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Fireside chat with Stanley J. Kon, Chairman at Ripsaw LLC

Who is Stanley J. Kon?

Stanley J. Kon is the editor of the Journal of Fixed Income (2001-present) and Chairman of Ripsaw LLC. He has taught and published research at various universities including the University of Michigan, New York University, University of Chicago, and Duke University and another career in institutional investment management. He has also served on several bank and holding company boards and has been a consultant to government, business and financial institutions.

What’s the story behind Ripsaw?

With more than a 40-year career in a variety of positions in the world of finance under my belt, I recognized a disparity in the wealth management field that favored those with deeper pockets and better resources. As the economic climate continues to fluctuate, it has never been more apparent that people need to feel secure financially and should have the means to do so in the absence of unlimited resources. In the interest of democratizing personal finance and leveling the playing field, I created Ripsaw® Wealth Tools in partnership with my two technologically sophisticated sons. The platform is designed to help people independently and affordably manage their wealth picture with a variety of different tools that cater to individual situations, lifestyles, backgrounds and preferences. My hope is to continue to use Ripsaw as an avenue to help others reach their financial goals and protect themselves and their families from money-related hardships.

What was the most difficult part of your experience in the beginning?

There are moments in time when circumstances are ripe for disruptive innovation. Recognizing how all the pieces fit together was not obvious at first and some sources have only been available recently. The combination of cloud technology, access to detailed data on mutual funds, ETFs, and individual securities via API (application programming interface), an abundance of free open-source code, a low interest rate environment that makes long-standing advisor fees and high fund expenses a huge drag on wealth accumulation, and the well-documented underperformance of active managers, all point to the potential for a dominant competitive alternative. Ripsaw® Wealth Tools is just that. It provides an independent, disciplined investment process solution that combines current information technology, commercial data access and innovative financial modeling within a low-cost subscription service to share the cost of data acquisition. NOT a percentage of assets under management.

What are you most proud of regarding your business?

I am most proud of all the people we’ve been able to affect with our platform. In Chapter 4 of my book, Do-It-Yourself Wealth Management, there is a case study of someone I helped reorganize their financial life after a divorce. Her revised wealth (net worth) portfolio meets the benchmark exposures while simultaneously substantially reduces expenses, increases yield, lowers bond default risk, and eliminates excess and uncompensated equity risk with a more efficient portfolio consistent with her risk tolerance and investment horizon. That was in 2016 and continues to be monitored and revised as circumstances change. Her feeling of financial security is evident and the appreciation never ends.

Mostly, I am now feeling secure in knowing my children will be able to manage their financial affairs throughout their lifetimes without me. Goal accomplished! Now it is my final mission to promote financial acumen to others as a life skill.

Ripsaw® Wealth Tools is designed for the efficient implementation of wealth portfolio construction, monitoring and revision in our imperfect world with taxes, regulations, illiquid private investments, homes, mortgages, social security, pensions, annuities, information asymmetry and many stock and bond investment accounts with restrictions. In this functioning investment process, there are valuation models for decision making like mortgage refinancing and annuities, portfolio analysis tools for screening and adding unrepresented investment exposures to accounts, and optimizer solutions for minimizing deviations from investment objectives across all accounts simultaneously with one click!

Unlike most asset allocation models based on assumption-burdened statistical estimates of risk and expected return, Ripsaw®’s source of discipline is that risk is measured by deviations from a Strategic Asset Allocation tradeable benchmark for 56 observable, economically intuitive risk measures and factor exposures in an aggregate wealth portfolio as well as the bond and stock sub portfolios. This is accomplished with data access to well-defined individual security and fund characteristics (distributions of credit ratings, maturity structure, bond sectors, stock capitalization, stock value/blend/growth, stock sectors and geographic location) and aggregating them into a dashboard of cash, bond and stock portfolio risk dimensions including monitoring indicators for portfolio revision.

What is your vision for the future of Ripsaw?

My vision for the future of this company is to continue to educate about the importance of financial literacy through our platform. For too long, wealth managers have been able to charge high fees because of the informational advantage they hold over their clients. Access to wealth management resources has always been exclusive. Our team is of the belief that financial management belongs to everyone – as a life skill – and our users have been able to experience the value in independently controlling their wealth picture in a way that benefits them the most. We hope to to leverage the success we are currently having and continue to demonstrate that managing your finances isn’t just for those who can afford a traditional wealth advisor.

What’s your advice for the businesses that are trying to adapt to this economic climate?

Flexibility! Every business has unique issues based on the combination of employee talent and required development, production process, marketing and vision. Business has always had to deal with monitoring employee productivity. For those employees that can work independently from home, employers will have to monitor and reward output rather than inputs. There are enormous productivity and cost savings benefits to eliminate commuting and reducing office space. Other employees that need to be more collaborative will be in offices. It is the face-to-face deliberative process that finds a solution that no one had going in. Employee compensation packages should be more tailored to the individual employee-employer relationship and requirements. If done right, the profitability and standard of living for all parties can be enhanced.

Please name a few technologies which have the greatest impact on your business.

Cloud technology, API (application programming interface), open-source code and some innovative financial modeling.

What books do you have on your nightstand?

Capitalism and Freedom by Milton Friedman and Free to Choose by Milton and Rose Friedman are a few books I like to keep close that have inspired me…

It is easy to understand the intended effects of various actions and policies. I is frequently not easy to understand the unintended consequences of those actions and policies. Central planners think only in terms of intended consequences and do not trust free markets for solutions. Milton Friedman provides a logical framework for understanding the unintended consequences and offers the more efficient solutions to society’s problems. It is also clear that capitalism is the only economic system for allocating resources that is consistent with personal freedom. I like to think of competitive forces that can be the checks and balances to inequities in society. A clear example is the public education system in our large cities. They have monopoly power. The children, their parents, and taxpayers are the consumers, but have little choice. A world with education vouchers to use for any school would create competition for students among schools. In order to compete, the quality of education in all schools would improve. This is especially important since the structure of education was set long ago for the industrial revolution.

We now need a structure for the information revolution. Competitive forces will get us there much sooner.

Because of the current economic climate our publication has started a series of discussions with professional individuals meant to engage our readers with relevant companies and their representatives in order to discuss their involvement, what challenges they have had in the past and what they are looking forward to in the future. This sequence aims to present a series of experiences, recent developments, changes and downsides in terms of their business areas, as well as their goals, values, career history, the high-impact success outcomes and achievements.

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