Ep675: Larry Shumbres – Invest in What You Know and Is Regulated

Andrew Stotz 00:02
Hello fellow risk takers and welcome to my worst investment ever stories of loss to keep you winning in our community. We know that to win in investing, you must take risk but to win big, you've got to reduce it. Ladies and gentlemen, I'm on a mission to help 1 million people reduce risk in their lives to join me go to my worst investment ever.com and sign up for our free weekly become a better investor newsletter where I share how to reduce risks and create grow and protect your wealth fellow risk takers this is your worst podcast host Andrew Stotz from a Stotz Academy, and I'm here with featured guests, Larry Shumbres. Larry, are you ready to join the mission?

Larry Shumbres 00:45
I'm ready and willing.

Andrew Stotz 00:48
Yeah, I'm excited to get you on the show. We just had a really nice talk. So I understand what you're doing. And I remember one of my first bosses in the business in 1993. Really brilliant guy. And he said, and he's accumulated a lot of money from his brilliance. And about five years ago. And he I, I asked him, What are you interested in these days? What are you investing in? He said, Andrew, I'm long compliance. That's good. I like that. So for the audience, you're going to understand what I mean by that. When I introduce Larry, we have our discussion. As an accomplished entrepreneur and respected leader in the FinTech industry, Larry's mission is to continuously enhance the investing experience for both advisors and investors through innovative technology. He is recognized as an industry expert, and has over 20 years of FinTech experience with companies such as Charles Schwab, Morningstar, and New York Life investments. Larry, take a minute and tell us about the unique value you are bringing to this wonderful world.

Larry Shumbres 01:59
Well, that's a great question. I'll tell you a quick story. Why, you know, what, what I it's almost like, What's your why the whole Simon Sinek thing? Back in 2008, whichever one nose was, yeah, in 2009, were great years, of course, right? During Great Recession. My second child was born, my son, and he was born with what they call father syndrome. So it was some health issues, right? medical issues. So at the time, I'm in finance, my wife's working full time, and we have a daughter, and you get this curveball where your son is born, which is supposed to be exciting, which it was, but then you find out that there's all these, these medical issues. So, you know, long story short, over hundreds of procedures, you know, I took a step back and said, How do we adjust our financial plan? You know, what do we need to do to change that? What do we, you know, how do we learn about all these birth defects that he has, and how to improve or solve for them? So you're two things that I was thinking about, during that time is going forward in my career, what could I give back to the community, the investors? How do I take this knowledge of what I'm going to experience, learn over the next, you know, decade or so, and bring that to the forefront and technology, right. And whereas, like my wife was, like, I'm just going to be, you know, out there on social media, to help any other parents that has a child that's born with this, get through that process. So, you know, with the last two companies, my last one that that I built was total risk, it was really focused on helping investors invest better around their risk tolerance, which was not just looking at their preference or perception of risk, but the risk capacity to show them where they should be investing based on their life situation, or what we call human capital factors. And then, you know, the shift over to compliance after I sold that company was how do I help advisors be compliant, and not just sit there on their phone, texting a client, something that they shouldn't be texting. So again, enhancing some issues out there to help the end investor overall. And that's really the value that I try to bring to every product and company that I build.

Andrew Stotz 04:27
And tell us about your current business and kind of what you're doing just so the audience really understands what your business is about?

Larry Shumbres 04:36
No, sir. So in the financial sector here in the United States and other countries as well, the SEC and FINRA have rules and regulations around how these financial institutions the employees communicate with their clients or investors. And if they send out anything via email, social media, but on the website, they put anything on a website or through any type of texts mechanism, all that information has to be monitored, archived and stored by their compliance team for at least six years. So what we've built is a new, modern, easy to use platform for financial advisors, compliance officers, and any employee that is helping monitor the whole process of communication or communication and discovery, compliance, and surveillance. So that's, that's present today, the one thing that we've heard in the industry and what I, I also do when I look to build a company is listen to the end user, or ask questions to the end user to find out what is the problem and try to solve that and help them with that. And that's, that's what we're doing here appraisals is building that more efficient compliance tool for the financial advisor, compliance officer and end user.

Andrew Stotz 05:57
And where's the best way for people to learn more about it? I mean, I'll put links in the show notes and I, you know, you've got an excellent video that I watch, just to understand your business that explains it in you know, a less than a minute or so. But maybe, maybe you just tell us where people should go to learn more.

Larry Shumbres 06:15
Yeah, it's a you could go to appraisal, stock calm, to sign up for a schedule a demo, watch, one of the videos that we have posted there gives a high level overview. And the spelling of results is results with a P at the beginning. So results.com be happy to, again, schedule a meeting with anyone through our site, or just, you know, poke around and see if there's a interest for you and your company.

Andrew Stotz 06:40
Yeah, so if any of the listeners out there in the finance industry, which I know I have a lot of listeners that are and you're looking for options, here's one to consider. Well, now, it's time to share your worst investment ever. And since no one goes into their worst investment thinking it will be tell us a bit about the circumstances leading up to and then tell us your story.

Larry Shumbres 07:04
Great, so as an entrepreneur, it's going to be an entrepreneur story of starting a company because not every entrepreneur, I don't know any entrepreneurs, at least that haven't failed at least once. Right? If not twice. So this was my fail and my worst investment and it was all around the hype around Bitcoin, right? So I had the idea of, you know, building a hedge fund, that is, you know, 50% tied to gold, digital gold and 50% tied to the top five cryptocurrencies based on market cap, right. So, this is back in 2017, I put a lot of time and money into it. I had another business partner that was putting time and money into it as well. We even had some friends and family money tied into this a little bit. And it was, I remember going to the first conference that was held down in Miami, Florida, and walking in, and I had a suit on like, I've gone to every other financial trade show or conference. And it looked like the fraternity just like, got out. I was like, Oh, I'm not good. Like, I just had chills down my back going, this is not good. This whole thing is not going to work out. Well.

Andrew Stotz 08:22
That ZZ Top song that says everybody else crazy bad or sharp dressed man just isn't gonna work. Right?

Larry Shumbres 08:28
Oh, so yeah, walking around that conference, just open up my eyes to realize that the 99% of the people there had no idea even what how financial, anything product worked, or the process of even getting on a platform, let alone just technology right, then its technology wasn't even that great. So, you know, at that time, we were going through the process, we completed fast forward, we completed the PPM, spent a lot of money on it. private placement memorandum, okay, to put out to actually sell the product and have investors review it, the whole process. So number one, we didn't have a track record. Number two, we couldn't sell it in the United States. And number three, how are we going to distribute it in other countries and then other countries have their own rules and regulations. So after spending a lot of money on attorneys and consultants and rules and regulations, and licenses. We were up and running live, but it just got to the point where it was we were just going to spend so much more money on this that it wasn't worth it. And there was nothing really happening in the US around any new rules or regulation or compliance. So we shut it down. We lost the money shut it down. And even I have to say it wasn't completely shut down because what's the PPM there? You could do something with it. So early last year, a few of my co colleagues in the industry that knew the digital cryptocurrency space, we've kind of played around again to see if we can get it up and running, if there was any, any thing worth it worth, you know, of this ppm. And what we put what I quickly found out was nothing's changed since 2017. Mike, we're not doing anything, we're not spending any money on this, let's just shut it down. I'm not even going to look at it. And that's what we did. So that's my biggest investment loss was trying to get into crypto hedge fund trying to launch it.

Andrew Stotz 10:32
And how long was it before from when you started the idea? And you started working on it until you shut it down?

Larry Shumbres 10:41
Oh, at least a year and a half? I'd say a good year and a half, almost two years before we were just like that's it?

Andrew Stotz 10:48
And were you working on it full time or just on the side?

Larry Shumbres 10:52
Just on the side? Just want to say when I had time, and I would have shut it down earlier? If I was full time from what I experienced. Yeah, it was. It was a rough go. Roughly.

Andrew Stotz 11:06
So how would you summarize the lessons you learned?

Larry Shumbres 11:11
Oh, well, the lessons I learned number one is don't get into an unregulated, don't try to build an investment product or tool around an unregulated industry, right? That was the biggest lesson I learned. Right? Yeah, if it was an ETF, it's different, right? The regulated came out was all approved through the SEC, until the SEC approved something. You know, it's really it was a big risk. And we knew it. But at the end of the day, it was also, you know, lesson learned that, make sure that your industry is regulated, and it's you could sell it.

Andrew Stotz 11:55
Maybe I'll share a few things about your story that kind of stand out to me. Well, one of the things is interesting is that Thailand came out with a digital asset law very quickly, and built a framework of regulation. And so Thailand has exchanges that are regulated by the regulator here. So it's a little bit different than let's say, you just get this impression from the US that all the regulator's doing is doing nothing, and waiting until people step out of line, and then slamming them down, and then scaring the hell out of everybody else. And they're waiting for the ShakeOut until there's no end. And let's say there's five survivors, maybe and then from those five, you know, they'll try to knock them down. If they can't knock them down any further, then they'll say, Okay, now we'll come up with a regulatory framework or I don't know, that's kind of my observation of what I see happening in the US. Any, any observation from your side about how they're viewing crypto? Like is that the idea, especially as you've just said, nothing's changed?

Larry Shumbres 13:03
Well, it also doesn't help when you have FTX come out and be very fraudulent and lose all that money. So that's not helping the cause to get any regulation set or time spent around it. Yeah, but I think you're right, I think they're, they're kind of like, waiting to see. Let it kind of narrowed down, but the bad ones kind of fall out. But the one thing that I see in the industry is that there's a lot of cryptocurrencies out there that have great technology that don't need to be cryptocurrency, they should just be a tech company, their blockchain and their technology is superior to a lot of things I see out there. And if they just focused on that, and not being not to add the token or the crypto side, I think they'd be a great company. So maybe that'll play out and then it'll narrow down to, you know, 10, or 20, like true cryptocurrency products that are supposed to be a currency, where a lot of them I don't think they're really current currency. They're more like a company, a tech company that should just stick to, you know, selling their product, right, instead of selling your children. Yes, it's my opinion.

Andrew Stotz 14:17
The other lesson that I take from your message is that, you know, when we're in startup business, and all that, you know, number one thing is get your revenue up as fast as possible. And when you have a government entity, that is basically doing everything they possibly can to prevent you from getting revenue. Maybe it's not a great place to start a company. I mean, you can click on a regulator at some point, and some people have, but from a startup perspective, you know, revenue is everything. And if you see obstacles to getting that revenue, particularly government or regulatory obstacles, then you know, it's probably not a great place to play.

Larry Shumbres 15:00
No, and that was definitely a lesson learned. And note, it's the good thing is I had another company that was running at the time, that was a lot more successful. And this company that I'm working on now that we're working on my team is be very successful. And we're proud of what we're doing. And we're in the regulation part, we're working with an around SEC rules and federal rules and regulations. So if you can't be going against them ever,

Andrew Stotz 15:28
if you can't beat them, join them. That's right. Absolutely. Based on what you learn from this story, and what you continue to learn, let's think about some of our listeners and viewers out there who are coming up with interesting ideas, not bad ideas, you know, your idea wasn't bad. And but, you know, what one action would you recommend they take to avoid suffering the same fate?

Larry Shumbres 15:55
Well, whether you're an entrepreneur or just an investor, it's wise to invest in what you know, right? Yeah, just an example, if you shop at Target a lot, right. And you know, that target is, is one of those places where you see, it's pretty busy all the time, you may want to look into investing in Target or an ETF or mutual fund that has target as one of the top 10. holdings. Yeah, so even ESG, that's out right now, that's a big talk, any type of environmental, social governance that you believe in, right, you can back down and invest in something like that. But at the end of the day, invest in something you know, and that is regulated? Don't invest in something you don't know. So if you don't know anything about private equity, or derivatives, or options, don't do it. Right. Learn it first, learn how it works, and then look to invest in it.

Andrew Stotz 16:52
Yep. So what's the resource that you'd recommend for our listeners?

Larry Shumbres 16:57
Oh, wow. To review any type of investments, you could go to the large financial institutions, right, Schwab, fidelity Vanguard, JPMorgan Chase, they all have a lot of plethora of information out there, to learn about investments. But more importantly, if you don't really have a passion for investments further with a financial advisor, right, they'll help you long way not only invest, but invest to, you know, plan for any life events and goals going forward.

Andrew Stotz 17:32
And you'll be supporting that life, advise that financial advisor to make sure that they're giving you good advice or not doing stupid things. So that's good, and that's helpful. All right, last question. What's your number one goal for the next 12 months?

Larry Shumbres 17:46
Yeah, my number one goal is to get to profitability number one, that and that, I think is easily our number one goal here at results. We're growing fast, we're doing a lot of great things. We're adding the right channels connections. number one goal is definitely profitability number two, is to install the our machine learning use cases in AI to really widen that moat around our company. So we are the leader in the industry.

Andrew Stotz 18:17
Fantastic. Well, listeners, there you have it. Another story of loss to keep you winning. Remember, I'm on a mission to help 1 million people reduce risk in their lives. If you've not yet join that mission, just go to my worst investment ever.com and join my free weekly become a better investor newsletter to reduce risk in your life. As we conclude there. I want to thank you again, for joining our mission and on behalf of a Stotz Academy I hereby award you alumni status for turning your worst investment ever into your best teaching moment. Do you have any parting words for the audience?

Larry Shumbres 18:52
No, thank you for your time. If you're an advisor, checkout results.com And if you're an investor, do your homework.

Andrew Stotz 19:00
Amen. And that's a wrap on another great story to help us create, grow and protect our wealth fellow risk takers let's celebrate that today. We added one more person to our mission to help 1 million people reduce risk in their lives. This is your worst podcast hose Andrew Stotz saying, I'll see you on the upside.