YAP Cast

YAP Cast S2E5: The Importance of Managing Money With Mona El Isa, Avantgarde


Financial inclusion is a big topic in DeFi. Millions of people do not have access to useful and affordable financial services that we often take for granted. These services may be having a safe place to keep our money, having access to credit, or being able to send money across borders. 

However, there is one aspect of money that even those with financial access are not confident in, ‘Money Management’. 

In reality, a large part of the population has difficulty managing their money. According to the Money and Pensions Service, 24 million adults in the UK don’t feel confident managing their money; nearly half the country. 

This statistic prompts curiosity to see whether it’s true that even those with access to all these savvy financial tools still feel uncomfortable managing their own money. If true, the question becomes, why? 

In this episode, Samantha hopes to answer this question and more by speaking to Mona El Isa, who entered the Goldman Sachs trading floor straight out of university. For the last six years, she has delved into DeFi, most recently with a company she founded called Avantgarde Finance, an asset management services tool built on decentralized finance.

Money management and its importance 

Though it’s one of the most important aspects of adult life, we are not always taught how to manage money. It is more something that is learned over time. Unlike learning how to drive a car, Mona is surprised that money management is not a mandatory education requirement starting at an early age.  

While there are options for giving someone your money and allowing them to manage it for you is simple, it requires expertise, Mona said if you want to preserve your capital. There are also a handful of reasons people may want to preserve their capital, whether against inflation, for more savings, or to increase their money because they have a higher risk profile. Whatever people decide to do with their money will require skill and time.

The complexity of handling money

When it comes to handling money, Mona said a good starting point is to understand the different asset classes; and, within each asset class, the different kinds of assets. When focusing on a sub-universe, for example, “the S&P 500, that’s five hundred companies.” When dealing with a company like this, Mona expressed the importance of needing the resources and expertise to analyze data from around five hundred companies with new evolving information coming out of these companies. 

This is not a simple task for one person to do on their own, but rather something that an entire team needs to do. Accessing high-quality and quite expensive data and research would be required to understand the universe and keep tabs on it, ensuring they make the right investments. Mona believes this is the first important factor of money management is the analytics and the resources, the second part “requires expertise in portfolio allocation and sizing.” Every time you want to take a position, you need to consider the risk-reward associated with that position, ensuring it is worth the risk. Mona expressed how important this second part is; if sizing and portfolios are overlooked, this can often blow up for money managers. Understanding when to be large is important when the risk-reward is worth it. 

Finally, the last consideration entails some” degree of discipline,” While it may be easy to come up with a practice or methodology, Mona believes it is harder to stay disciplined around your investment process. Having people around you who can challenge you and bring you back to reality can remind you of what you are supposed to be doing. 

 

Transparency in real-time

While there is no special way to track real-time in traditional finance, we as customers, expose conflicts of interest when our assets are managed by a bank or a private banker. When asking others for advice on where to invest assets, Mona expressed the importance of being careful that banks or investors are not just recommending a product to you because they will benefit from that product. Individuals need to find a way to make sure that they’re being shown all the options and that they are being given in real-time, which includes all the information and the transparency so that they can better make decisions.

Conclusion

Traditional finance is looked upon as very logical and restricted by the law and ethical ideals. It’s also a very manual process. This makes for complications when handling our own or other people’s assets, as in practice, asset management seems to be more about instinct, gut feeling and trust rather than logic. The lack of transparency in the current system could be the reason people don’t feel comfortable or equipped to manage their money. 

This episode covered how for Mona, traditional finance is clearly a highly manual, connections and back-office-driven world. Her experience in managing money counted for little as she found herself having to build all the connections, physical, social and legal, to get her fund going.

Next time we’ll speak to Mona about how her knowledge has benefited her in the crypto and DeFi industries and, more importantly, whether DeFi is the solution to asset management that people hope for. Mona will discuss how she took her hard-earned wisdom and applied it to crypto and decentralized finance. As well as whether this will solve some of the problems we’ve heard about in this episode. 

Find out more about Avantgarde here

Follow Mona El Lisa on Twitter here.