Author: it-teaam

If you speak with Marcos Cordero, the co-founder & CEO of Miami-based Gradvisor, he’ll share with you two troubling statistics about college savings.

First, 80% of parents don’t know what a 529 plan is, and second, 60% of those saving for college don’t use a 529 plan.

That didn’t sit well with the former engineer and MIT and Harvard Business School alum.

So, he started Gradvisor to help more people save for college and encourage employers to become more active participants in the college savings process.

A 529 plan, or qualified tuition plan, is a tax-advantaged vehicle to help save for college costs and is sponsored by states, state agencies or educational institutions in accordance with Section 529 of the Internal Revenue Code.

I interviewed Cordero about his plan to disrupt the college savings industry, how and when to fund a 529 plan, and how employers can help their employees save for college.

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Zack Friedman: Why did you start Gradvisor? What problem were you trying to solve?​

Marcos Cordero: I realized that there is a widespread lack of awareness among parents about the best ways to save for future college costs.

Just as you wouldn’t save for retirement with a savings account, parents need to use the right tax vehicle when saving for their kids’ college education.

Parents need to treat saving for college like saving for retirement – contributing every month over time to take advantage of compounding interest and making portfolio adjustments along the way.

Zack Friedman: How does Gradvisor work?​

Marcos Cordero: Gradvisor is a digital platform that helps companies incorporate 529 plans into their benefits packages.

We function as a robo–advisor, using algorithms and data to recommend the best 529 plan to each employee based on his or her financial situation, geographic location, goals and comfort with risk.

In addition to being able to automatically make payroll deposits to their 529 plans, employees also receive access to one of our financial advisors who can provide guidance on saving for college.

Additionally, some of the companies we work with offer to match contributions, similar to a 401(k).

Zack Friedman: There are multiple 529 providers in the market. How is Gradvisor different?

​Marcos Cordero: Most companies that currently offer 529 benefits choose one 529 plan that would work best for the highest number of employees (most often in the state where most of its employees live).

Gradvisor is different in that we offer any 529 plan for any employee and use completely unbiased algorithms to recommend the best fit.

If you are in a state that does not offer a tax deduction/credit on 529 plan contributions, you should absolutely be shopping around for the best plan, so employers who offer their state’s plan in this situation could be doing their employees a disservice.

Zack Friedman: Given that 529 plans are primarily state-centric, how does Gradvisor work with companies with geographically diverse employee bases to help solve this problem?​

Marcos Cordero: We are able to address the needs of the market that’s known as the ‘holy-grail for 529s’: the employer channel. If you are a large employer, you likely have employees in different states and each one of these employees needs access to different plans.

Without this access, employees could lose out on important benefits offered by a certain state to its residents.

It is far too big of an undertaking for an employer to offer every plan form across the country to its employees and set-up payroll deductions for each. Due to these difficulties, many employers who would love to offer 529s don’t.

We’re also encouraging people to save more and earlier for their children’s education.

For example, the average Gradvisor user begins saving for college when their child is five years old, compared to the overall average of 7 years old.

Gradvisor users save $236/month compared to the overall average of $175/month.

Zack Friedman: How critical is an employer match program for a 529 plan?​

Marcos Cordero: Once an employer agrees to offer 529s to their employees, the single best way they can help them is by offering a match on contributions.

Even something as little as matching the first $25 an employee puts into an account can be just the encouragement one needs to get started. If an employer isn’t in the position to do that, it is important that they still commit to educating their employees.

Zack Friedman: How can people who think they can’t afford a 529 plan actually afford one?

Marcos Cordero: We recommend creating a 529 plan as soon as you become a parent (you can even open and start saving in a 529 plan before your child is born).

Given the number of 529 plans available to parents, choosing one can also be intimidating. We take the guesswork out of that process by selecting the best one for each employee based on their specific financial situation and goals.

Beyond even selecting which 529 plan to open, choosing a proper investment portfolio can be daunting as well.

For those who don’t believe they can afford it, we first must convince them that it’s worth it. [According to] The Center for Social Development, “Children with $1 to $499 designated for school are 2.5 times more likely to enroll in and graduate from college than children with no account.”

From there, we stress the importance of putting a little bit away at a time. If families can put aside $5 a week, it can go a very long way by the time their child attends college.

Zack Friedman: If someone is expecting or has a newborn, what should be their 529 strategy?

Marcos Cordero: The reality is that every person’s financial situation is different. Some people can afford to contribute the minimum. Some have the ability to fund a certain percentage. Some can afford to ‘superfund’ their plan with $140,000 up front. Our goal is to maximize every dollar that is put into that account.

However, regardless of their situation, we always encourage our clients to do automatic monthly contributions if they are not funding with a large one-time deposit. This allows them to have a plan in place and also to take advantage of dollar-cost-averaging.

The best thing for someone with a newborn is to not delay. Next thing you know, you put off starting a 529 plan, you blink and you’ve lost 5 years of contributions and compounding interests.

You can be a more aggressive investor when a child is younger so these are critical years. Start off with what you can and as your financial situation improves, increase your monthly contribution.

Zack Friedman: Life comes with a lot of financial obligations – student loans, a mortgage and other major expenses. What about the parents who never funded a 529 plan and their child will start college in 10 years? What do you recommend they do?

Someone who is getting a late start needs to find the right balance between playing catch up, but not being overly aggressive.

If you are located in one of the 34 states that offer a tax deduction/credit, be sure to take advantage of that.

Illinois, for example, allows joint filers up to a $20,000 deduction on their state taxes for contributions into an Illinois 529 plan. That can go a long way.

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If you want to know how to make money with gift cards, the answer may be easier than you think: you can sell gift cards on a number of gift cards aftermarkets.

The holidays are over. The presents are unwrapped. And you have a pile of gift cards that you may never use.

You’re not alone. According to CEB TowerGroup, nearly $1 billion in gift cards go unused each year.

Good news for retailers. Bad news for you.

So, what can you do if you want to convert an unused gift card to cash?

Access the gift card aftermarket where sellers can sell gift cards that are unwanted, and buyers can scoop them up at a discount.

Supply and demand drives the dollar amount of the discount offered, but both buyers and sellers are acquiring or disposing of the gift card below face value.

Gift cards can be found across most major retail categories, including department stores, restaurants, home and garden, hotels and travel, health and beauty, clothing and toys.

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If you are looking to sell gift cards, here are a few options to navigate the $130 billion gift card market:

1. Cardpool: How To Sell Gift Cards

Cardpool buys unused gift cards in exchange for cash or a gift card to another retailer. When you sell gift cards on Cardpool, you will receive a dollar amount less than the face value of the gift card – up to 92% cash back – and then Cardpool will resell the gift card at a premium to the price Cardpool paid you, but still at a discount to the gift card’s face value. Cardpool’s most popular gift card brands include Macy’s, Best Buy, Home Depot, Victoria Secret, Kmart, Hyatt and others, which are sold at a 3-7% discount to face value.

2. CardCash: How To Sell Gift Cards

CardCash is the largest gift card exchange. CardCash can sell gift cards at a discount up to 35% and buy gift cards up to 92% of face value. The Top 5 selling gift cards at Card Cash are Walmart, Target, Home Depot, Lowes and TJ Maxx. In 2013, Card Cash raised $6 million in funding from Guggenheim. In 2014, CardCash acquired its largest competitor, Plastic Jungle. CardCash also has agreements for gift card exchange with Walmart, Amazon, CVS and United Airlines.

3. Gift Card Granny: How To Sell Gift Cards

With over 350,000 discount gift cards across over 1,000 retailers and restaurants, Gift Card Granny is one of the largest discount gift card providers. Gift Card Granny, which allows users to buy and sell gift cards at a discount to face value, says it receives 12 million visitors each year. In 2016, Gift Card Granny’s best selling gift cards were Amazon, Best Buy, iTunes, Target and Walmart.

4. Card Kangaroo: How To Sell Gift Cards

Card Kangaroo offers discounts up to 35% when you buy gift cards, and offers up to 92% of face value when you sell gift cards (or trade gift cards). The company sends a check or a PayPal transfer within 24 hours.

5. Raise: How To Sell Gift Cards

Raise is an online gift card marketplace. Like eBay or Craigslist, users set their own prices to sell gift cards.

6. Coinstar Exchange Kiosk: How To Sell Gift Cards

The maker of Coinstar kiosks (which convert coins to cash) and RedBox (DVD rental kiosks) now offers a kiosk to sell your gift cards for cash. Coinstar Exchange accepts gift cards from over 150 leading national retailers and restaurants, including Crate & Barrel, Hewlett Packard, Petco, Marriott, Gap, Walmart and others.

While you need to visit the kiosk to convert a gift card to cash, the kiosk will pay you immediately (rather than waiting for a check or money transfer).

Other Gift Card Resources: How To Sell Gift Cards

There are numerous other gift card apps that compete in the gift card space:

• Gyft: buy, send and redeem gift cards
• Giftcards.com: make your own gift cards
• E-gifter: purchase and send a gift card from a group of people
• Giftagram: gift-giving of curated gifts
• Elfster: gift exchanges
• Slide: organizes gift cards

The good news is that spillage, or unused gift card volume, has declined over the past 9 years from 7% to less than 1% of the gift card market.

The bad news is that fraud may be on the rise. That seems counterintuitive as major credit and debit cards shift to more secure chip readers. However, many low-cost gift cards will not migrate to chip readers and still rely on more vulnerable magnetic strip technology, which is considered less secure and prone to fraud.

Before using a gift card app or website, you should check the gift card balance to save time. You can call the phone number on the back of the gift card, or use Cardpool, Gift Card Granny or Raise, for example, all of which have gift card balance checkers.

CEB TowerGroup expects electronic gift cards to reach $18 billion in sales by 2018, driven by payment offerings from Apple and Chase as well as money transfer services such as Venmo and PopMoney.

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Investing is one of the best strategies to build and preserve wealth and save for retirement.

What is the best investment strategy of hedge fund billionaires?

George Soros brought down the Bank of England. Carl Icahn won big on Herbalife. Dan Loeb forced change at Yahoo.

The secret to their success?

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Here are five investment lessons from these legendary hedge fund investors that you can apply to develop your own best investment strategy:

1. Develop an investment thesis

An investment thesis is an underlying reason why you are investing in a stock.

With the exception of momentum traders and quants, most hedge fund investors develop an investment thesis before they deploy capital.

For example, the investment thesis can mean the stock is undervalued and underappreciated by investors or there may be a catalyst such as a potential take-out acquisition on the horizon.

Hedge fund investors conduct rigorous fundamental research, build financial models and identify catalysts that will propel the current share price toward their target share price.

One best investment strategy is not to invest blindly based on stock tips from a broker or a news article. Rather, savvy investors invest in sectors and companies they understand and where they have done their homework.

Warren Buffett, although not a hedge fund investor, only invests in companies he understands. If he can’t understand the business model, he passes on the investment opportunity.

Best Investment Strategy: Only invest in companies you understand. Develop a thesis of why you are investing. Do your homework and understand the numbers behind the company’s products and services.

2. Risk-Reward

In a bull market, it’s easy to expect that a company’s share price will rise 10%.

However, hedge fund investors don’t think of investments as a unidirectional bet.

Rather, each investment has a risk-reward ratio. If an investor is long a stock, the reward is the probability that the share price will rise, and the risk is the probability that the share price will fall.

Share prices rise and fall for several reasons, including financial performance, company or industry news, competitor dynamics, analyst ratings and other factors.

Before you invest, assess the probability of the risk-reward of each investment. You can develop the reward-risk ratio by reading analyst research, reviewing the company’s public filings and management presentations, or developing your own financial projections.

For example, if you think that there is a 50% probability that a share price could rise or fall, that’s probably a poor investment choice. Since the reward-risk ratio is 1:1, it’s no different than flipping a coin.

Best Investment Strategy: Look for investment opportunities where the reward-risk ratio is at least 3:1, meaning the upside potential is three times greater than the downside potential of the company’s share price.

3. Concentrated Bets

You’ve probably been advised repeatedly that you should maintain a diversified portfolio to protect against one company adversely impacting the rest of your investments.

For many investors, particularly those who are risk adverse, investment diversification is their best bet.

An index fund or ETF that invests in the broader stock market, such as the S&P 500, can provide ample diversification.

While it depends on the hedge fund, some hedge fund investors maintain a concentrated portfolio of 10-15 stocks. Why? These investors have strong conviction in their investments, supported by financial analysis and independent research.

Best Investment Strategy: Understand and assess your risk tolerance. Concentrated bets have the potential for outsized investment returns – up or down.

4. Hedge your bets

Like its name suggests, hedge funds typically are not 100% long the stock market.

Rather, they employ some form of financial protection to guard against share price declines due to market or company-specific events.

Depending on market factors, some hedge funds are 80% long (and 20% short) while other hedge funds are market neutral (meaning they are neither market long or market short).

Hedge funds use all types of hedging strategies. Some include:

• Buying a put option to protect against a long position
• Shorting a competitor of the stock they are long
• Longing an industry leader and shorting an industry laggard
• Longing an undervalued stock and shorting an overvalued stock

Best Investment Strategy: Protect your investments with some form of a hedge. Before shorting a stock or using options, however, check with your investment advisor and be sure you understand all the inherent risks associated with these strategies.

5. Cut Investment Losses

No investor is perfect. The best investors are often wrong, despite all the research and financial analysis. However, when they are wrong, they know when to cut their losses.

Yes, you may sell the stock and the share price could then rebound. But instituting discipline in your investment process will save you money in the long-run.

Best Investment Strategy: Develop your own threshold to sell a stock when its share price falls. One rule of thumb is a 10%-15% decline below your purchase price. You may have a threshold that is higher or lower, but choose a loss rate that works best for your investment needs and stick with it.

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Amazon Go is about to revolutionize your grocery shopping experience.

For most shoppers, a trip to the grocery store is a smooth experience until you approach the inevitable bottleneck: the checkout line.

There, you will likely wait behind a wall of shoppers, each unpacking their shopping cart at a seemingly snail-like pace. Then, they rummage through their wallets, deciding on cash, credit or debit. The price scanner jams. The card reader is slow. Paper or plastic?

If Amazon has its way, you may never wait in line again.

On Monday, Amazon unveiled its newest concept, Amazon Go, a grocery and convenience store without checkout lines.

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Here is how it works and what you need to know:

1. Grab and Go – Redefined

Amazon wants to redefine the meaning of “grab and go.” Before you shop, you will need to download the Amazon Go app. Next, you will enter the store and shop like you normally do. Any item that you take from a shelf is automatically added to your virtual cart. If you change your mind, you can return the item to the shelf and your virtual cart is automatically updated. When you are finished, you simply leave the store. Yes, leave the store.

No checkout lines. No registers. No self-checkout.

Amazon simply refers to it as “Just Walk Out Technology.” In a way, it feels like ‘shoplifting’ legally because you are not physically paying before you exit the store (although your Amazon account is billed directly for all items removed). Expect to be tracked during your shopping experience through various sensors, cameras and your smart phone. If Amazon can track customers this closely during their shopping experience, perhaps Amazon Go may mark the end of shoplifting altogether.

2. How It Works

What’s the technology behind Amazon Go? Amazon combines machine learning and artificial intelligence to create the Amazon Go experience. According to a promotional video released by Amazon, Amazon Go uses “computer vision, deep learning algorithms and sensor fusion much like you’d find in self-driving cars.” Practically, the store contains countless cameras and sensors that track what items you place in your physical shopping cart and then link that to your virtual cart, where payment is made.

3. What Can I Buy?

Amazon Go offers an array of ready-to-eat breakfast, lunch, dinner and snack options prepared fresh daily. You will also find grocery essentials such as bread, milk and cheese.

4. How Can I Visit Amazon Go?

If you live in Seattle and work for Amazon, then you may be in luck. Amazon Go has a single, 1,800 square foot physical location that is in beta testing only for Amazon employees.

5. When Will Amazon Go Open?

Amazon Go is scheduled to open to the public in early 2018.

Amazon is not the first to track shoppers inside a store. Retail technology companies such as RetailNext help over 300 retailers conduct comprehensive in-store analytics to increase sales, reduce costs, measure customer behavior and augment the shopper experience. Beyond a grocery format without checkout lines, in the long run Amazon’s technological competitive advantage in data analytics, customer shopping habits and “one-click” transactions may also help differentiate Amazon Go from traditional grocery retailers.

In addition to improving the customer experience, Amazon is poised to begin collecting customer data unlike any retailer. While many retailers track customer behavior and foot traffic patterns within a store, arguably no retailer has been able to do so with such precision. With Amazon’s technology, Amazon will be able to record when a specific shopper makes contact to a specific item or product, which is considered more revolutionary in retail technology.

While consumers and investors will have many questions in the weeks to come, including on Amazon’s earnings call scheduled for late January 2018, this is not Amazon’s first foray into a brick and mortar or grocery business. Amazon launched a physical bookstore last year in Seattle and subsequently opened locations in San Diego and Portland. Two additional stores are slated to open soon in Chicago and Dedham, Massachusetts. Amazon Fresh is Amazon’s online grocery ordering service.

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David Kimball is on a mission.

Since being appointed CEO of Prosper Marketplace – a leading lender of personal loans and consumer loans – late last year, Kimball has stepped outside his former financial role as Prosper’s CFO to take on a more operational-driven strategy.

Along with FinTech industry guru Ron Suber, Prosper’s president, Kimball is intent on growing loan volumes, offering lower average rates compared to traditional lenders, delivering higher returns to investors and returning Prosper to profitability.

Prosper, which is the original online peer-to-peer marketplace, has originated over $9 billion in consumer loans over the past decade. The San Francisco-based marketplace offers both personal loans to consumers and allows investors to invest in those loans to earn a financial return.

In February, Prosper signed a deal with a consortium of investors – including affiliates of George Soros’s Soros Fund Management and Dan Loeb’s Third Point – who plan to buy up to $5 billion of Prosper’s loans over the next two years.

A personal loan is an unsecured loan typically from $1,000 – $100,000 with fixed or variable interest rates that can be used to make a large purchase (medical procedure, home improvement, engagement ring, wedding, baby or other major life events) or to consolidate debt such as credit card, for example.

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I spoke with Kimball about Prosper, the future of financial technology (or “FinTech”), what FinTech companies are getting right and how Fintech companies can do better, the transition from CFO to CEO, his words of wisdom for aspiring entrepreneurs, and his best personal finance advice:

Zack Friedman: What is the state of play in the FinTech industry today?

David Kimball: In a short amount of time, the FinTech industry has proven that technology offers customers a better, faster and more accessible experience. As with any industry, as this one matures, it continues to find what works and what doesn’t work. FinTech is not just about the tech – just like financial services cannot just be about finance. We’re now deeply embedded in the financial ecosystem and traditional financial services and consumers alike recognize our value. As a result, the focus has shifted to new ways to partner and ensuring sustainable companies.

Zack Friedman: What can we expect from FinTech over the next 1-2 years? What coming disruptions or technological advancements in the space excite you?

David Kimball: It is exciting to see more partnerships between FinTech and traditional finance companies.

Ultimately, the long-term success of platforms will be dependent on their ability to deliver a great product and a consistent experience. The success of the partnerships will depend on the ability for the two companies to communicate and understand each other (language, transparency, and culture), and it will depend on how well objectives remain compatible.

In the marketplace lending space, we are discussing several different approaches to partnerships between platforms and traditional financial institutions, including banks buying loans as investments, utilizing referral models, or providing lending as a service.

It may be even more exciting to see more FinTech-related partnerships. We see a lot of niche tech companies that exploit a very narrow focus of the industry. These companies are still designing their value equations or pivoting into adjacent spaces, but I already see great opportunities to bring more of these technologies together to use new data to automate steps of the lending process, and provide more comprehensive solutions.

Zack Friedman: What’s your plan to rebound from 2016’s financial results?

David Kimball: Last year, the industry did a lot to lay the foundation for a successful 2018, and we’re seeing that work pay off. The [recently announced loan purchase deal] gives us the funding stability we need to continue to grow, while at the same time giving us some great long-term partners that are invested in our business and its success.

We’ve been building loan volume every month since July 2016, and our loan portfolio performance is strong with great returns.

Zack Friedman: There is a lot of talk about how wonderful FinTech companies are and how they are revolutionizing traditional finance. What can FinTech companies do better?

David Kimball: One of the biggest challenges for FinTech companies is to fully comprehend the complexities of the industry we’re working to disrupt (or improve). Financial structures are complicated and have often evolved over decades. Technology makes the experience infinitely easier, but you need to understand why products and services are structured the way they are. It is naive to think that it comes down to poor design, lack of intelligence, or lack of effort. Without that empathy and understanding, FinTech companies risk making the same (or new) costly mistakes. At Prosper, we are always evolving and continuously improving to make the experience better for our customers. This requires us to carefully consider old rationale and regulations and new, creative solutions that challenge the status quo. It’s a difficult and ongoing balancing act.

Zack Friedman: Given your finance background as Prosper’s CFO (and previous finance roles at USAA and Ford), how did your finance background prepare you to be a CEO? How is the job different than CFO?

David Kimball: I always wanted to be a CFO that was more than just a numbers person. A successful CFO is one who partners with the business instead of playing the finance sheriff. That requires a willingness to understand the business, to think holistically, to work with peers who jointly own the results. The CFO is the finance subject matter expert, but should be able to consider other disciplines, just as a CTO should be able to understand the financial implications of engineering decisions. If you work with a team ignores the financials, then the CFO is relegated to carrying around a measuring stick highlighting boundaries. I have worked in both situations, and it is far more satisfying to play the partner rather than the cost monitor.

As CEO, I continue to think holistically and I now have an opportunity to flex into other areas of the business. I work with a terrific CFO and great partners across the organization. It is a tired analogy, but the best CEOs I have worked with have been like orchestra conductors. The good ones know the music and know how to give each player the right resources to reach their best. If the groups work in harmony, it is an amazing experience.

Zack Friedman: As a CEO, you’re an executive, leader and entrepreneur. What three pieces of advice can you offer to an aspiring entrepreneur who wants to start the next big thing?

David Kimball: Surround yourself with people who challenge you. Whether you’re an entrepreneur or a CEO, you need smart people who are willing to speak up and challenge you in order to be successful. If you believe you’re the only one who can accomplish something, you’re toast!

Being resilient is also critical. That is part of the magic of Silicon Valley – there is a tremendous appetite for pushing boundaries. Sometimes that works, but many times that doesn’t. It’s great to see the willingness to screw up and to adjust quickly. That agility and resiliency ensure we can continue to transform.

It’s important to maintain a founder’s culture and remember why you started this in the first place. Once you lose track of the mission, you begin to attract a talent base that is not mission-driven. That group will be less willing to ride out the challenges that eventually face every growing company.

Zack Friedman: As CEO of a marketplace lender, and a seasoned finance executive, you have exceptional insights into consumer loans and the U.S. consumer. What’s the best personal finance advice you have ever received?

David Kimball: Pay off your home as soon as you can. It defies all the traditional finance tips, but the peace of mind and flexibility that comes from paying off your home is priceless. (Though darn hard in the Bay Area!)

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