Brian Barnes, M1 Finance,

M1 Finance

  • There’s a savings and retirement crisis in the US, but
    many of the apps and companies that have popped up to address
    the problems Americans face fall short.
  • Folks should avoid the fintech gimmicks and embrace
    engaged investing to build up the necessary nest egg for their

The financial future of the
average American looks vastly different than it did a generation
or two ago. Instead of holding long-term jobs that offer
pensions, people today are more likely to have several employers
throughout their career and be responsible for managing their own
retirement funds.

Given that the Federal


this year that 53 percent of adults with
self-directed retirement accounts are not comfortable or are only
slightly comfortable in their ability to make financial
decisions, this is a worrisome trend.

And it’s not just retirement
we’re struggling with:

  • A whopping 69 percent of
    Americans have

    less than $1,000
    in savings


  • Household

    has recently
    reached an all-time high.
  • Student loan debt has topped
    $1.3 trillion.

The good news is that today’s
fintech startups offer a variety of digital alternatives to
pension funds, 401(k)s, and savings accounts, many of which are
intuitive and convenient. The bad news? A lot of these startups –
in a bid to stand out amid the noise – are promoting gimmicks in
lieu of solid financial strategies and education.

We’ve all heard of them: the
program that attracts new investors by insisting they can get
ahead by

investing spare

; the

funds that group
companies by “theme”

(health ETFs, booze ETFs); the ones that
encourage day trading with zero commissions.

Here’s the problem with gimmicks,
though: they don’t work.

Consider the fitness industry.
It’s notorious for gimmicks that will help us get fit, once and
for all: shoes that “sculpt” while you walk, bracelets that track
your activity, workouts that are based on brand-new science and
will work faster and better than all other workouts.

In reality, you don’t need
special shoes or a bracelet or a specialized weightlifting
routine. You need enough knowledge to make good decisions in any
situation, and then you need to use that knowledge to build good
habits. Because eventually, those shoes will wear out or you’ll
lose your magic bracelet or you’ll move too far away from your

You need strategies for staying
fit no matter what life throws at you.

Investing is the same way.

Engaged Investing: A strategy for whatever comes

There’s not a single investment
strategy that will make sense for everyone. And maybe more
importantly, nobody will have the same investing goals throughout
the course of their life. That’s normal.

So even if you learn the ins and
outs of how to pay down your college debt in five years, when
that five years is over, you may have no idea how to build up
your retirement fund or save for a down payment.

A better, more comprehensive,
strategy is what I call “engaged investing.” It’s somewhere
between active and passive. At its core, this means learning as
much as you can about your money and the ways you can invest it
so that you’re equipped to make a good financial decision whether
you’re facing job loss, a windfall, retirement, a major illness,
buying a house, sending a kid to school, caring for an aging
parent – or anything else.

More to the point, it means
taking ownership of your finances rather than blindly trusting
(and paying) an advisor.

The reason engaged investing is
so powerful is that it takes away the scariest part: the unknown.
I don’t think there are many (any?) people out there who are
thinking, “No, I don’t want to have enough money when I retire.
I’d rather just wing it.” But a lot of us are headed in that
direction exactly because we’re not sure what to do. We’re not
taking action because we don’t know what actions to take.

Investing is like exercise. You
don’t have to be perfect when you start. Nobody expects you to
run a marathon the first time you lace up your sneakers. But you
have to actually do it to see the results you want. You have to
take the first step to be able to take the next ones.

So what would I recommend? In
finance, as in fitness, the long-term solution is to build good
habits – don’t look for the quick fix or the performance
enhancer. Start small, but start. Embrace your ignorance and seek
out ways to educate yourself. There will be ups and downs; you’ll
make mistakes. But ultimately, you’ll be better off doing
something than doing nothing.

And really, there’s no better way
to learn than to do. After all, you can’t improve your mile time
without first running a mile.

So invest a little money. See how
it works. Get to know the ins and outs of a platform so you can
invest more once you have the hang of it—or switch to another
platform. Remember: the key isn’t to do everything right. It’s to
do something and to stay engaged.

Brian Barnes is the founder
of Chicago-based roboadviser M1 Finance, LLC.