VIDEO: Nest Wealth CEO Randy Cass on Robo-Advisors and Wealth Management

James West

Nest Wealth is a robo-advisor that offers wealth management and creates a low-cost, customized global portfolio for clients. CEO Randy Cass joins the Midas Letter to talk about the technology and how to invest properly.


James West:     Thanks for joining me today.

Randy Cass:     It’s my pleasure to be here.

James West:     So Randy, NestWealth is a robo advisor. What is it that a robo advisor actually does?

Randy Cass:     It’s a great question, because the term robo advisor has been in the media a ton over the last couple of years, but not many people have a clear understanding. The best way to think about it is take the valuable services that an advisor has offered a limited section of the population over the last five, six decades; make anything that can be automated, automated. So think of things like the paperwork, think of things like meetings: going down to the office downtown and having to show up at a certain time, and only being able to talk then; get rid of that, make it digital again.

At NestWealth, each individual gets a customized portfolio made of low-cost ETFs, and then the entire relationship is managed by, as you’d expect, an individual, a human, but the greatest and best technology is there for the user to see how they’re doing, transparently view what they’re holding, make sure that everything is going exactly as they need it to go, and because there are no big legacy offices and massive boardrooms, we’re able, as are all robo advisors, to offer the service of this type of sophisticated wealth management for really a fraction of what it used to cost to have that level of expertise available.

James West:     Interesting. So is it TFSA eligible?

Randy Cass:      Oh yeah. I mean, the whole thing about the way that NestWealth was established, national banks’ NBIN, which is their custodial clearing house part of their business, they’re the back end. So we never touch the actual assets; every individual has an account set up in their name, their assets are held in a segregated account under their name. It never is as if you’re writing a cheque to NestWealth and then NestWealth is putting it into an account for you; all the money gets transferred between the custodian national bank, with the suitable insurance you’d expect a custodian to have, and back to the client.

We interact in the middle as the concierge for our clients, so if they need help, if they need to figure out how to make deposits or withdrawals, we facilitate that service for them. And on the flip side, we are the portfolio managers. So we make sure that the portfolio is allocated properly, the right ETFs are selected, the ETFs are rebalanced when they need to be, and that is what we get paid.

And we get paid, it’s traditionally in this industry as you’d know, a percentage of assets under management; for a mutual fund, it can be as high as 2.5 percent. NestWealth gets paid a flat monthly fee, and that’s regardless of how much money you have in the account. So you will never pay us more than $80 a month, and we start at $20 a month at the lower end, and that means that our average client has $175,000 in their account, they are 47 years old. Our second-largest group is the Baby Boomer demographic.

James West:     Okay. So can you tell me, if I was to have been a NestWealth client for the last five years and I had put $100,000 to work, what would be my average rate of return over those five years?

Randy Cass:     Yeah, so with the preface of course that past doesn’t indicate future, and with the secondary preface that we have been open for business and taking individual accounts for about two and a half years now, what I can tell you is that the portfolios, again with no default products, range from the really conservative ones that have generated returns annually of about 4.5 percent. If you had invested in those asset classes in that allocation over the last decade, you’re looking at a 4 to 4.5 percent annualized return, and the most aggressive combinations we would have done would be closer to the 8.5 to 9 percent annualized return.

So you have that whole spectrum. Again, these aren’t portfolios that were established in the time, but we use seven asset classes; anyone can go to and see the asset classes we use and the portfolios we use, and can even answer some simple questions and see what kind of portfolio we’d create for them, and how much that would save them in fees. But we use Canadian stocks, US stocks, global equities, we use short-term bonds, medium-term bonds, real return bonds; there’s a bit of an inflation ahead, just like gold would be in many cases. And then we also use real estate, commercial in the US.

What we do is, with these combination of assets, we can show you had you held these similar ETFs over the last 10 years how you would have done. But again, very important to state that in no way does that indicate what’s going to happen in the future. What we can promise, though, is that because the fees on portfolios of size become so – the minimums – I mean, $80 a month, we have clients that are moving six and seven-figure portfolios into NestWealth and dropping their annual fees from $20,000 to $30,000 a year to $960. You do that over the next 10 years, you’re looking at another $350,000 that’s left in your pocket, just because of the fees, not because of anything that happened in the market.

James West:     Sure.

Randy Cass:     If you believe that passive over time tends to outperform active, and if you believe that passive with the lowest fees tends to outperform passive with the higher fees, then inevitably, what we say is that there is probably no better solution that exists in the Canadian marketplace for that type of investor than NestWealth right now.

James West:     That’s a very compelling argument. What is the minimum size of capital investment that I need to start a NestWealth account?

Randy Cass:     We don’t have a minimum size at NestWealth; we truly do believe in kind of democratizing the process of getting sophisticated portfolios created for people. That being said, when you think about it, at $20 a month, it really doesn’t make sense for $5,000 or $10,000 to come into our accounts; there’s better solutions that exist out there for that size. That’s why most of our accounts do tend to skew up to the kind of 150,000, 175,000 range. Once you get about 35,000, 40,000, 50,000, we become an incredibly compelling value prop at $20 a month, and then it begins to scale up to that 80 where it caps out.

What we do, however, undertake, is that for some clients that want to try us out, we’ll create a much simpler portfolio allocation for them, up to $10,000. We’ll manage it for free. We’ll give them a sample and a taste of the interaction, the service, the customer experience, and they will make a decision at that point as to whether it’s something that’s going to be a meaningful part of their future or not.

James West:     Sure. Okay. Well, let’s leave it there for now. That’s a great introductory interview; we’ll come back to you at another time and see how you’re making out. Thanks for joining us today.

Randy Cass:     My pleasure. Thank you for having us.

James West

James West

Editor and Publisher

I employ a Capital Efficiency Model that dictates money should never be exposed for longer than is absolutely necessary to the possibility of being lost. Thus, I routinely sell half my position when a stock doubles from my entry price, and I sell stocks that lose 20%, unless there are...
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Midas Letter is provided as a source of information only, and is in no way to be construed as investment advice. James West, the author and publisher of the Midas Letter, is not authorized to provide investor advice, and provides this information only to readers who are interested in knowing what he is investing in and how he reaches such decisions.

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