Evan Harp: When and how did your practice begin?
Rita Cheng: I started Blue Ocean Global Wealth in November 2013, after spending 14 years at Ameriprise Financial.
I established Blue Ocean Global Wealth in recognition of four trends defining the financial planning and asset management industries: the supply and demand imbalance of quality financial planning advice, the lack of global professional and intellectual development opportunities for today’s graduates and tomorrow’s industry leaders, a maturing financial advisor demographic that merits an innovative partnership solution, and the interdependence of our global supply chain with respect to technology, communication, and human capital.
The book, Blue Ocean Strategy, by W. Chan Kim and Renee Mauborgne, inspired our entrepreneurial vision of developing innovative solutions to address these acute challenges. The creators of Blue Ocean, surprisingly, do not use their competition as a benchmark. They follow a different strategic logic that Professors Kim and Mauborgne call value innovation, which is the foundation of a Blue Ocean strategy.
The mission of Blue Ocean Global Wealth is to help women, families, and entrepreneurs plan and protect their money so that they can make rational decisions about their finances. Blue Ocean Global Wealth empowers clients to have the confidence and clarity to take control of their financial future.
I wanted to create a firm that really centered on financial planning, and create an environment where people weren’t fearful of being judged for their money experience.
Harp: What is your investment philosophy?
Cheng: I believe that financial planning transforms lives. Everyone deserves access to competent, ethical financial planning advice. Financial planning incorporates each client’s unique and personal financial circumstances. The financial plan guides the strategic asset allocation. For clients with a longer time horizon, I incorporate both core portfolios and opportunity portfolios. The core portfolio is the portfolio that incorporates the overall strategic asset allocation for the client to reach their financial life goals. The opportunity portfolio can be invested more aggressively. The core portfolio is the “workhorse” and the opportunity portfolio is the “racehorse.” I also emphasize tax diversification as part of the financial planning process. Last, but certainly not least, I help clients understand the distinction between risk tolerance and risk capacity.
Risk tolerance is a measure of how much risk a client is willing to take on. Generally, there are three types of investors: conservative, moderate, and aggressive. The level of risk tolerance increases as clients move from conservative to aggressive. Factors including age, income, financial goals, and psychological and emotional conditions — all influence risk tolerance. Risk tolerance is subjective. While there are factors that inform it (age, income, financial goals), they are not determinative, given the role of emotion and psychology.
CFP® professionals define risk tolerance as the amount of risk you can take and still sleep at night. How much risk is a client comfortable with? What level of risk won’t keep them awake at night after refreshing the balance on their portfolio dashboard?
Risk capacity may sound similar, but it’s different in an important way. The level of risk clients are willing to take is not the same thing as the level of risk they should take. Risk capacity is the measure of the latter. It’s an objective determination of the level of risk clients should be taking in their portfolios to achieve financial goals. Factors like time frame/time horizon, cash flow, income requirements, debt, insurance, and liquidity will determine their risk capacity.
Harp: What is the biggest obstacle you had to overcome, and how did you do it?
Cheng: When I entered the profession, my older daughter was just shy of her third birthday and my son was six months old. I did not see anyone who looked like me or whose story resembled mine. I joined professional associations and became involved in the profession. I also had mentors, sponsors, and advocates who believed in me and supported me along my journey.
I learned the importance of asking for help. Asking for help is not a sign of weakness — it is a sign of strength. The message from my MantraBand bracelet inspires and empowers me: “To be fearless is to do what scares you, to take a chance, to make a change. To love again. And to get back up after you fall. To be fearless is to know your fears, but never let them stop you.”
I am so appreciative of my mentors, supporters, and advocates that I make sure I pay it forward and create opportunities for those who come after me.
Harp: Exchange is slated for February 5–8. What do you think the biggest story in the market will be at that time?
Cheng: Personal finance is personal. Consumers value digital business models that offer personalized financial advice on their terms. Technology can allow financial advisors and wealth advisors to deliver more customized advice more effectively and efficiently.
Impact investing and ESG-focused investment solutions will continue to gain prominence as investors align their portfolios with their priorities. Younger investors will continue to demand more transparency and sustainability from their retirement plan providers. For them, it’s not enough to avoid doing harm. Rather, they want to proactively address important issues, such as social injustice, income inequality, gender inequality, climate change, and gun control.
Harp: Who is another financial advisor that inspires you and why?
Cheng: Carina Diamond, the chief experience officer of Dakota Wealth, inspires me. Carina founded the program, Flourish™ Women and Wealth, an initiative that has brought over 1,000 diverse women together to discuss how to plan for their financial future. This dedication to guiding women financially led Carina to establish an endowed scholarship at the University of Akron to inspire female students to pursue careers in financial planning.
Carina is also a founding member of Diversitas, an annual financial knowledge symposium to expand diversity in wealth management, which began at the University of Akron and has expanded nationally to include 24 partner universities. Five to seven hundred students and career influencers, such as teachers and guidance counselors, attend annually to learn about careers in the wealth management industry, dispel myths about the business, and connect with employers. Carina is a truly inspiring changemaker.
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