Do It Yourself Retirement Investing

Do It Yourself Retirement Investing

A new Web-based solution offers ETF model portfolio solutions for investors going it alone.

Reviewed by: Cinthia Murphy
Edited by: Cinthia Murphy

Wayne Connors is an Air Force veteran who went on to become a registered fiduciary and work in private wealth management before he set out to create a new business model centered on helping do-it-yourself investors go it alone.

An expert in asset allocation, Connors launched a Web-based service called Retirement Investor, where he offers model portfolios anyone can replicate for a monthly subscription fee. In its first three months in business, Retirement Investor counts “a couple hundred” investors as members—a number Connors and his three-person team—hope will grow tenfold in 12 months. caught up with Connors to learn more about his way of helping clients invest for retirement. Tell me about Retirement Investor. When and why did you start this business?

Wayne Connors: About two years ago, I started building the website, which went live this past October. I got the idea for it when I was managing money as an investment advisor. I would normally charge a fee, just like other advisors—the 1%-a-year type of thing—and I had someone ask me, “Can you just tell me what to do so I can do it on my own, and I'll pay you a monthly fee instead? And then whenever you make changes, let me know, and I will do the changes on my own.”

That's when I started looking around to see if there's anything out there like that, where a do-it-yourself investor can get guidance by following a professionally managed model portfolio of ETFs, but not have to pay a financial advisor for it. That’s how Retirement Investor came to be. Is cost the main consideration for DIY investors? They don't want to pay advisory fees, so they choose to go it alone?

Connors: I would say there're two things. The first is definitely cost. If they do it themselves, they could save money by not having to pay an advisory fee, which becomes larger as their account gets bigger. If they're paying 1% a year and they have $200,000, they're paying $2,000 a year. But as it grows to $400,000, now they're paying $4,000 a year. Over time, that 1% a year adds up.

Another driver, though, is simply trust. With everything going on in the financial industry—the Madoffs out there—a lot of people have just become distrustful of financial advisors and they think, at the end of the day, no one cares more about their money than they do. It really comes down to who you're going to trust. Your business model is that the investor pays you a monthly membership fee for the roadmap to portfolio construction and management, right?

Connors: Exactly. It could be either $19.99 a month or $199 a year. How do you compete with robo advisors who charge, say, $25 on $10,000 invested, and they do all the portfolio management for you; it's all automated? What's your value proposition relative to that model?

Connors: It seems to me that the bigger robo advisors, like Betterment and Wealthfront, are charging a fee based on the size of your account. They're still looking for assets under management. Their goal is to get you to open an account with them, because they want the assets under management so they can make their stake.

And consider that, to many DIY investors, it’s hard enough going at it with a face-to-face advisor; now they've got to do it with a faceless advisor, a robo advisor. That’s not an easy sell, particularly for older people.

But where we are really different is on education. Our goal is to help investors do it on their own, and for that, we offer a lot of educational videos on do-it-yourself investing and a monthly video newsletter, plus loads of information on the site.

People who come to use our site are looking to get educated. They want to take more ownership and responsibility over their account. Someone who uses a robo advisor just wants to basically turn their account over to someone else and not have to worry about it. Retirement Investor offers five ETF model portfolios. But investors don't buy in to them; they simply replicate these portfolios on their own online brokerage accounts, right? So you don’t actually manage assets?

Connors: That's correct. We do not manage assets. We do not revenue-share with any of the ETFs' fund managers that we recommend in our models. Our sole source of revenue is our membership fee. When your clients get the memo saying, “We're tilting toward value at the moment,” and they want to execute that trade on their own, they have to go through their brokerage accounts and incur whatever trading fees there are, right?

Connors: The way it works is that after you select what model portfolio you want, you simply type in the dollar amount you're investing and hit "calculate." It'll then tell you how much money you need to put in each fund. It'll calculate how many shares you need to buy, so it creates a trade report. You can simply print that off and go do your trades.

When we make a change to the models, people will get notified. They'll come back to the website, and we have a tool called "balance my portfolio." From there, based on the value you have in each fund, it'll tell you what funds you need to sell and buy. But you're right, it's up to you to execute your own trades.

We use Vanguard funds, and for Vanguard funds, there's no trading cost if you open a brokerage account at Vanguard. We also use iShares and WisdomTree. And there are no trading costs for those if you're trading at Fidelity. We also use one or two Schwab funds. There's no cost for trading those if you trade at Schwab.

So you won't necessarily pay a trading cost on every single trade you do. It really depends where you open up your account. We might make a change, like an adjustment, maybe once every three months. So you're not trading a lot. What's your decision-making process on which ETFs you recommend?
The first criteria is the asset class. If we want to put senior bank loans on the fixed-income side of the portfolio, the first thing we do is find what funds offer that exposure. We then look at the size of the fund, the cost and the returns. We pick the one we think is best.

For example, going back to senior bank loans, one of the most popular ones out there is the PowerShares Senior Loan (BKLN | C). But the one we use is the First Trust Senior Loan (FTSL | C), which is significantly more expensive than BKLN.

The reason we went with that was because FTSL didn't have a lot of really low-quality loans or junk-rated loans, and they also didn't have energy. Their performances are night-and-day. That's a case where we didn't go with the lowest cost, because we wanted to go with the higher-quality fund. What are the biggest mistakes investors typically make in their retirement investing?

Connors: I would say there are three really big mistakes we often see. First—and that’s especially true with 401(k)s—is investors not taking advantage of a company match, and they’re simply not investing enough for retirement.

The other mistake is realizing that if you're investing for retirement, it's a long-term goal. Therefore, you shouldn't be investing based on short-term market movements.

Another mistake is taking on too much risk. You may not be retiring for 20 or 30 years, and you already have some money saved up, and you may only need to earn 7% a year in order to hit your retirement needs. Why invest or build a portfolio that's trying to get 12 or 14% and take on unnecessary risk? You chance losing money. As we start a new year, what assets do you like, and what assets are you avoiding?

Connors: In U.S. equities, we have basically large growth, large value, mid value, small growth and small value. We believe value is going to start doing better. As interest rates start to move up, the sector that tends to be the largest beneficiary of that is the financial sector. And today financials make up a large percentage of the value indexes. Growth has become very pricey.

In terms of international exposure, we're invested in international large companies across multiple countries, similar to an MSCI EAFE index, but we're using the currency-hedged WisdomTree International Hedged Quality Dividend Growth (IHDG | B-47).

We had the WisdomTree Europe Hedged Equity (HEDJ | B-49) originally, but we replaced it with IHDG to diversify a bit from Europe and lower the risk. We don't see a lot of downside risk there.

We also believe in the small-cap premium. We follow Fama-French and the three-factor model. We own small-caps in international developed markets. And in alternatives, we use U.S. REITs through the Schwab U. S. REIT (SCHH | A-86). We want that index for diversification.

Contact Cinthia Murphy at [email protected].

Cinthia Murphy is head of digital experience, advocating for the user in all that does. She previously served as managing editor and writer for, specializing in ETF content and multimedia. Cinthia’s experience includes time at Dow Jones and former BridgeNews, covering commodity futures markets in Chicago and Brazil equities in Sao Paulo. She has a bachelor’s degree in journalism from the University of Missouri-Columbia.