Interview: How to invest wisely in the digital age Special

Posted Feb 14, 2018 by Tim Sandle
Personal finance is on the top of many people’s minds. While the digital era provides more opportunities for investment, making the wrong choice can be costly. Wealthsimple Dave Nugent, Head of Investments, gives some advice.
File photo: The social media sites are coming and going.
File photo: The social media sites are coming and going.
© FT
Toronto-based Wealthsimple aims to make investing simple and accessible for millennials. By using a computer or smartphone, potential investors can develop a strategy to meet their financial goals, provided they make the right choices.
To find out more about the appropriate strategy to adopt, Digital Journal spoke with Dave Nugent, who is Head of Investments at Wealthsimple.
DJ: Many millennials don’t save much money. What can be done to address this?
Dave Nugent: We actually find that our clients, about 85 percent of whom are under 45, are pretty responsible. But having said that, a lot of people of all ages have trouble saving money. Some of the ways we're addressing this is by making saving and investing convenient with full access from a smartphone or computer, human via real-life stories from interesting people through our Money Diaries and transparent so customers know exactly what they’re paying in fees. Our services focus on the long-term – it’s not sexy but it’s important that our customers learn that the boring strategy will grow your money over the longterm.
DJ: Can technology help with this process?
Nugent: Technology is a huge factor in helping millennials start investing – we're used to accessing services on our phone, on our own time. Most young people don’t want to schedule a lunch with their adviser once a quarter. I know that's not how I want to spend my time. We want something convenient an on-demand. What most of our clients do is set up auto-deposits so that a portion of each paycheck goes into an investment account - it's really convenient, and it helps them be more successful investors by staying disciplined and contributing regularly.
DJ: Speaking of technology, how do you see fintech’s challenge to conventional forms of banking?
Nugent: Customer expectations are evolving rapidly. Three years ago, when we launched Wealthsimple, it was clear the banks didn't take us very seriously — now, they're starting to understand around how fast innovation needs to be, what's needed to achieve it, and what kind of companies can deliver it.
But I think fintech companies represent an opportunity for banks as much as a challenge — to add digital capabilities, interact with their customers in new ways, and reach new demographics. Building really great technology and keeping up with the pace of innovation today is tough, and for traditional institutions, partnering with technology firms can be a great solution.
DJ: How else will financial services change over the next three to five years?
Nugent: As in other industries, technology will continue to play a bigger and bigger role in how financial services are delivered to clients. And I think we'll continue to see more attention paid to investment fees and the value investors get for their fees. We've seen a big shift away from higher fee actively managed funds to low-fee ETFs, and I think that will continue.
DJ: What advice would you give to first time investors?
Nugent: Get started. That's the most important thing. The more time you can give your money to grow, the better off you'll be. And remember, it’s not a sprint, it’s a marathon. It's all about longterm discipline. Once you have a portfolio that matches your needs and goals - and we can help you figure that part out, without you even having to commit to investing with us - stick to it. Don't listen to the pundit on TV saying tech stocks are going to have a huge year or your uncle with the great buy-in opportunity - drown out the noise and stay disciplined.
DJ: For those with a little more experience, how can people build up wealth in the longer-term?
Nugent: The principles are fundamentally the same. Make sure your portfolio is diversified, keep your fees low, and stay disciplined! And automating as much as you can is beneficial for investors no matter your experience level — the more you can just do it without having to think about it too much, the better off you'll be.
DJ: What do you think of bitcoin and other similar tokens in terms of investments?
Nugent: At the end of the day, Bitcoin is a speculation; it's really volatile, and nobody knows what’s going to happen with its value. We believe in keeping risk low - for most investors, we're talking about your life savings here! - and not investing more than 5% of your overall portfolio in those types of assets. And, of course, with that 5%, clients should be prepared to lose it, because above all, no one can predict what will happen with Bitcoin or any other types of cryptocurrency.