MarketRiders - Interview with Mitch Tuchman, CEO - Zing Talk

Hello and welcome to Zing Talk.

Today our guest is Mitch Tuchman, CEO of MarketRiders and a long-time venture capitalist, consultant and investment adviser.

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Could you start off by telling us a little about yourself and what you do at MarketRiders?

Market Riders is an investment advisory service, but instead of having mahogany panels and offices where people come in and pay us 1.5% of all their money for the year, we provide our financial advice through software for $9.95 a month.

You've had a pretty extensive background in various areas of the market prior to founding MarketRiders. How have those experiences influenced what you're doing now at MarketRiders?

MarketRiders is sort of the expression of all my experiences together. I was a software entrepreneur for many years, and was fortunate to have some financial success with that. I was afraid to invest looking at the dot com bubble, so I approached a friend who ran a hedge fund, and he explained how it all worked. That led to him asking me to do some consulting for him on his tech portfolio, so I became a money manager in a very crazy way. The entrepreneur in me said ‘geez, there's another big opportunity here to build software for a process that people pay way too much money for.'

Now this really is a needed service out there. I know as someone who's personally a follower of ETFs I've really been a fan of the fee comparison MarketRiders offers. Given the liquidity, tax efficiency and expense ratios of ETFs vs. mutual funds, do you think mutual funds are a dying breed?

Well, things like mutual funds don't die overnight, but if there were an ETF that was an index of all mutual fund companies, I'd probably put a short on it for long term investment. The financial services industry has very subtly put their hands in people's pockets and extracted fees from people. The Obama administration and the whole mood in America is against that. I think the mutual fund industry has been highly profitable due to how they can take their money, and I think those days are over.

You've specifically targeted retirement investors for your service, but this type of technology seems like it could be useful to other retail investors maybe looking for a more short-term approach. Any plan to move into that space?

When I say target, I mean who I think our message resonates with most, and as a business man I'm lowering my customer acquisition cost. We have a lot of people out of college who are just starting to invest that are using our service. So this service can be used for any kind of investment other than making some bucks on things you have a sense on.

Another way you look to keep costs low is by filling the portfolios you recommend with commission-free ETFs. Do you think the market is heading to a commission-free world? And are the ramifications for that?

Yes, these are subtle things that happen in an industry that if you're a player in it you see it, but maybe if you're not, you don't. Schwab, Fidelity, Vanguard have all lowered their commission to zero for certain ETFs, and while that may look like a price war, it's not. What they're really doing is effectively going after the mutual fund industry. ETFs are perfect building blocks for a long term portfolio based on a theory called asset allocation.

We don't know what way the markets will go tomorrow or the next year, we don't know if bonds are going up or down, or stocks, so we allocate our money amongst all of them, and if they behave in certain ways, we rebalance. ETFs allow any investor to implement an asset allocation strategy similar to these endowments and wealthy families. The brokers are offering ETFs for commission free trading so that you take your money out of mutual funds, buy ETFs, and use them as building blocks. Brokers see the writing on the wall with mutual funds, and they can take your money and keep custody of it, which they make money.

Alright, now that we've got the tough questions out of the way we have a few fun ones we ask all our first-time guests. What was your first, and what was your worst job?

My first job was delivering dry cleaning for my father's dry cleaning business in Indianapolis. My worst job was when my father told me that because I didn't have good enough grades, he wanted me to go work for a while before he'd pay for my college education, and he sent me to Miami to live on my own and live in the world on my own. One of the crazy jobs I had was a “landscape architect” so digging ditches, watering flowers for wealthy people in the middle of summer was my worst job. It was really not very pleasant.

What is your favorite restaurant that you've ever been to?

I'm not a big foodie, that's my wife's department. Steve's Ice Cream in Boston, does that count?

What do you like to do outside of work?

I'm a big bicyclist, and a lot of downhill skiing, and a little bit of tennis.

Tell us something about Mitch Tuchman that no one's asked you about in an interview.

No one's asked me about my kids and my family. I have three kids, my oldest son Jack, Leo, and Lucy. That's what's everything's about, as long as you've got a great family like I've been blessed with, everything's good.

Alright, this last one is Benzinga's trademark question: What was the best, and what was the worst investment decision you've ever made?

Best investment decision in general was moving to the bay area in 1982, but I've had pretty good home runs in investing in stocks. Worst one was Sirva, publicly traded company, went bankrupt, doesn't get much worse than going bankrupt. It was a corporate relocation company, and they were growing by leaps and bounds by taking on the risks of selling a home. They were doing this on the buildup to the housing crisis. I thought they were fully hedged, but I was not diligent enough to analyze their balance sheet in a way that would show me the real exposure that they had.