Explosive growth lands investment firm on list of top companies
FormulaFolios uses computer models to research and invest in stock market.
In 2000, as a 20-year-old employee at Morgan Stanley in Grand Rapids, Jason Wenk witnessed one of the worst stock market plunges in recent memory.
A shortage of computer programmers in the financial sector had led to the teenaged Wenk being hired just as the dot-com boom was reaching its peak.
“I came in with a technology background, and my first experience was to watch the stock market completely implode,” Wenk said.
“I saw firsthand what that did to people. It ruined retirements. It was devastating to a lot of people.”
So Wenk began to work independently on a software program that uses thousands of factors to predict where the stock market is headed. The investment program does the work of approximately 1,000 analysts, able to look at historical data in an instant, Wenk said.
Having successfully built the investment software program, in 2002, Wenk formed his own investment advisor firm, Retirement Wealth Advisors, headquartered in Grand Rapids.
“Anyone can build great software, but if there’s no one to use it, it’s kind of pointless,” he said. “So Retirement Wealth Advisors was started to use the program directly with clients.”
He steadily built Retirement Wealth Advisors into a solid business, managing more than $100 million in assets in 2008.
He said the financial crisis of 2008 was the real take-off point for a second venture, FormulaFolios, which uses his investment computer programming to help other investment advisors manage their clients’ money.
“That’s what our software was built to do: identify those dips,” he said. “Before that crisis, we had explosive growth for Retirement Wealth and we started hiring more people and advisors in other states.”
Retirement Wealth Advisors now has 130 advisors in 38 states.
It wasn’t long before the decision was made to make FormulaFolios its own company to advise wealth managers at other firms, Wenk said.
The new business, FormulaFolios Investments LLC, officially launched in 2012, and in its first year of eligibility for the Inc. magazine 500|5000 list, it was listed as the second-fastest growing private company in West Michigan, with a three-year growth rate of 471 percent and revenues of nearly $2 million.
At the beginning of 2014, FormulaFolios had three employees; it now has 35 and could be near 50 at the end of 2016, Wenk said. He recruited some experienced executives to lead the company but said a majority of the employees are recent graduates of West Michigan colleges and universities.
FormulaFolios managed approximately $100 million in assets in its first year and added about $460 million last year. Wenk said the company has surpassed last year’s numbers in the first seven months of this year. He expects FormulaFolios will add another $760 million in assets to the company’s portfolio this year. Wenk said the company should see about $20 million in revenue this year after $2 million in 2014.
The current volatility in the market is helping his business, he said. He has a program watching tens of thousands of factors that could influence the economy, stocks and bonds.
“When times are good, every investor can look kind of smart,” Wenk said. “But when the market gets a little bit volatile or indecisive, that’s when it’s beneficial to have computer models watching for thousands of signs every single day.”
Once the models find what is likely the best option, the process is automated.
“Our software does all the research, tells us what to own, when to own, what to buy and what to sell,” he said. “We implement and process the trades. On any given day, we could be trading hundreds of millions, all in a very automated fashion.”
He said there are more software programs and companies popping up that are similar to FormulaFolios, but because the financial industry is so regulated, the growth in technology has been slower than other industries.
Just as Windows transformed how people use computers, Wenk said he hopes FormulaFolios will help change the way people use computers and data to make their financial decisions.
One of the biggest measures of his company’s success, Wenk said, is its performance. He knows there is no guarantee for success in the stock market, but he hopes his solid history continues into the future.
To grow his business, Wenk said he’s utilizing the Internet in more ways than most financial institutions. For instance, he maintains a “basic blog” with one of the largest subscriber bases in the financial world, he said.
“We try to be front and center in front of our target market, which are financial advisors who are looking for technology,” he said. “We listen to what they want and we make sure the things we build are irresistible to them.”
Wenk knows the company’s explosive growth isn’t likely to continue forever, but he said he’ll keep growing it while he can because that’s the great part of starting a business.
“One of the most rewarding parts of being an entrepreneur is creating jobs,” Wenk said. “If we can grow this thing and create opportunities for other people, that’s what we’re going to do.”