And financial advisors don't crash
In the United States, about one out of every 210 people has experience trading online, according to Asktraders.com. The phenomenal growth of internet trading, mobile apps and so-called robo-advisors has helped introduce the benefits of investing to a massive, new generation of those preferring to handle their own financial matters.
Professional advisors and other observers view this as largely a good thing—but there are limitations. And increasingly, such platforms are coming under greater scrutiny and are being held accountable when limits are stretched. In late June, FINRA fined Robinhood $57 million and ordered the online brokerage to pay some $12.6 million in restitution, plus interest, to customers for a total settlement of $70 million. Among other infractions, FINRA cited "significant harm" to millions of customers affected by the firm’s systems outages in March 2020.
“For some people, who enjoy doing financial investing themselves, such online trading platforms are excellent,” Hunter Von Unschuld, JD, CEBS and founder of Fractal Profile Wealth Management LLC told Advisors Magazine in a recent interview.
“But markets are not easy to understand,” he continued. “And advisors bring a lot to the table, such as being there with advice in tough times and being more tax efficient. An app won’t help you set up investments in a tax efficient way.”
Von Unschuld recounts a case from last year when an investor – not a client – approached him on a consulting basis. The individual had done $30 million worth of online trading in 2020, garnering about $1.2 million in gains. Unaware of wash-sale rules, the investor ended up having a more than $800,000 tax bill.
The wash-sale rule, according to Investopedia – an online financial information platform – is an IRS regulation that prevents a taxpayer from taking a tax deduction for a security sold in a wash sale. A wash sale is one that occurs when an individual sells or trades a security at a loss and, within 30 days before or after this sale, buys a "substantially identical" stock or security, or acquires a contract or option to do so.
“If the person who came to me with that $1.2 million gain had an advisor knowledgeable of the tax ramifications, his taxes would have been hundreds of thousands of dollars less,” Von Unschuld said.
Although Fractal Profile Wealth Management counts some retirees among its clients, the firm’s client base is split along essentially two lines: age 58-70 pre-retirees for whom the firm works to put together all the ingredients for a customized retirement plan, and young professionals who have high incomes but not a lot of assets.
For the older group, it’s about peace of mind. “They see that they can retire, and we make sure they are comfortable with a plan,” Von Unschuld said. The younger professionals learn how to invest money, save, manage a 401(k), which Von Unschuld can actively manage for them, and more.
“For example, we do tax planning and work to build their assets,” he explained. “The idea is to set them up when they’re young and be as tax-efficient as possible because over time that has a huge impact.”
Education is key to Von Unschuld’s practice, which is based in Albuquerque, New Mexico and Tucson, Arizona, and where there is no minimum investment required.
“Ideally, before an individual even becomes a client, we have them take one of our classes,” he said. “So they can learn what’s really out there.”
A big problem today, in his opinion, stems from the constant barrage of financial news, which tends to have little impact on the 75 percent of people at the average income level. As a result, people get the wrong ideas about how markets work and where they should be investing.
“It’s got that Las Vegas feel to it,” he said. “The financial news coverage, for example, is in fact entertainment and slanted toward how much money someone just made on GameStop. But what about the people that lost money?”
At Fractal Profile Wealth Management, Von Unschuld’s primary job as a fiduciary who is acting in his clients’ best interests is to educate each client on all the financial possibilities that fit their individual situation.
“We will not just say invest in this,” he said. “We explain how different portfolios work, how different strategies work, and different products. We show clients how investments will work for them — what they will and won’t do for them — and what they can be expected to do over a number of years.”
Von Unschuld, who has been involved in the financial services sector for more than 30 years, emphasizes that his financial planning process will not end until somebody says they understand what they have chosen to do and why.
“It could be two meetings, it could be five meetings,” he said. “And it’s an ongoing process. When we sit down for a review or just when questions come up, we might change things.”
Von Unschuld is adamant about having a fiduciary handle one’s finances. So much so that he established the Fellowship of Fiduciary Education in 2014 and founded The American Society of Fiduciary Education (TASOFED) in 2016. The goal is to provide consumers, investors, and retirees across the country with the finest comprehensive financial education courses possible.
“Always ask, are you a fiduciary?” he said. “And there is only one acceptable answer, and that answer is ‘Yes.’”
Von Unschuld also shares another good question when seeking out a financial professional: “What do you invest in?” he said, adding, “Does an advisor eat his own cooking?”
For more information on Fractal Profile Wealth Management, visit: fractalprofile.com
