How to inspire the next Warren Buffet

Please note, this blog was originally posted on my personal site (TydlaskaCFP.com) back on 10/2/2015.


When I was a kid, my favorite activities included playing with GI Joes, building Legos, and collecting pogs. I grew up in a relatively normal middle class family in the suburbs of San Diego. Weekends were filled with soccer games, camping trips, and water-ski outings to Mission Bay.

Personal finance wasn’t a topic we discussed very often. Instead we focused on the finer points of roasting s’mores. It wasn’t until I graduated from UCLA that I started to learn the basics of personal financial management.

If you are a parent and interested in improving your child’s financial literacy from a young age, you may consider buying stock for your budding financial analyst by opening a custodial account (an account designed specifically for children under 18). But this process can be time consuming and expensive.

That is why I love the product offered by the startup Stockpile, which makes gifting stock as easy as buying a gift card. You can even buy stock with a credit card! This Palo Alto-based company allows you to give stocks to anyone, including children, so they can own some of their favorite brands including Disney, Apple, and Nike. As children age, they can accumulate a portfolio of their favorite cereals, video games, and candy bars as easily as I accumulated GI Joes and Legos.

When I learned of Stockpile, I had to try it out myself. As I have been interested in the wearable technology space, I decided to purchase some stock in Fitbit. The process was very straightforward and took less than 10 minutes. Here are some screenshots from the steps I went through.

Advantages of Stockpile:

1. Speed. What makes Stockpile different from using a traditional stockbroker like Charles Schwab, Merrill Lynch, or Fidelity is the speed at which you can send a gift. Once you get used to the site, you can send stock gifts in as little as two minutes. All you need is your credit card and the recipient’s email address to create an SIPC insured account, which protects your account up to $500,000.

2. Fractional Shares. If you want to buy one share of Google, that would set you back $600 at today’s valuation. With Stockpile, you can buy smaller denominations such as $20, $50, or $100.

3. Fun. Stockpile makes it fun to collect some of your favorite brands. Once you have purchased a few different stocks, you can build a portfolio of your favorite brands. You can also use Stockpile to give fun gifts to your friends. If your friend loves Tesla, but you don’t have an extra $70,000 lying around, buy him $70 worth of TSLA.

Opportunities for Stockpile:

1. Tangible Gifts. Currently they do not offer physical products like a framed share certificate or physical gift cards. Disney offers a commemorative certificate for $50, but that is a pretty steep price to pay. I am sure Stockpile can find a reasonable vendor to produce attractive looking certificates in the $5-10 range. Another option is to create physical cards similar to baseball cards with stats on the company’s market cap, headquarters, number of employees, and key products. I created a mock-up of what a Nike gift card could look like here.

2. Website Content. The website lacks educational content to engage recipients. It would be great if there was a video of Sponge Bob or Elsa describing what a stock represents. Future topics could cover concepts like shareholder voting and how to vote on Mickey’s boss (once you accumulate one full share). The website also lacks charts and graphs to show how your investments are doing over time.

3. Cost. Probably the biggest challenge facing Stockpile is their pricing schedule. Stockpile currently charges $2.99 plus 3% of the value of the gift. So my $50 gift card ended up costing $54.49 [$50.00 + $2.99 + $1.49 ($50.00 x 0.03) = $4.49]. At first blush this fee may seem expensive, especially since companies like Robinhood allow you to buy stocks without commissions. But given my experience in the financial services profession, I personally know how cumbersome it is to gift stock to a relative. Stockpile shortens a process that used to take over 2 weeks to 2 minutes. Instead of worrying about your relative’s social security numbers, birthdates, and addresses, you can focus on which brands they love. And within 2 minutes...Boom! Their birthday gift is taken care of. When do I get my “Uncle of the year” award?

Conclusion:

While I do not think Stockpile is the answer to building wealth for the average investor, I do believe this is a great way to get children and other novice investors interested in the stock market. I recently purchased some Apple stock for my 11 year-old nephew who is an Apple fanatic. He owns an iPhone, MacBook, iPad, and even an Apple Watch. When I asked him how owning Apple makes him feel, he replied “It makes me feel like I want them to sell more things and do better to raise the stock [price].” He also said he has started telling his friends to buy Apple products! The next time I visit him in person we are going to explore Apple’s financials on Yahoo Finance and teach him how to track the stock on his own.

Overall, I think this product is a great way to increase financial literacy for children and it eliminates a lot of the headaches associated with setting up custodial accounts. But what do you think of Stockpile? Would you use this service to buy stock for your friends and family members? Leave your comments below.

Views expressed in this post are that of Shawn Tydlaska, CFP(r), MBA. Shawn is a Certified Financial Planning pro and graduated from University of Michigan Ross School of Business. This blog is for informational purposes only and should not be considered a recommendation or endorsement to a particular investment or strategy.