Wall Street key to inequality fight

As the gap between societies richest and poorest continues to widen, the stark reality is that Wall Street is one of the few institutions with the ability to tackle this.

Government has failed time and time again to improve the lives of ordinary Americans. Relying on charity won’t solve the root cause of inequality either; it usually only papers over the cracks. If anything, it could make things worse by perpetuating dependency.


It’s time to get over the financial crisis

It’s easy to blame Wall Street for people’s financial struggles. We hear the same things over and over again: bankers’ irresponsibility caused the financial crash in 2008. Hard-working Americans were left with nothing, while Wall Street executives walked away with big bonuses. Wall Street executives are greed and excess personified.

Let me be clear. It’s shameful that people lost out in the financial crash, but we can’t afford to stigmatize Wall Street any more. The recklessness of a few shouldn’t write off our whole financial system. After all, America’s prosperity was built upon free enterprise and wealth creation, with Wall Street leading the way.

But rather than arguing that Wall Street is the bane of our lives; that it is structurally incapable of doing anything but make the world worse, let’s ask some difficult questions. Let’s ask, instead, how we can funnel the power of Wall Street to help more people out of poverty; help more people pay for college; help more people go on vacation; help more people buy houses.


Government isn’t working

Finance is remarkably powerful. It decides who makes more money, and who makes less. The system can allocate more money and capital to one part of the country or segment of the population than another. This is a risk, but it is also an opportunity. It is an opportunity to shift the dynamics, and make sure that more money reaches our most hard-working people.

The real travesty is that millions of hard-working people in America are unable to afford to pay for their children’s education. In many families, there are two parents are in full-time employment; they save the little bit of money they have left after food, rent, and bills, and they still can’t seem to pay for healthcare or education. After 10 years of saving for their children’s education, they end up with much less than they expect. No college. No vacation. No upgrade on your car or house.

One diagnosis of this problem is that these people aren’t making enough money to begin with. That the government needs to shift money from wealthier people in the form of taxes. But another one is that they are not getting the returns on their savings that they deserve in the first place – so all their hard work is going to waste.

Due to the miserly interest rates that many savings accounts now deliver, many families’ earnings and savings are being eroded by inflation rather than the opposite. They end up with less money rather than more.


Equality starts with equality of opportunity

How do we solve this problem at its root? How do we make sure that inflation doesn’t continue to erode the savings of millions of people? We need to give Americans the opportunity to make the most of their money. The best form of equality is equality of opportunity. Everyone deserves an equal opportunity; everyone deserves a fair chance to realize the American Dream.

For the last century, Wall Street hasn’t done this.  It has offered the wealthy access to special, high yielding investment opportunities, while limiting the middle class from participating in the same opportunities. The government allows the middle class to gamble and play lotto, but limits them from investing in specific opportunities that have outperformed 401ks and pension plans for years. If one could level the investment playing field by giving everyone access to the same opportunities it would make a big difference.

Over ten years, a compound interest rate of one per cent on a base of $20,000 will become $22,092. One per cent is good for a saving account right now. Over that same period a compound interest rate of eight per cent on a base of $20,000 will become $43,178. The difference is incredible. It is huge. It is the difference between paying for college and not paying for college.

But investment opportunities at the 8 per cent mark have been keep off the books for many banks and investment companies, reserved only for wealthy investors.

The democratisation of good quality investment opportunities will be a truly disruptive force in finance over the coming years. This has been denied to millions of people for generations but several Wall Street firms are now trying to step into the void to change this.


Recognize the good in Wall Street

Wall Street has been blamed for our desperate financial situation, but it also holds the solution. The average American has been neglected from specialised investment opportunities for years, limiting their return stream, and making them less likely to pay for college, buy a new house, or take the vacation they have always dreamed of.

Wall Street can change that. But it also demands a new perspective from the government and the public. We need to recognise that as well as creating problems, finance has the potential to do a lot of good too.


Originally published on Comment Central

Investing for your Future

Investing for your future

Saving and investing can seem like a daunting and complicated task. The problem with today’s investment environment is that there are endless options, and choosing the right one often feels impossible.

But, with a few tips and some clear direction, you can save and invest intelligently for your future.

You just need to know what to look for.


1: What do I Invest In?

This is the most important question. When saving for the future, you need to ensure that your portfolio:

Matches your risk profile

Is diversified in order to reduce market exposure and risk

Offers the right potential returns to meet your retirement or saving goals

Most 401ks, IRAs, and saving plans allow you to invest in a portfolio consisting of a combination of stocks and bonds, also known as a mutual fund. For younger investors who have a greater risk profile, more stocks than bonds are selected, as they would like more capital appreciation, and for older investors, more bonds than stocks are selected as they aim for capital preservation.

This sounds boring, and it is.

One of the major issues with these mutual funds is that they are directly correlated to the stock market. This means that they move in parallel with the US stock market, so if the economy has a downturn, your savings account will decrease, and your expected return will be affected. In 2008, the economy crashed because of the mortgage crisis and many Americans’ savings accounts were negatively affected because of their direct correlation to the stock market.

Recently, non-correlated funds have emerged allowing the average investor to allocate their savings into a portfolio of non-correlated investments. These funds are designed to be unaffected by movements in the stock market giving you more safety against large swings in the market.

For years, the wealthy investor (accredited) has been able to invest in high yielding, non-correlated portfolios, but most recently, funds have emerged allowing the 99% (non-accredited) to participate in these kinds of investments.

My goal when creating Forefront was to give everyone access to these kinds of opportunities. For years, the government allowed the average American to gamble and play lotto but restricted them from investing in specific investments because they deemed them uneducated or unable to evaluate specific risks because of their income level. I associated wealth inequality to the lack of opportunity the middle class had when it came to investing, which is why I created Forefront. My ultimate goal is to give everyone equal opportunity.

One of the goals of Forefront is to allow the average investor (non-accredited) to participate in investment opportunities previously reserved for the wealthy. The benefits of this are:

  1. Non-correlated portfolio giving the investor safety from the stock market
  2. Potential for a higher rate of return
  3. Risk mitigating structures to attempt to reduce potential risks


2. How do I evaluate fees, and should I be worried?

One of the major pitfalls with investing is the high fee associated with savings plans. Many 401ks and other retirement funds charge investment fees, service fees, and administrative fees. These fees can add up and can reduce the potential return you are expecting in your portfolio. A 2014 study by the Center for American Progress showed that a 25 year old worker who makes $30,500 could pay $140,000 in fees by the time they retire at 67 if they pay only 1% per year in fees and contributes 5% of her salary to her 401k.

This example highlights how fees can be a devastating aspect of investing, and if people are not careful, they could see a lot of their hard earned money lost.

When creating Forefront, I understood the importance of fees, especially when it came to servicing the average investor. We decided that we would not charge a management fee and not make any money until the investor made 8%* on their money per year. I wanted to turn Wall St on its head and make the investor the priority, not the broker or manager.

Forefront was created to empower the investor and provide them with the tools to have the opportunity to succeed.

At Forefront, the investor is the priority.

Cole Reifler


*The Trust will not pay the Advisor a management fee. Instead, the Trust will pay the Advisor an advisory fee that compensates the Advisor after shareholders receive the first 8.00% of annual Pre-Advisory Fee Net Investment Income (the “Hurdle”). The Advisor will receive no compensation until after the Hurdle is passed. For Pre-Advisory Fee Net Investment Income above 8.00% and up to and including 18.00%, the Advisory Fee will provide the Advisor with 80% of such income, while shareholders receive 20%. For Pre-Advisory Fee Net Investment Income above 18.00%, the Advisory Fee will provide the Advisor with 20% of such income, while shareholders receive 80%.