On Fitbits & Fees


If you are like me and frequently trying to battle the temptation to eat delicious fattening foods in large quantities, you may have ended up purchasing some of the latest wearable tech designed to “nudge” you into better behavior. Such fitness trackers, like the fitbit Charge or Jawbone UP, have become extremely common place. Thousands and thousands of Canadians are currently tracking their steps, exercise and caloric intake through their phones and wristbands.

There’s only one little problem. Many people don’t ultimately stick with their new healthy lifestyle.

The age of the internet has brought with it the age of big numbers, and the belief that human activity can be simply discerned with the right amount of information. Figure out the correct code and human behavior can be reduced to a matter of basic inputs. Such ideas have appealed in particular to economists, who for a long time have argued that humans are rational machines that pursue self interest. Despite overwhelming evidence that humans do lots of stupid and irrational things, much of it leaving them miserable, economists have argued that it really just means we don’t adequately understand the real motivating self interest at play. Big data promises to change all that.

Wearable technology, particularly around fitness, has aimed to make managing your health easy, and frequently fun. But most people abandon their trackers once the novelty has worn off. The people who continue to use them were the ones already inclined towards regular fitness and managing their health. In other words changing behaviour is considerably harder than just giving people a nudge.

If this is your idea of fun, you probably don’t need, but will regularly use a fitness tracker.


The same is true for investing. The current focus in the investing world is on fees. Fees, it is argued, should always be lower and the primary concern of investors should be around those same fees. But focusing on fees as a solution to investing woes is like a fitness tracker managing your diet, it’s most useful when you already look after all the other aspects of your life. It’s not that fees aren’t important, but as a measure of your financial health it is really last on the list.

An anecdotal example of how little fees matter comes when I meet people who frequently have TFSAs at a bank. How did they get their TFSAs? One day a teller recommended they open one, and having heard that a TFSA was some kind of good idea they did it. What do they hold in that TFSA? When was the last time it was topped up? When did the person last hear about it’s performance? Who is encouraging them to continue saving? Has anyone reached out to discuss rebalancing or other investment strategies?


The answer to these questions frequently is a shoulder shrug. Yes, fees are important but they can’t make sensible planning happen, nor can cheap financial management encourage people to take a more active interest in investing. Worrying about fees in a world where many people either aren’t saving, aren’t saving enough, don’t know what they are saving in, and are unsure what their savings options are seems to be putting the cart before the horse, assuming incorrectly that one leads naturally to the other. In truth you can only be mindful of fees once all the other investing options have been taken care of.

In many respects the internet is increasingly giving us the impression of knowledge and control, but often times that only seems to be an illusion. As we increasingly migrate to low cost solutions provided through our phones and tablets we may not always realize that our best solutions are not always the lowest cost ones, but the ones that best suit our needs.

Within my business we have always strived to keep our costs down, and I have the comfort of knowing that our costs are competitive. But the reason that investors have chosen to work with us has little to do with cost. For my clients that we have helped steward into retirement, the young and new investors who have a chance to sit down and discuss their investment needs and learn about all their investing options our real value is not in cost, but in being accessible, providing clear advice and peace of mind. There is no fitbit for that.


The Failure Of Google Glass Is A Useful Warning To Investors

Google_Glass_with_frameLast week Google announced that it would not be proceeding with another round of Google Glass for 2015, meaning that the most ambitious experiment in wearable technology had come to an end. Google Glass has many failings, ranging from looking stupid to attracting angry mobs of people, but it did seem to be the vanguard of wearable technology. Wearable tech has attracted a great deal of attention, both from consumers and investors, but I have a feeling that it’s rise may be overstated.

For the most part wearable technology is a subset of the “internet of things“, the growth of cloud computing, mobile sensors and high speed communication between stuff. The most beneficial forms of this could be about smart city grids communicating with cars to smooth traffic flows and reduce congestion. In reality it is largely counting how many steps you take everyday.

Looking past the incredible number of terrifying elements about our privacy and data mining that go along with these devices, by and large most wearable technology hasn’t really taken off. Google Glass may be a high end flop, but the vast amount of wearable devices on the markets today have yet to win over big audiences. They remain largely niche devices with a high drop off rate. Where as people adopted smartphones on mass, many people have just shrugged their shoulders and moved on, while those that do buy into wearable tech often stop using it after a few months. This suggests that there is a disconnect between understanding what smartphones get right and wearables get wrong.

That gap is clearly frustrating tech companies, and it will be interesting to see whether Apple’s first wearable device, the Apple Watch, is able to change the pattern. But for investors the allure of the new as a reason to invest should be tempered, and excitement over the prospect of “the next big thing” and the importance of getting in on the ground floor may prove financially costly.

Take for instance TESLA Motors (TSLA: Nasdaq). Tesla may be a car company, but it is treated like a technology company on the stock market, meaning that it is currently trading with a ridiculous P/E ratio, close to 130x next years earnings. Put simply, if Tesla were to pay out all of its earnings to its shareholders it would take 130 years (given current earnings) for you to receive the equivalent value of what you paid for a share. That gives Tesla, a company that sells cars by the thousands a market cap similar to General Motors, a company that sells cars by the millions.

That’s crazy, but normal for the tech world. This has been exceptionally true social media sites like Twitter, Linkedin and Pinterest. All of them also trade well and above “normal” valuations, especially given that they don’t make anything.

The lesson for investors is to be cautious about technology companies. They come with a host of pitfalls and unique qualities that are frequently glossed over in the excitement of the new. Investors have been swept up before with the prospect of some great new device that can’t go wrong, but with some notable exceptions much technology often finds itself on the scrapheap of history. Or maybe we will all start carrying around smart glasses for every beverage