Why True Link is launching an investment division today
Four years ago, financial institutions’ inability to help protect my grandma from fraud caused me to start the kind of bank I wanted my grandma to be able to bank at. Our first product, a debit card with extra security features, has already prevented millions of dollars in financial losses.
Very early on, our customers surprised us by using it as a budgeting and cash management tool also, and as a way to administer trusts or protect medical benefits, to put financial plans into effect, or sometimes as a way for the kids to be involved in their parents’ financial life without taking over. We learned a lot about their lives, perhaps more than we had expected.
One key thing we learned is that once you’re retired, budgeting and investing are tied closely together. Your savings aren’t an abstraction for the distant future — they’re how bills are paid. Over four years processing millions of financial transactions and being the actual form of payment for tens of thousands of customers, we learned a lot about how they spent the money, and where that money was coming from. To help them with budgeting, we needed to learn about their investing.
What we found was often deeply troubling.
We found that the financial advice retired folks were getting was often sales-driven or hunch-based rather than service-driven and objective. Most of our customers didn’t know how much they were paying in fees and what they were getting in return, how the investment option recommended for them correlated with their personal needs, or what other strategies had been analyzed and what tradeoffs were considered. Many of them were paying more than they were benefitting and not optimizing their income for the retired years of their lives.
Perhaps more importantly, the senior customer was treated almost as a leftover — “you put your retirement savings in a target date fund with us and guess what, now you’re past your target date” — as if they were a carton of cream going bad in the fridge. Today’s retirees are not past their target date, they are looking toward the future — and they absolutely know when they are being sold warmed-over retirement savings products rather than something built specifically for their needs.
Rather than watch retirees settle for mediocre investment options, we decided to do something about it — to help create a better future for the people who, incidentally, hold almost half of the wealth in America. We built True Link Financial Advisors and spent the past year with around two hundred clients in California, learning and refining our approach, bringing in the best of what’s available, throwing away the worst of it, and adding unique benefits specifically for people living off their assets. We built the kind of investment firm we’d want managing our own families’ retirement savings… and then, put our own families’ money in right beside yours.
Today, we’re making that investment approach available to the public for the first time.
The core of our investment approach starts with an understanding of a person and what they need. We start by looking at factors like age, assets, health, insurance coverage, and your current monthly budget and inbound cash flow. Based on this we figure out when you’ll actually need the money — and use those time horizons to recommend investments in low-cost, broad-based index funds that balance minimizing financial risk with providing returns that will meet your financial needs.
Our approach is algorithmic — not based on hunches or personal preferences — and developed by an investment team that has collectively managed hundreds of millions and even billions of dollars. We try to make it clear exactly what the tradeoffs are — more in stocks or more in bonds, earlier or later retirement, reducing or increasing spending in the near term, including annuities in the financial plan or not.
Unlike many other investment advisors, we’ll tell you for free exactly how we’d invest the assets — dollar amounts and ticker symbols — and you can print it out, take it home, and invest it yourself, never paying us a penny. We think if everyone did this it would make investing a lot easier, cheaper, more objective, and more transparent.
We also offer an advising service, where if you choose to hire us, you’ll get a human as well as an algorithm. We’ll tell you in plain English exactly what that human will do to earn the fee, and exactly what that fee will cost. And we encourage you to consider alternatives — look at what we say we’ll do, and consider hiring a different financial advisor, using an online service, doing it yourself, or asking a friend or family member to help you with it. Making it easy to comparison shop would improve both service and value across the financial industry.
Most of all, we hold ourselves to a fiduciary standard. Our financial advisors don’t earn commissions or have sales targets, we don’t get kickbacks or referral bonuses from third parties, we don’t charge confusing fees, and we don’t sell proprietary products.
To provide good service to retirees, a financial institution needs not only high ethical standards and sound financial systems, but also an understanding, empathy, and appreciation for the life situation of the customer. There’s a need for a financial institution that offers safety, support, and independence.
From our very first existence — as a living room wall covered in sticky notes — we’ve described our vision as “The financial services brand for older adults.” As we reflect on what that means, we mean both that we want post-retired adults to come to us and to continue choosing us as their trusted partner every day. But we also mean for in its metaphorical sense — we want to be for retirees, acting in their favor as advocates and entrepreneurs, making changes to an industry that often serves them poorly and almost always could do better.
We hope by making our financial toolkit available to the public for the first time retirees are able to make more objective, informed investing choices, get better advice and better service, with lower, clearer fees. We’re here to change the status quo — and bring better financial services to a population that has earned a better shake than what they’re getting.
Kai Stinchcombe is CEO of True Link Financial, Inc.