because fintech is going to fix our broken world because these people are coming out with fresh eyes, not accepting the current paradigm and saying, why in God's name would you do all this heavy lifting or do it this way? And just questioning everything, which is the only way we're ever going to get anywhere.

Yeah, exactly.

I agree.

I think my answer is pretty similar. It's more focused around actually the need of financial advisors to be in the loop. I think early on is when robo-advice platforms were doing phenomenally, or at least initially had phenomenally good hype. I wouldn't necessarily say that they were doing well.

You nailed it, hype.

And I think a lot of the investors in our company today, are from Silicon Valley, but a lot of them, I think early on, had either made investments in robo-advice platforms or had evaluated them. The current paradigm in Silicon Valley is that your average financial advisor doesn't provide a whole lot of value and that building tools and technology to replace them is the right approach. I think the way that we got around that is before building the business, we talked to 2,000-some clients and 250-some advisors, and ask them, why did you choose your existing financial advisor? First of all, I think of the 250 clients, 200 or something used a financial advisor to manage their money. It's clear that Silicon Valley—

Something's going on here.

Yeah, about the metrics here. The second is that they made their decisions on which financial advisors to use, not at all based on the historical performance of that advisor or the performance or their year-on-year performance when they've managed their capital. It's things like financial literacy. I love this advisor because anytime I call, he has a couple hours available to sit down and explain to me my portfolio or explain specific planning decisions, or we'll have advisors say, hey, I need a villain. I need someone to call me and say, you can't buy this Ferrari, you can't afford it, or someone to call—

Those are never the fun calls.

Yeah, I'm sure you know as a financial planner. Or to call and say, hey, you shouldn't divest from the market right now. Things will get better, and there are a very concentrated number of days in a year that drive the vast majority of the returns, and by exiting the market, you are likely reducing your probability of being there for those days. I think that is what we saw, and for a while, we were shouting at a closed door on those things, but once we— I think Once the metrics started to show up that says like, hey, like the paradigm is shifting, like independent advisors grow, that industry grows at 60% year-on-year net of asset growth.

Wealthfront hasn't put them all out of business yet, so something's wrong with our thesis.

Exactly. Like things like independent advisors are growing, not like reducing in any way. And I think after that, we, you know, we have two incredibly amazing backers, tons of backers actually, but Institutions and Founders Fund and Sequoia.

You can brag about them. Those are big names to brag about.

That bought into that vision, which I think is why we're here today.

Well, if you're mentioning contrarian visions and you name Founders, well, Peter Thiel is no bigger contrarian. It's interesting is I've also seen it. What you say is just so bang on because I have also seen a massive shift. It was a couple of years ago, it was like, why are you throwing money at advisors? They're all going to be put out of business anyway. Yeah, there was the hype cycle and early growth of a lot of the robos and then plateau, right? And difficulty growing and all kinds of other issues. You're right, like people are proving or voting with their money that they do not want to get rid of their financial advisors and that robos only take you so far. So yeah, it's good on you for realizing that guys like me are actually of value. I appreciate that. I'm biased, but that said, I think one of the things that sums it up the best is 2 things. First, 2 things I heard is like, yes, these are wonderful solutions that engineers designed for some industry they don't understand, was the first one. No knocking on engineers, but sometimes when you can program anything, you think you can do anything. The other piece was the— Michael Kitces said at one point, it was a comment about— it's a press release that Wealthfront put out. And I think Michael's comment was, oh yeah, they just announced this, further proving they have no idea what it is we do with our time. It was just like— I was like, I think I actually just specifically tweeted under it, nailed it. It was so accurate. Excellent. So you both answered that one, right? Now moving on to the next one, last one. What excites you the most about what it is you're working on and gets you up in the morning to keep on fighting the good fight and keep doing what you're doing?

So I think the first thing is, I don't know, for anyone who's ever built something before, building something, like regardless of what it is, is really fun. But, you know, the second aspect, you know, more relevant to the business is I feel like we're doing something positive for the world in the sense that we're empowering humans. It kind of aligns with my whole thesis that AI is actually good for the world because it enables humans to do what they care about doing, or like relationship, social, creative-oriented tasks, and all the manual stuff is being automated. And I think we're kind of really putting that forward, right? We're allowing our users to spend more time on what they care about doing, right? And every time that we get some excitement from an advisor, it just makes me really excited. Because it feels like we're pushing something forward.

Samir Vasavada Yeah, I think the same is true. I actually love— I'll go a step further. I actually love end-client reactions and their perspective is like, at the end of the day, the way that we think about investment advice is like our customer is kind of the advisor, but it really is the end client. The advisor is functionally a distribution channel to the end client. When we thought about building this business, we thought, how do we want to deliver wealth management advice and investment advice. You deliver investment advice through the financial advisor, but it's ultimately delivered to the end client. I think that's what is so exciting is creating a very new and exciting approach to investment management for the end client so that we can do things like ESG, industry restrictions, restricting the company that you work for to account for human capital, and also just comments like better understanding what you're invested in and better financial literacy. We had an example of an advisor whose end client, because they were invested in Pepsi, went out and drank more Pepsi and chose Pepsi over Coke. The same was true with Disney. They canceled their Netflix subscription, got Disney+. You can have both. You're not invested in Netflix, are you? All these things I think are so interesting to me because it shows the psychological thought process in investment advice. People really do care where their money is, the companies they support, as well as just I think half the battle, most people don't realize, especially I think both in Silicon Valley and in Wall Street, everyone's so focused on the idea of how do we maximize returns on a year-on-year basis.

They're missing so many other dimensions.

I get it. Most people don't realize half the battle is just getting the client to care, getting them to pay attention, getting them to care about what they're invested in, their year-on-year returns, all these different things. The easiest way to do that is to help them better understand their portfolio, which I think individual securities help them bring. Really early on, Samir and I made the decision that individual securities just makes a lot more sense, and we got a lot of weird looks like, hey, ETFs were built for a reason, funds were built for a reason, why are you going back in time? But I think with commissions being zero, and even like the advent of Robinhood, have you seen Tesla and all of these other companies?

There is no amount of cars that can be sold to justify that, but continue. It's just insane.

What's so insane about it is people are buying into the ethos of Tesla. Robinhood traders are buying into the ethos of like, this is important, Elon Musk is cool, and electric cars matter, more than any of the fundamentals of that security. I think Wall Street and Silicon Valley are just finally realizing that a little bit, that people care about those things. They care about the ethos, they care about the companies that they're invested in. Your average retail investor can influence the market now. And it's funny, I keep seeing—

I will say at some point fundamentals do matter because I've seen this game before. It happened in the dot-com bubble. And yeah, at some point the company's got to deliver, otherwise the belief starts to waver.

Absolutely. Just as an FYI, our investment management is based on fundamental data. Our expected return exists. The expected return that we calculate is based on those things. I think really this is a case study of that retail investors and like people do care about the companies they invest in beyond what the return looks like. And I think building that into a holistic portfolio is really important.

So let me also say that your comment about realizing the consumer is your consumer and the advisor is a channel, clearly I think that impacted your UX design because what you've done is something very non-enterprise looking. It is very sleek, simple, user-friendly, gets it done effectively, and often, too often, Yeah, the advisor tells you what they want, thinking about what they want, not what the consumer is going to better digest, understand. And too often we fall down these rabbit holes of that. So good job in that regard. So gentlemen, I thank you for your time. This has been great. Uh, everybody can check you out at vyze.com and, uh, keep up the good work. Uh, you got some, you got some, some big expectations for Barrett's Packers.

Awesome. Thanks so much, Jason. This was amazing.

So that was my interview with Samir Vasavada of Vyze, and I encourage you to take the time to take a look at what they're working on. Until next time, I'm Jason Pereira. As always, if you enjoyed this podcast, please leave a review on iTunes, Stitcher, or wherever it is you get your podcasts.

Until next time, take care.

This podcast was brought to you by Woodgate Financial, an award-winning financial planning firm catering to high net worth individuals and their families. To learn more, go to woodgate.com. You can subscribe to this podcast on iTunes, Stitcher, and Google Play, or find more episodes at JasonPereira.ca.