A Q&A with serial disruptor, entrepreneur and personal finance revolutionary Uri Levine. He is best known as co-founder of Waze, the disruptive traffic monitoring and navigation app acquired by Google for $1.3 billion in 2012. Waze and all his subsequent startups are about disrupting established industries in a way that is revolutionary and with the latest crop — including FeeX, Engie, FairFly, Moovit, Roomer, and Zeek — all but one (Moovit) are specifically about saving people money in fresh ways.
What was the inspiration for building FeeX?
There were several but one anecdote that stands out in memory is that my Dad passed away 10 years ago and I inherited a retirement account from him. It had a ridiculous management fee so I called the company to complain and say I will move the assets to a more competitive company if they do not lower the fee to something more reasonable. They responded that they could not give a discount to a dead person. I replied: “So you can give fees to a dead person?” They made the realization they could give me the discount but I began to think how ridiculous this was and started to wonder if everyone was paying far too much in fees.
So over time you did come to believe that everyone was probably paying too much in fees and was unaware?
Yes. I did a simple experiment. I asked a dozen of my friends if they knew how much they were paying in fees on their retirement accounts. None of them knew. I knew at that point that this is a secret and that would be my next startup after Waze.
So those friends readily admitted they didn’t know?
No. I had to do it in such a way that they didn’t feel embarrassed if they were to admit it. I told them that I was trying to shop around to decide what type of account I wanted to open next and I needed to know what to expect in terms of a typical or average fee. It is interesting because this is the thing with GenX, we feel embarrassed that we don’t know because we feel like we should have known, ours is a generation that is more used to asking why than previous generations. The result is that you don’t ask because you don’t want to reveal the fact that you don’t know. Even worse, you continue to let the “experts” further confuse you because you don’t want to feel like an idiot.
What was the timing of all this?
Waze’s success and acquisition were my signal to move on and pursue my next FeeX as my next startup, which we formally founded in August of 2012. In fact though, I had begun envisioning and conceptualizing how FeeX might work a few years before Waze became successful. In my experience, having another problem ready to work on is often the way other entrepreneurs tend to think as well. This started in 2009; 2008 was a hard year for the industry and for investors. Because of this it really stood out to me on one of my portfolios that I had lost 20%. Not only that, at the end of the year I got my statement and I saw that in addition to the 20% I lost there was a 1.5% charge for management fees. So I called them and said:
“You know I could lose 20% all on my own, I don’t need you for that and charging me 1.5% on top of that just sounds wrong to me.”
So they said okay we will refund your fees for 2008 and we will reduce your fees closer to 1% going forward. Initially I was very happy about that — it was like putting money back in my pocket. But then I got back home and began asking people about how much they were paying in fees and their lack of knowledge propelled me to consider things more deeply and research and I realized the scope of the problem: That 1% draw can end up eating approximately 30% of the potential value of your portfolio in the end. People were and remain unaware of this negative aspect of compounding.
So you really think people are unaware that compounding can have negative connotations?
I think they are not fully aware of the scope of the negative connotations. For years many people remained blind to how much they were paying in fees. It was camouflaged both by their returns being largely positive and not looking closely enough at their fees to see how much they were paying, after all if it is a net gain why go to the trouble? It is a much more stark contrast in down markets, even though you still must put your detective hat on to discover what you are actually paying.
You brought up GenX earlier, who among the three generations you constantly see referred to in the media is better off?
Millennials have the longest time to prepare.
Baby Boomers are paying the most in fees and have the least help because so many of them work with and rely on potentially conflicted advisers.
GenX is the one making changes, moving their accounts from one place to another to pay less in fees. They already have some assets saved. It is GenX and the Millenial generation that stand to get the most benefit from increased transparency and should be using tools like FeeX to study what they are paying and shop for the lowest fees.
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