Leveraging Tech to Make Traditional Investing Work in the Modern Age

Tullio Siragusa  (00:09):

Good day everyone. This is Tullio Siragusa, your host up here at Tech Leaders Unplugged. I am excited to speak with Wesley Belden, who's the CEO of Raise Financial today. Hey, Wesley, how are you?

Wesley Belden (00:23):

Tulio. I'm doing great, and it's great to be here.

Tullio Siragusa  (00:26):

Great to have you. We're talking today about leveraging tech to make traditional investing work in the modern age. And specifically an interesting statistic that we're going to discuss is the fact that 78% of millennials are not confident they will be able to retire. That's a staggering thought, right? <Laugh>. That's great. So before we dig into this conversation, see how to solve this problem let's get to know Wesley a little bit. Tell us a bit how you got here about the company, about yourself. Again, welcome to tech Leaders Unplugged. Let's get unplugged, Wesley.

Wesley Belden (01:06):

Let's get unplugged. So yeah I had kind of a non-traditional finance start. I was a sociology, chemistry double major in undergrad with a minor in anthropology. And I decided to go to work in finance. So I went to work in finance.

Tullio Siragusa (01:21):

That totally makes sense. <Laugh>

Wesley Belden (01:25):

I mean, you know it's the language the world has written in, so I really kind of wanted to get, you know, versed in it. Obviously having that, you know, educational background, when I started my job at an investment firm, they really encouraged me to get my MBA, so I went to get my MBA in the evenings which they paid for, which is tremendous. And so I got my MBA in the evenings. And that kind of started my financial career. From there it kind of always sat with me and really understood how that's the underpinning of the world in society. It's kind of the answer to nine out of 10 questions is usually finance and how money changes hands. And so understanding that I was moving through my career and I started going down an entrepreneurial route.

Wesley Belden (02:05):

And I was able to do this because I had no student debt. My undergraduate degree was at University of Florida while I was a resident. So I left with basically zero debt. Well actually zero debt. My most expensive semester was like $1,800 because I had three labs that semester. And then the company that I worked for paid for my graduate degree. So because of these two things, I was able to take a risk on myself. I was able to invest in myself because I wasn't saddled with all this debt. And basically that early point in my investing journey, that early point in my wealth creation journey has made all the difference. It set things up, and it wasn't necessarily something that I did that made me really smart or unique. There were basically choices that were made for me.

Wesley Belden (02:49):

I was busy with work and school, so I couldn't spend money, which means I kind of, you know, blackened, you know, invested all of that. I didn't have debt because, you know, of the choices that were kind of chosen for me in, in educational perspectives. And that gave me the freedom to really do the things that I wanted to do. And now what we're really focused on is understanding that my journey is very unique. You know, that isn't the sort of thing that looks like that's not what it looks like for most people. And they leave college, you know, they do have lots of debt. They're living in a place in which they can't afford housing because that's where the good salaries are. So we're really looking at how we can use technology to innovate in this space and build products that acknowledge the unique headwinds facing this generation and build products to help them basically multiply the impact of what resources they do have so that they can do as well as previous generations.

Tullio Siragusa  (03:40):

Great. So I'd love to unpack who is the profile of the 78% that are worrying about ever being able to retire? What does that look like? I think you mentioned some of it, many of them might have started with tremendous debt, right out of college. Some might have made choices that put them on a trajectory of being overburdened too soon. Is that the profile? What else? You know, what's, what's typical of that 78%? That all, just the initial choices of some of it is something else. I can't help but keep thinking about how many millennials might have planned a retirement plan through some exit, you know, in a startup, right? <Laugh> instead of doing traditional investment, curious to see what you've, what you've learned about that 78%.

Wesley Belden (04:31):

So, I mean, I think it's, it's a big number and a big audience. So I think what you're looking at here with large scale audiences like that it's, it's everybody, right? This is regular people, this is abnormal individuals, this is, you know, kind of, it goes the entire gamut. Also, you know, millennials and, and I think the stat rings true and maybe even a little bit worse for Gen Zers. So you're having Gen Zers are starting to get to this point in which now some of them are, are getting of the age where they're, they're building their career and moving through it. You also got to look at geriatric millennials which I think is a neat term. <Laugh>, millennials that are towards like I guess it would be like 42 to like 38, like that demographic of millennials. These individuals kind of started their career at the height of the 2008, 2009 financial crisis.

Wesley Belden (05:18):

So this really kind of engendered in them maybe a lack of trust in the financial systems. And perhaps they pulled, you know, their exposure out of the system and not participating in that, in that timeframe of economic expansion can really set you back in the same way that just not investing early in your journey really sets anyone back. And so you wonder if maybe that kind of has a component to it, but realistically, you know, it's, it's an audience that is just burdened with debt. Like, you know, we were told that we needed to get college degrees, and you do, I mean, two out of three jobs in this country require a college degree. So you need to get a college degree. But what this translates to is increasingly more debt in ways that have not been experienced by, by young, you know, young professionals.

Wesley Belden (06:05):

In previous generations, there's 53 million Americans that owed $1.7 trillion in student debt. And that's, you know, a non-retirement debt. You can't default out of that. You can't, you know, bankrupt out of that. Like, this is debt that will follow you until you pay it off. And these are big, big balances. And so that really kind of changes the way that you can invest early in, in your career, early in your, your, you know, time. We all know that $100 invested today will bring more money in 10 years than $10 invested every year for the next 10 years. Young people with these tighter budgets are unable to take advantage of that compounding, you know, that compounding growth in return.

Tullio Siragusa  (06:48):

Yeah. It sounds like it's like borrowing from the mafia, you know, you'll never get out of that. So before we dig into the solution, I'm also curious about the other 22%. What are they doing right?

Wesley Belden (07:01):

Probably delusional <laugh>, they've got that toxic positivity going. I mean, there could be, there could be people like me, right? That, you know, we were able to graduate from college without debt. And I want to be clear here, I'm not uniquely smart. I don't, I don't take any credit for the fact that I left college without debt. I mean, it was, yeah, I wanted to go to school in,

Tullio Siragusa  (07:26):

But you did something that a lot of people forget to do. You know, go work for a bigger company that has these kind of benefits that you can take advantage of. A lot of the young guys just want to go from college straight to or from high school, straight to being multi-millionaires, and sometimes don't want to put the effort and time and energy to work for a bigger company where they got to work through it and get this kind of support. But that's a whole Nother topic for another day. That's a…

Wesley Belden (07:49):

That's a, that's a great point though. And you, you think about that. And to be clear here, I definitely wanted to go from college to being a multi-millionaire. I just didn't necessarily know how to fill in the dots. It was also a great time for me to kind of grow and mature. I think I really kind of needed that space to kind of have, you know, mentorship and, and have exposure to people that had kind of been on this journey before to kind of gain a little bit of their wisdom. And then honestly, to have some guardrails. Like, I think I needed guardrails as I was beginning to develop, you know, who I was as a person, how I wanted to be as a professional and how I wanted to be as a man as I grew up, and, and, you know, made my way in this world.

Wesley Belden (08:25):

So, yeah, I, I think that, you know, big companies can be, you know, obviously there's, there's all the cliches that go along with that, but there's also a lot of really positive things about launching a career inside of, you know, a company that treats their employees well. Also, the company that I worked for as American Financial Group, they really take care of their employees. Like when you look at people that work there, their employee retention is just astronomical. Like nobody leaves because it is such a great, like, place to be. The people are excellent. They take care of their, their, their staff. They provide upward mobility offering things like paying for my college, like, I don't know, that's huge, right? So, you know, look on Glassdoor, look at different companies, see, see what people are saying about how it is to work at that company. And it's a big company, yet they really prioritized and focused on taking care of their talents. And I think that's a really important thing to look at when, when looking at that corporate job or looking what employer you want to work for.

Tullio Siragusa  (09:17):

Yeah, absolutely. And, and that's got to be challenging today. because There are a lot of influencers who are constantly pushing this idea of go work for yourself, build your own business hustle. But there's still a lot to be said about going to a big company and taking advantage of their benefits and continuing education or just learning from, you know, a well-known environment. So, but let's, let's talk about how we solve this with tech. Going back to the topic, some of it we can't solve its desire, its context, its belief, right? It really depends on the individual. But I'm curious to see where tech can help, you know, course correct, if you will, the 78% that's going down this path of I'll never retire. Curious to see what, what you're, what you guys are cooking up as it relates to leveraging technology to help with this issue.

Wesley Belden (10:13):

So, I mean, I think, you know, the, the, the number one thing about this is you have to make it easy, right? You have to make it simple and easy to understand and easy to onboard. Technology is fantastic at this. It's in front of all of us. We can create these great user experiences that are easy to onboard, easy to understand, and importantly, easy to kind of put in the background. So we don't have to continually think about it. This stuff just happens, right? And so what we're doing here is we're trying to engineer a product that basically stops or gets in the way or, or puts things in the background of like kind of the natural human inclinations of, of, you know, I guess harm or, or lack of planning, right? So I mean, like, almost even something like setting an automatic withdrawal from your checking account to be invested every month or every week, is something that can kind of fight you know, your natural inclination to spend the balance of your checking account.

Wesley Belden (11:04):

If your checking account is kind of decreasing, I am balanced by this amount that's being invested every month, that's money you can't spend. And then obviously you don't spend it. So I think technology is really a great tool to kind of get products in front of people, make it easy for them to internalize and ingrain it in their lives. And then finding ways to kind of just streamline it and make it work through. We always say, you know, around here when there's an issue where we're building something, it's like, do you want to engineer better people or do you want to engineer better products? And, you know, I can tell you from living and working in this space, it's a lot easier to engineer products than it is to engineer people to change their behaviors. And so I think that's, that's kind of the thing that we look at when we build products. How can we engineer things and build things that fit into people's lives that allow them to get the outcomes that they want? Because It's not a lack of desire, it's a lack of resources to help you on that trajectory.

Tullio Siragusa  (11:59):

So you meet them where they are, which is brilliant. But, but curious, what does that look like? You know, can you walk us through a day in the life of someone getting started? And do you gamify the process? Do you, how, how did they get to a place where they turn things around, they're stuck to have a good plan for saving, good plan for investment, good plan for retirement, good behavioral adjustments how, you know, walk us through that, that use case, if you could.

Wesley Belden (12:31):

Yeah. so there's lots of little things. You know, it's really just kind of getting started. You find that as soon as you start down that journey, you immediately feel better. But like, really it's just kind of making, making that simple, showing people what we're, what we're doing, how they can start planning for this, helping them discover what looks right for their budget. And when you figure out what looks right for your budget, you can then start to allocate and earmark that towards, basically, it, it's going towards this and nothing else. And it's coming out automatically. So that's really what we do, is we work with our customers, figure out what fits into their budget and then we automatically like to set that up to be withdrawn. So it gets, you know, it's what supports this investment vehicle.

Wesley Belden (13:12):

We have a unique focus in our structure. Getting back to what we were saying about compounding returns earlier, we know that more money upfront kickstarts compounding returns at our company. We looked at this and said, okay, well how can we replicate this sort of thing? Because if you're putting money away, let's say you're putting three, $300 away a month, like over the space of 40 years or 30 years, that's going to add up to a lot of money. But it adds up to a lot of money over that 30 to 40 year period. So we know that money's coming in. How do we essentially borrow off of that future income, that future, that future investment to basically leverage a large lump sum today? And so that's what we do at, at our unique approach, is essentially saying, we're going to you know, signing you up for a membership.

Wesley Belden (13:57):

Your membership payments is, you know, equivalent to what you would be investing month in and month out for the next 30 years. But we invest a large lump sum of our money proportionate to what has fit your budget on a monthly payment upfront. So that large upfront, you know, capital we deploy for your benefit that gets to start compounding on day one. A great way to really think about this is kind of like how you can take out a mortgage to live in your house today, and you can get all the benefits of living in that house today. I know, you're not living on the street. You're also enjoying the upside of that real estate as it appreciates or the old way before mortgages were a thing, you could save up money for 30 or 40 years and then buy that house. So we're kind of taking that same model we're doing for investing in the stock market, what mortgages did for home ownership. And so it's a, it's a mix between basically allowing this revolutionary product fit kind of just to seamlessly slip into your life and start producing long-term benefits for you.

Tullio Siragusa  (14:58):

Let's see if I can oversimplify this. You're lending people the money to invest into their future, and then there's some kind of amortization to get that back. And, and you're sharing in the interest growth I'm assuming I'm oversimplifying it, but why aren't other institutions doing this? I mean, this is brilliant.

Wesley Belden (15:18):

Yeah. So that is a bit of a simplification. It's good… it's a convenient way of thinking about it for sure. But other institutions aren't doing it because this is not the way that it's been done, right? And if you look at the other institutions that would be doing this check out their balance sheets, they're crushing it. Why change the darn thing? You know, like  JP Morgan, I think had 132 billion in revenue last year. I don't think they necessarily need to innovate something new and exciting that's going to benefit you in a better way. You know, we live and work in this space. Our team is experiencing this. I want my kids to grow up in a world where the majority of people that they interface with are doing well financially, emotionally, and health-wise.

Wesley Belden (16:00):

And this is a tenant to it, giving these types of tools to people to prepare for their future. You know, we're not doing anything for anyone. We're giving the tools that they need to do for themselves and do for their families. And that's what drives us. You know, and, and of course, we need to make a, a, you know, we need to make revenue to survive here. And again, that's the language of world finance. If we can't sustain ourselves then we can't continue to scale and help more people. But to answer your question, it's a dramatically different way of thinking about things. And I think it's one that's maybe not as steeped in the one-sided benefit that consumer finance usually is structured when it comes to regular people. And so there's not really a profit motive for the entrenched players to innovate in this space, because honestly, everything's just going great for them,

Tullio Siragusa  (16:47):

Right? I mean, but it sounds genius. And I kept saying, I can't stop thinking about what are the vehicles where this applies to, like, for example, whole life, right? You don't get the compounding benefit up front. You have to keep paying into it, right? But what I'm hearing is you can set the value upfront and then you pay a membership fee that basically pays into that value. So you get the benefit of the upfront, but you commit to a long term. What are some of the vehicles that are being used? Like is there a particular, is there some new financial vehicle you guys had to create to do this? How does this fit into the governance, if you will? Because it's a highly regulated industry too. I'm just curious, you know, how, what is it called? What is the actual product called?

Wesley Belden (17:38):

So, you know, we just call it Raise Financial or Raise investments. But like, as far as, you know regulation, like we're regulated by the CFPV but like, it, it's, we're trying to figure out like where we fit in with the SCC and how that goes forward. 

Tullio Siragusa  (17:52):

Yeah, I'm just curious... like, is it an ira, a 41K, a whole life? I'm curious where, again, it could be completely disruptive from that. Maybe for those people who are also for the first time hearing about this, how do they wrap their heads around that?

Wesley Belden (18:06):

So, I mean, a good way to kind of think about it is that it is like an investment account, but the funds that come to you at the end are essentially a net, and they'll be booked basically as income. So it's income from an investment account is the best way to kind of think about it. Okay. But no, it is, it is incredibly new, right? And so it's, you know, it, it's like a mortgage, but it's not a mortgage, right? It sits on, you know, our balance sheet. So it doesn't blow up your leverage requirement. There's a requirement as individual investors. If you're a non-accredited investor there's leverage requirements on what you're allowed to hold on the balance sheet. So we hold the initial position on our balance sheet, the surplus or returns of the account go to your balance sheet. And so that's the way that we're able to kind of structure that to where it fits in that way. And also that has the added benefit of providing down market protection for the end consumer as well as ourselves. There's a lot of really innovative ins and outs that we kind of massage into there but it's an entirely new space and, and <crosstalk>,

Tullio Siragusa  (19:06):

But it's a shared risk. You're essentially sharing in the risk with the and the reward with the investor. So is this where the tech comes in to help you balance that out?

Wesley Belden (19:18):

So, we use tech to look at, you know, basically how the account is performing, and then that dictates how our, you know, down market protection needs to exist, priced and purchased, right? So basically you don't want these accounts to go below the initial BA balance of the account, right? Because that's the thing that you're trying to protect about. Like, the reason why there are leverage requirements from non-accredited investors is a good reason. They don't want people to get into a situation in which the upside is obviously wonderful, but the downside can be devastating. And so we use technology to kind of basically price, organize, and then purchase down market protection so that you'd never find yourself in that situation where, you know, if, if the market goes down a percentage, you're on the hook for that. That also is a component of how this is structured, because these are considered collateral for these positions.

Wesley Belden (20:08):

So the collateral, you never want to drop below that initial account value. So we use technology to, to do that, to kind of basically constantly repackage and reinvest for that down market protection, because that does cost money. And so, we want to make sure that we're not buying more insurance than we need. We use the technology to kind of describe how your account's doing. We use it to show, you know, kind of what, what's going to fit with your budget. And then obviously the more that we can do from a management perspective for your account using the technology, the better, easier and cheaper it's going to be for us to deploy.

Tullio Siragusa  (20:43):

It's brilliant. It's brilliant enough where I'm going to check it out too, you know, especially talk to my kids about it. So one of the things I wanted to ask is, is your plan purely to go direct to the consumer? Or do you think about possibly licensing this kind of vehicle for other financial services firms who might want to offer to their consumers? What's the thought process?

Wesley Belden (21:09):

That's a great question. And so the thing to think about is this market is huge. I mean, it is huge. Like our early adopters that we're looking at, you know, it, it's, it's, you know, it's 10.5 million people looking at 11.5 million people. We're looking at early adopters. This is a huge market, and that's our early adopter space, and that space is supposed to triple over the next five years. So this is a tremendous opportunity. It's a tremendous marketplace. I think that, you know, we're going to need help deploying more of this. You know, there's a, a, a sense of how large an institution can grow in a scale wise. I think that, you know, I would like to see this grow and serve and help as many people as possible. So having institutional partners as we deploy this on a larger scale, I think would be a very, very positive thing for the mission, for the product, and for the outcome.

Tullio Siragusa  (22:02):

How's it been for you guys in terms of aligning the financial vehicles? You have some partnerships in place and hedge funds. How, how does it operate in terms of giving you the funding you need to be able to make this possible?

Wesley Belden (22:18):

So it's been interesting. It's a lot easier to explain this to our target customer than it is to describe it to our institutional partners. Because again, like they are more entrenched and steeped in, in the old way of doing, that's

Tullio Siragusa  (22:33):

A significant shift on how things used to get done. I mean, but, but it's not hard to understand once, once you see the value of it, the mortgage analogy, which is perfect. You know, you basically get into a house, you get value for something you, you don't have money for, and you pay into it until you, until that value returns back to you. I mean, it's a great analogy. I'm just curious to see, I mean, people should be all over this thing. So you know, what, how far along you guys are with that?

Wesley Belden (23:01):

So we have a lot of interest from, from customers, obviously. That's they, they understand the value, they understand the utility in this product. So that's been like the groundswell. And then we're looking at a few different ways of kind of developing what we want our capital partners to be. There's a lot of opportunity here, or a lot of different directions to go, and we kind of consistently pivot based on what the environment looks like long-term. That probably will be mostly an institutional component of our company. But as of now, it's something that we want to control internally because that is basically the, the, the sources of capital that's our main expense driver. And so, as a company that we're growing and scaling and moving off the ground, we want to make sure that we can control our costs and we have to control those. Because if we get those out of link with the value that we have to provide our customers that's kind of a recipe for, you know, a difficult financial snapshot. So right now, go ahead.

Tullio Siragusa  (24:00):

Well, congratulations we're, we're up on time Wesley, but it sounds to me as though you've really honed in on how to leverage technology to disrupt the old system of doing things that doesn't serve everyone. At least 78% of millennials need something like this because they're far behind, right? You come out of school, you're already behind. So how do you get ahead? And that's always the big challenge. You know, some people never get ahead. The traditional systems were never set up that way. You know, they make the wealthy more wealthy. So this is democratizing investment, in my opinion. Would you, would you agree with that?

Wesley Belden (24:41):

A hundred percent. Amen. it's not only democratizing it through access, it's also innovating to be more effective for the audience, right? So you look at, at, you know, through the likes of Robinhood and e-Trade, we have more people investing in the stock market than ever before. But during that same time period that more people were investing in the market, the concentration of total market value kept shifting to the top 10% wealthiest people in that space. So right now, 89% of the total stock market value is owned by the 10% wealthiest people in America. And so that leaves the rest of us, you know, with a much smaller piece of the pie. So it's not necessarily about making sure that people have access, it's about making sure they have access as well as the tools to really do this for themselves in a way that can help spread that or, or bridge that gap, giving that multiplicative power to really kind of start actually improving their position instead of running so fast to stay in the same spot.

Tullio Siragusa  (25:36):

Excellent. Well, if you haven't checked out, Raise Financial, please do. I certainly will. Thanks for being with us. Wesley, stay with me as we go off there in just a second. All right. What we got coming up getting unplugged on Thursday with Irv Lusting, who's optimization principle at Princeton Consulting. And on Friday speaking with Henry Michaelson, excuse me, who is the CTO at Halla.  So come back on a Thursday, that's tomorrow 9:30 AM Pacific and we'll continue getting unplugged with some awesome guests. Take care, everyone.