Why we founded Centerfin

“Create more value than you capture” — Tim O’Reilly

As I reflected on my twenty-year career in financial services, it dawned on me that many of the house-hold names in the industry were doing exactly the opposite. A pervasive, misaligned, and misguided incentive structure has the typical Wall Street firm focused on extracting value, not creating it.

Under the guise of product complexity, a culture of excessive hubris in financial engineering preys on the layman’s emotional relationship with money. The “retail” space, which is industry jargon for the individual investor segment, is riddled with excessive fees, layers of unnecessary intermediaries, and redundant products. A triple-levered inverse ETF is not an appropriate product for individuals seeking to build wealth, much less a complicated options strategy. Fees are determined by the bloated cost structures of incumbent organizations, and not by what is fair and appropriate. And while in many other industries, technology has successfully diminished the role of intermediaries, increasing the amount of value that accrues to the end customer, intermediaries are still very present on Wall Street.

Over a decade ago, the global financial crisis spawned a much-needed reexamination of Wall Street’s incentive structure, and with it a new crop of start-ups ready to challenge the status quo and affect real change. However, what we have seen to date has largely been the digitization of the user experience, without much true disruption of the underlying financial products.

With the pretense of zero commissions, online brokers lured a younger generation of unsuspecting investors to new platforms that precipitated speculation. An era of unprecedented technological innovation and unbridled monetary stimulus added fuel to the fire with social media posts perpetuating a lackadaisical approach to allocating investment funds. Robo-advisors offering low-fee, passive portfolios, are essentially asking the individual investor to use cruise control for the duration of a cross-country car ride. Along with these market new-comers, index funds and ETFs continue dominating market inflows, and by growing their market share, the disparity in company valuations and lack of corporate governance sets the stage for the next financial calamity.

Centerfin flips the incumbent business model on its head. Every decision we make, we make with our clients first in mind, obsessed with delivering value instead of extracting it. We believe we will be successful if we focus all our energy on making our clients successful.

For a fraction of the price, and with a customized personal experience, we take an investment approach long utilized by premier money-management institutions, utilizing technology to provide access to our clients. Joining the Centerfin community offers an opportunity to participate in real change. With numbers comes strength, and as the Centerfin community expands, so does our ability to shift the balance of power from Wall Street to Main Street.