Decentralized finance (DeFi) can be complicated to understand for the everyday investor and seems to be growing in popularity in financial discussions. That's why we brought on Adam Blumberg, CFP® and Co-founder of Interaxis.io, to compare traditional finance to decentralized finance and explain how DeFi can affect your wallet, your economy, and your financial plans.
Thomas Young: Hi, everyone. Welcome back to The Rocket Dollar Podcast. Today, I'm excited to have Adam Blumberg with us. Adam is a certified financial planner and co-founder of Chart Wealth Management in Houston, Texas. Adam and his partner, Ron, also founded Interaxis in mid-2019 to help educate users and investors about decentralized finance, blockchain, cryptocurrency, and other financial topics. He has been a keynote speaker and panelist on topics such as smart contracts in oil and gas, the state of defy, which we'll define in a little bit and crypto-backed lending. Adam, thanks so much for being on the show with us.
Adam Blumberg: Sure. Thanks for having me.
Thomas: Before we get into doing a deep dive into Interaxis and how you guys got there, I want to talk a little bit about your background and how you got started doing what you're doing. When did you decide that educating investors about decentralized finance was something that you wanted to dive into and pursue?
Adam Blumberg: Well, being in financial services, I got into financial services in January of 2009, which is if you know anything obviously about the markets and finance in the United States in 2008, 2009, that was just an awesome time to get in. Shortly before or after is when the market cratered. That's when I got started in financial services. So, perfect timing. Since then, of course, I like to attribute the bull run in the US stock market to the fact that I've been involved, although I don't think anyone else will give me credit for that. But, basically, in my time and in my time with Ron, my partner in financial services, we decided that our focus was going to be family businesses, small business owners. We don't just do investment planning, investment management, we don't just do one particular part. We do succession planning, estate planning, all that, which is very complex.
I apologize that I'm going very roundabout to get to answer your question, but what we realized along the way is we became very good at explaining complex concepts to people in a way that they can understand. Because when you start talking about the succession plan of a business when a business owner has three kids and only two of them are in the business and they also have real estate and they also have other investments and we're talking about the estate plan and succession plan and investment management and key people, it gets very complex. We have to explain it all in a way that people understand. Trying to use my hands and trying to do it over the phone and even trying to create very long PowerPoint or very long documents is difficult. I just have them into the office and we do it on a whiteboard and once we've done it on a whiteboard and they can ask questions and it's very interactive, then we all get it.
If there's any point, one or two or three years down the road where a client calls and says, "I don't remember why we're doing this particular part. I don't remember why we're doing this life insurance trust. I don't remember why we're doing this part of the succession plan." I go, "You know what? You're just going to have to come into the office. We're going to have to get on the whiteboard again and explain it again." Once we start, they remember it.
All that to say, we got involved and got interested, I guess, in cryptocurrency, later in blockchain. I got very interested in, went way down the rabbit hole on the actual technology. That led us to decentralized finance, which is the combination of the blockchain technology plus the cryptocurrency, the financial aspect and thought, you know what, most of the people, most of the videos I've watched or the papers I've read, you have to be very technical to understand them. I'm not that technical. I just work at it and work at it and work at it. I thought for this to be mainstream and for the retail investor and the retail user to understand it, someone's going to have to explain it to them in a way that I know they'll understand. We might as well do it, right? We already have a financial background. I can explain it in a way that I can talk about traditional finance and then how decentralized finance is either building a similar system or changing the system or disrupting it or augmenting it or whatever it might be.
Ron and I were sitting around now and we were saying, "Gosh, we wish there were something that made this easy." And then Ron said to me, "Why don't we just do it?" We enjoy explaining things to people but the problem is we can't get enough people to sit down in our office and listen to us talk about decentralized finance and cryptocurrency. Next, the best thing is we'll just record ourselves doing it and throw it out there on YouTube and a blog site and see what happens. Is that an adequate and very, very long answer to your very short, early question?
Thomas: No, absolutely it is. One of the topics that I want to get into is your YouTube channel because of being... We're in different spaces, Rocket Dollar and Interaxis in what we're doing. But, we both have a similar education gap that we're trying to fill, right?
Adam Blumberg: Right.
Thomas: Us with self-directed retirement products, you guys with cryptocurrencies and blockchain and decentralized finance and the things that we've talked about. I love that you guys took that approach of just doing what you guys had been doing in your office one-on-one and leveraging video, which is fantastic to get in front of as many people as possible. I'm sure that when your clients now call you and ask you about why are we doing this, it's much easier to just send them a link and it allows you to get a lot of your time back and also serve other people, right?
Adam Blumberg: Oh, sure. Yeah. As we're looking at LinkedIn and Twitter and Telegram and wherever else that we're having conversations with groups of people that might be all over the world. If I see something, see some people asking some questions and trying to discuss it, I can just throw a video in there and go, "Look, we kind of explained this. Here's the video. After that, maybe we can all have the conversation again, now there were all on the same page." Where you say that you're in a different area of educating people, you're right. Everyone is very, not very keen, but everyone understands the extremely traditional financial investments that are available. Right? What goes back to buying and selling stocks to buying and selling mutual funds to ETFs to manage money as we move through there. But now, between technology and different regulations, there's access to more and more opportunities to invest, more and more options than were previously available to only the super-wealthy. It takes folks like us and like YouTube to get people to understand that's even possible.
Thomas: Right. Specifically, in our space, it used to be to understand what a solo 401(k) or a self-directed IRA was, you went into an attorney's office, more than likely an attorney's office, and they would sit you down in front of a whiteboard and they would explain to you how the concept worked and that was structure works and how you get the control of your money. It's very similar in that way.
Adam Blumberg: Right. Oh, sure.
Thomas Young: We mentioned earlier before we started recording, that you guys were thinking about starting a podcast. I think that's exciting because I know that when we started this podcast, I was very nervous recording and having conversations. It was more about thinking about someone driving to work, listening to my voice, something about that made me nervous. But, I love your YouTube channel. What kind of format are you guys thinking for your podcast and how to bring that education completely in the audio and not having the whiteboard or is it going to be to supplement what you guys are doing with your YouTube channel?
Adam Blumberg: I think in my head, it's more supplementing what we do with the YouTube channel. They kind of supplement each other with the idea that we can go on the YouTube channel and we can do video. For example, we could do a video on retirement planning, right? We have the background to do it and we probably will because not everything in the video has to be about decentralized financing. Cryptocurrency can just be about finance, right? And then, I can have you guys on the podcast and go, okay, now we're going to talk to someone who's been in the retirement planning world with a little different bent on it. We can have 20 to 30-minute podcasts and talk about your role within the retirement planning community. We did a video recently on Oracle's within the blockchain world and now we want to do a few different podcasts interviewing different people that are in the Oracle space, right?
So they can talk about their particular company or their technology. But, we also have the video to back it up. If you're listening to and you go, "I don't even understand what an Oracle is." Well, you can go to the video and know what an Oracle is, and then the podcast makes a lot more sense.
Adam Blumberg: I'd say that. I'd also love to use our podcast as an ability for when Ron and I find something that's interesting, some piece of news, we can just get on and talk to each other about it and then just throw it out there. That's the beauty of podcasts and YouTube and everything else since we all have this ability to easily and inexpensively put some content out there and everyone else gets to choose whether they want to listen to it and when.
Thomas: Right. Adam, what is an Oracle? I don't know if people listening might not have even heard that term before and might not be familiar. Just at a high level, what is that?
Adam Blumberg: Well, one, you can go look at the video, right? But, an Oracle in this sense and the blockchain sense, an Oracle is some sort of, I guess, trigger. Some sort of data that's going to trigger usually a smart contract to act. One of the examples might be, let's say it's in the supply chain world, right? I might have goods on a ship that's going from Asia to California, right? And then, of course, there's a GPS device on the ship and as soon as the ship hits port in California, it can send a signal to the blockchain, for instance, to say, "Hey, this ship has gotten here." And I have a smart contract that says, "Okay. Once those goods hit California, those goods, I now own those goods and I now pay my supplier who's in Asia." Right?
We have a smart contract that is immutable, transparent out there on we'll call it the Ethereum Blockchain. As soon as that GPS device goes on the blockchain and says, "Yes, this ship has hit Los Angeles, I now own those goods." And maybe some sort of payment by a cryptocurrency gets sent to my supplier in Asia.
The Oracle was the positioning, the GPS device in that instance. In Oracle, a really easy Oracle is let's say you and I, Thomas had a bet, let's say we were using some sort of, in this case, decentralized gambling app, something like that. You and I had a bet on a football game, we might say, all right, the Oracle is whoever espn.com says wins the game. Well, of course, it's easy for you and I to know who won the football game, right? But for the smart contract to be effected in, for money to go from one of us to another, for cryptocurrency to go from one of us to another, it's looking at espn.com constantly. As soon as that game goes final and the score comes in, then it can trigger the smart contract and pay probably me the money because I'm betting on a better football gambler than you are.
Thomas: Okay, that makes perfect sense. I'd never heard of that concept before. That's fantastic. I guess that gets to the core of why this, of why your videos are so valuable because there are a lot of terms that people are not familiar with and in such a new space like blockchain, like cryptocurrency. For the layman, like myself, it's difficult to grasp these concepts just verbally if you don't have someone very educated like yourself, but without those visual cues. I think the approach that you guys took to education is fantastic. I like it. Like I said, I was on your YouTube channel last night just browsing through.
Adam Blumberg: Thank you.
Thomas: It doesn't have to be more complicated than a whiteboard and a video camera or an iPhone to convey a lot of content and education. Right?
Adam Blumberg: Right. Yeah, it's very... It should be pretty simple to explain all this now. It takes some time for us to understand it first, right? We have to do our research and understand it. But again, we're not trying to explain the technical underpinnings of it, right? I'm not trying to explain code, I'm not trying to explain a token monetary policy or anything like that. We're trying to explain it from a high level.
It's very important for us, for our users and the people watching the viewers that we're trying to explain in a way that you understand why some of these protocols, why some of these blockchains, cryptocurrencies, whatever, why the concepts are important to you and how it's going to impact you, how it's going to impact your country's economy, the world economy. That's what's important to us because at the end of it all when we start talking about cryptocurrency, it's essentially another form of money. How do we use money? Why is it important? How is it affecting the economy? We are not about trading cryptocurrency for interest.
For example, I'm not that interested in it. We are interested in how you're using your money, why it's important, what the options are, how to protect yourself, what the risks are, those kinds of things and explaining that because in reality, look, I don't understand really how email works. Right? I don't have to understand the underpinnings of email. I have to know that I have to know how to hit the compose button and type an email and hit send. I probably have to know how to copy someone, how to reply, how to reply all, how to most importantly not reply all. I have to know those things, but I don't have to understand how SMTP works to get an email to work, right? We're trying to explain how you use email, not how email works.
Thomas: Right. I think that's a really important distinction because I think that there are a lot of people out there that are trying to explain how it works or how and not how to use it. I think that's a great segue into the next topic I want to touch on is, why is it so useful for investors or small business owners, your core clients to understand how AI, defy and blockchain can help them on their path to succession planning or estate planning or retirement planning? Why is it, how do those things, why is it important for those things to be sort of brought together?
Adam Blumberg: I'll say this, it's not really for necessarily our financial services clients. Right? We keep those two separate and so we have to say things and not say them here. I'm not giving investment advice here and the videos are not giving investment advice or anything like that. We keep those two separate.
It's not that important for those people in particular until there's some real need for it. In which case... I have had clients go, "Hey, we've heard about Bitcoin. Can you tell us about it?" And I go, "Oh, you should watch my videos." Again, my videos aren't telling you to invest in it. They're just telling you how it works and how investing in it might work. Eventually, I think there will be a need to bring the two together, right? We can create some tokenized ability to enact a succession plan for a business, tokenize the ownership and such. There will probably be a need to explain it there, but that gets complex and technical both from a financial and blockchain space.
Right now in the US, people are interested in it as maybe a different place to allocate some of their funds. Something that as we know is non-correlated to the rest of the market that has potentially some significant upside and has quite a bit of risk. We want to explain that part. If you're looking to invest in some of this, let's explain to you some of the risks. Let's explain to you how you do it, who some of the players are. The videos are out there. You know how to reach me. If you have any questions, call me, email me. If I can help you out, I'll get you to someone who can.
Thomas: Right. It's very similar to the approach that we take with our clients and that we're not investment advisors, we're not selling any particular investment. We're, I mean, we have a twofold, right? We educate on what you can do with these accounts that should it be right for you, how to do it. And then, we go a little step further and we establish and set up the accounts for people. But at no time are we saying, "We believe that you should be invested in real estate with 10% in publicly traded securities." We don't do that.
Adam Blumberg: Right.
Thomas: That's not our business. We do come at it similar to you guys where we're providing the education, we're saying this is something that you can do, should it be right for you. You and your advisor who is licensed and has a history with you and knows your complete financial situation. Maybe you guys decide and then we're here to provide you the content that you need, the education that you need and then we'll establish the account. I think in that way we're very similar.
Adam Blumberg: Oh, yeah. Exactly. It's not... For that cipher, whether it's the crypto or whether what you guys are doing where I know you can have the self-directed IRA to either invest in crypto or real estate or private companies or whatever it might be, it's the advisor's role to help the client understand if that should be a part or if that can be a part of their portfolio. Then, you guys are providing the means to be able to do that and the education in terms of this is how it works, this is why you can do it and we're going to give you the techniques and the legal way to be able to do it.
Thomas: Right. I'll be honest with you, when we started Rocket Dollar, we ruffled a few feathers with advisors because they saw us as trying to come in and take their business by promoting alternatives and by promoting that you should be in all real estate and whatever, which is pretty far from the truth. What we advocate is saying, "Hey, you need to know all of the options available to you, work with your advisor to determine what is best for you and here's this tool to do it. You can have them." They should also be looking at what you've invested in with your Rocket Dollar account. You shouldn't fire them or you shouldn't move all of your money to us, but it should be part of your pay. You should consider it as part of your overall picture. I think since then since we've made that clear and since we've spoken one on one with different advisors, a lot of them have come around and said, "Oh, no. This is a value add for my clients. It's not cannibalizing my business."
Adam Blumberg: Oh, sure. You guys, I'm sure to have seen that for so many, I would say, most advisors in the US. Maybe this ruffles some feathers, but for most advisors in the US, they have a hard time putting clients in something where they're not quite sure how they're going to get paid for it.
Adam Blumberg: And their company and they have issues with potentially compliance and regulation and they might be with a firm, a broker-dealer or something, it doesn't even allow them to recommend something like a self-directed IRA.
Adam Blumberg: In terms of our Wealth Management Company, we went a few years ago or several years ago, we had to leave one broker-dealer and then leave another broker-dealer because we had this idea that we wanted to charge our clients a monthly fee based on their net worth and their income because that's how we were providing our advice. Our advice was pretty much based on how you pass on the value, how you grow the value of your overall wealth. It can be your business, your real estate, whatever you want to do and how you save that, pass it on whatever it might be.
If I have a client who's worth $20 million or $30 million and that that is tied up in their business and real estate and everything else, well, they might not have a lot of money to invest. I can't charge like an AUM fee to them and have it be worth it for us. We said this doesn't make sense. While our first broker-dealer didn't like that model, our second broker-dealer didn't like that model, so we had to go completely independent. Well, if you're completely independent and you're charging a client based on their net worth and their income, a monthly fee, from a compensation standpoint, I don't care where they invest. I care that I have a fiduciary responsibility and obligation that I have to give them the best advice for them. I have to do what's in their best interest. I can only do what's in their best interest when, again, from a compensation standpoint, I don't care where they invest.
That's where a solution like yours fits in perfectly because I can go, "Look, you've got a whole bunch of money in your IRA, but it's all completely market correlated. We can move it elsewhere." I have clients who say, "Look, I'd love to own some property, but the only money I have is in my retirement account." Well now, I have a solution for that and it fits exactly what they want as long as we've gone through what the risks are and how they evaluated. Then, it makes sense for them. They go, "Wow, I didn't even know we can do this." Well because, not to bang on them, but most advisors either aren't able or don't know how they're to get paid on it so they don't do it.
Thomas: Right. There you get into maybe, I wouldn't necessarily say the ethics, but you get into really which advisors are doing the best thing for their clients. We're not advisors, so we can't say that we are, but your approach of being completely independent and charging a subscription model allows you to do, like you said, what's best for your client and their unique situation versus being an advisor at a big bank and having a mandate that this is what you do in certain ages and this is how you get paid and no, don't sell any other products, don't selling external products, even if it's what's being asked for, your hands are tied.
There is value in the big banks and investors or advisers, right But really, you want to find someone and build a relationship with someone that has proven to have your best interests at heart. One of the things I love about your model is that because you charge based on net worth and income, you are so incentivized to increase that net worth because then you can charge more. I don't think that's anything to scoff at, right? If I were a client of yours, I would say what's the best way for me to pay you as much as possible because that means that it's working, right? And so that alignment of goals for the advisor and the client is not as common as it should be in our world. Right?
Adam Blumberg: Oh, it's not and it's changing. You saw some of the big custodians now are offering subscription pricing and you see people like altruists come out for better opportunities for financial advisors to connect. You've, of course, seeing all the custodians that are knocking their trading fees down to zero. It's getting there and it's going to take the advisors finding different ways to get paid, to get compensated. But, the real point is we need to show our value. As advisors, we need to show our value. There's very little value that we have in just managing your investments anymore. Right?
For the most part, algorithms can do that better. If you're talking about just managing market investment, now giving clients real advice based on their circumstances, you almost have to be a person, you have to be a human to do that because I have to listen to my clients. I have to look at their face contorts when I start talking about cryptocurrency or investing in real estate. If I see a funny look, I go, "Why don't you want to invest in real estate or whatever?" They might go, "Well, I had a bad situation." We have to talk about that. Well, a computer can't do it. We have to do that. If that's the only real value we can still offer to our clients, then that's how we should get compensated by actually offering that advice as a value.
Thomas: Right. It's like speaking with a professional about any area of your life. If you talk to, and I don't want to compare an advisor to a therapist, but it could be, it's a similar thing where there's real. What I'm trying to get at is it's not that... But there are real emotions involved and there's real history that someone might have, maybe the burned on a piece of real estate or you watched your dad lose all of his money on a startup deal or whatever. You have deeply ingrained beliefs that might be limiting you and it takes a professional's advice and professional experience to, I don't want to say get you back on track, but get you to a place where you're making decisions, not from emotion, but rather from an informed perspective. It takes a human to get you there a lot of the time. Right?
Adam Blumberg: Oh yeah. It's funny that you say kind of like a therapist, I have clients who refer to me or refer to us as their financial therapist. They'll say, "I need some financial therapy." A lot of this, let's say they get told by other people what they should do. They'll get told by their banker, they'll get told by the brother-in-law, whoever else, here's what I do. You should do this. You should talk to my guy. I invested in real estate and I made a killing. Some of it is just, it's a bias, right? Because you only remember the winner. You don't remember the losers, right? No one talks about their losing hand in the blackjack table. Right? They're talking about their winning hand.
So yeah, if you listen to stories on the way home, on the plane home from Vegas, it would seem like everybody's always a winner.
Adam Blumberg: But Vegas wasn't built because we're all winners.
Adam Blumberg: It can be somewhat emotional. That's the whole point. Computers can be completely unemotional and we can use algorithms and plug that in later. But, it's not always about having the highest rate of return all the time.
Adam Blumberg: It's about getting to where you want to be from a goals perspective, understanding your risk, what am I willing to risk to get to those goals? Are my goals achievable? As you said, if there's some sort of emotional aspect, my father got burned on a deal like that, I refuse to invest in that company because I don't like what they're doing for the environment. When we start talking to clients about their family business, it is extremely emotional. Right? This was something they gave time and money for, something that moms and dads might've lost time with their kids growing up for to build and now they're going, "Wow, this is emotional. I want my kids to have this, I want my grandkids to have this."
Adam Blumberg: It does get very emotional and that's why we have to be human about it. That's why we have to get compensated in a way that I'm willing to talk to you. I wanted to talk to you and understand what we want and that's the only way I can have a true fiduciary relationship because that's the only way I can do within your best interest is I have to ask, I have to figure out what your best interests are. Sometimes, your best interests aren't the highest return all the time.
Thomas: Right. Absolutely. That's a great statement then. Adam, I think that's a great place to pause our conversation. But before we sign off, what's the best way for folks to get in touch with you? I'll include links to your YouTube channel and your social media on our show notes, but if anybody wants to get in touch with you, what's the best way for our listeners to do that?
Adam Blumberg: Email is always good. I'm email@example.com, that's I-N-T-E-R-A-X-I-S .io. Our Twitter handle is @interaxis8, the number eight. Those are pretty good ways to get ahold of us. firstname.lastname@example.org works also. As you said, you'll put the links to the YouTube channel. The website is interaxis.io. We're still retooling that. We have some other plans for that. We want to work with some folks in industry and such on how they're integrating decentralized finance and blockchain into their company. We're trying to retool the website also, but those are the best ways to reach us. We hope someone does call, email, whatever you want to do and we're happy to talk to you. We're delighted to be on this podcast. We met Mark at a conference in Chicago and we talked quite a bit. Yesterday I was walking the dogs and play with my little girl and wearing my Rocket Dollar t-shirt.
Thomas: I love it. Well, Adam, thank you so much for taking the time out to sit with me and share your knowledge. Looking forward to publishing this episode and we'll speak soon.
Adam Blumberg: All right. Thomas, thanks so much. I look forward to it.