The document discusses personal finance topics such as investing, fees, and behavioral challenges. It provides advice for optimizing investments including having a model and data, and executing on financial plans which can be difficult when activities are optional or don't provide immediate feedback. The author works as a data scientist to help automate financial advice through Wealthfront to make investing the right way easy and accessible for everyone. Wealthfront aims to not only invest clients' money well but also help clients make good financial decisions on and off their platform through automated nudges and reviews of external accounts.

1. Rethinking Personal Finance
Duncan Gilchrist, PhD

2. If you check the market once a year, what fraction of the time
would it be down relative to when you last checked?
Reality (by time interval):

3. If you invested $1 in 1870, what would that be worth today?

4. Cyclical Behavior

5. Top Mistakes
1. Bad behavior (e.g., performance chasing)
○ DALBAR: Cost of market timing ~ 5% / yr
2. Bad investments (e.g., high fees)
○ White House: Cost of conflicted advice ~ 1% / yr

6. $100k growing at 6% for 30 years → $600k
$100k growing at 0% for 30 years → $100k
________
$500k
Diversified portfolio grows at about 6% / yr
Tragic Consequences

7. Fix Behavior
Problem
Fix Fee
Problem
(Great) Human
financial advisors
Investing on own
(Vanguard, Robinhood, …)
Fix
Both

8. Bio

9. Duncan Gilchrist
AB Applied Math, PhD Business Economics @ Harvard
Half a dozen journal publications
● Why do people go to bad movies?
● How can we improve organ donation?
● How should we pay people?
Present:
Data Scientist & Research Lead, Experience @ Wealthfront

10. Two Questions
1. How to optimize? Figuring out which option to pursue.
2. How to execute? Actually pursuing that (or any) option.

11. Need a model & data. Difficult to optimize when:
1. Little information is available
2. Activity is done infrequently, so limited feedback
3. Activity takes a long time to complete and/or feedback
that is received is lagged
4. Significant uncertainty or high volatility in outcomes
Optimization = Cognitive + Behavioral Challenge

12. Execution = Optimization at Micro-scale.
Need to prioritize & be motivated. Difficult to execute when:
1. Activity is optional
2. Activity must be repeated frequently
3. Activity results are difficult to measure
4. Activity doesn’t yield immediate gratification

13. Optimization is Straightforward
Execution is
Straightforward
Yes No
Yes
No
Seeking medical attention Career decisions
Financial planningEating well;
Getting in shape

14. Wealthfront Mission:
Everyone deserves sophisticated financial advice

15. Wealthfront Approach
automated advice
low cost
everyone
human advisor
high fees
wealthy clients

16. Make It Easy to Invest the Right Way

17. Financial Advice @ Wealthfront

18. Every $1 invested with Wealthfront is invested well.
But…
1. What about behavior at Wealthfront?
2. What about money invested elsewhere?
3. What about other financial decisions?
Good Decisions On AND Off Our Platform

19. Tension Between Automation & Education
Clients come to us because we do the right thing
But automation alone is insufficient:
Have to understand why something is right

20. (Even Subtle) Design Teaches Where to Look

21. Automated Nudges

22. Stop Focusing on the Past

23. Invest for the Future

24. Link an external investment account. We provide personalized,
actionable recommendations on:
1. Fees
2. Diversification
3. Cash drag
4. Tax efficiency
Investments Elsewhere: Portfolio Review

25. Q + A
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