Meet Aaron Lebovitz

Managing risk means Aaron’s life is filled with maybes. What Aaron is sure about (and there are no maybes here) is playing tennis, competing in poker tournaments with his family, and effectively managing risk of all forms at Arta. Formerly a quant strategist, financial trader, and impact investment manager, Aaron is now Head of Risk at Arta.

Tell us about your background. How did you start your career in risk and finance?

I began my career in New York as a quant researcher and then as a trader on a structured products desk at Chase before they merged with JP Morgan. As a dealer, when you’re trading a swap book, risk management is the most important part. We had plenty of effective tools to help with pricing products. It was managing the risk of complicated positions that required most of the focus and mental space.

From there I went back to school to earn my Ph.D. in Finance at the University of Chicago Graduate School of Business. I put my degree to work in quant trading at various Chicago-based firms. By that point, I had worked across many asset classes, using different risk models and approaches to risk depending on various investment horizons and objectives.

Based on my experience at the trading firms, I started to become interested in the idea of using these sophisticated quant techniques, commonly used on the institutional side, to inform how we look at risk for individuals. I liked the idea of using automation and sophisticated modeling to offer consumers more value and performance than they could get from working with a traditional financial advisor.

Wow, a Ph.D. in Finance? So Dr. Lebovitz, how did you become so interested in the field in the first place?

I started learning at home. I was very fortunate; my parents had the means to invest for the long term. And also fortunate that my dad always did all his own stock research and had the time to engage me in the process. Dad did all his research on our Apple IIe during my high school years, so I saw the power of automation and access to big data early on. I asked a lot of questions and that was how I learned the basics. I didn’t give much other thought to personal finance topics through college.

Once I graduated, I started working and making enough money to think about saving and investing. So, I started to teach myself. I didn’t have many educational resources available to me at the time so it was a DIY approach. Fortunately, my wife was interested in learning too. She worked as a research consultant so she had access to a variety of helpful books, magazines, and articles. We worked together to learn as much as we could.

You’ve gained specialized financial expertise from your educational and professional experience. How does this influence the way you teach your kids about personal finance? Do you take a structured or informal approach?

It’s important to give kids what they need and what they are open to as individuals. At my home, financial conversations happen informally and regularly. I talk my kids through the basics of consumer finance. We cover things like how to get a credit score, what it means to build credit, how NOT to screw it up, and how to manage saving for the short term and long term.

I’ve just begun talking about investing with them, as they’ve reached college age. My wife and I set up IRAs for them and my son also bought some ETFs in an investment account that he set up himself. I believe that as they get older and (hopefully!) have more money to invest, conversations around this will happen naturally.

My wife taught the kids budgeting through real world experience. When they first went to college, we gave them an allowance and helped them budget so they wouldn’t run out of money. We gave them a dollar amount and guidelines but left it up to them to work out the details. After a month or two of running out of money a week shy of the next allowance, they got the hang of it.

Financial education can feel overwhelming, especially in the beginning, and having someone to walk you through the process is immensely helpful. The challenge with listening to podcasts, reading articles, etc. is that it’s difficult to know if you are following and executing the advice correctly. This goes double for those that are just starting out. With investing, there is always risk. When there is the risk of losing money and the opportunity seems unclear, people will often choose to “play it safe” and skip it altogether. It’s important to have someone knowledgeable in your corner to show you the ropes.

With everything you know now, if you could go back in time, what about personal finance do you wish you had learned sooner?

I went from being absolutely broke to earning a substantial salary in a short period of time. I was relatively young (30’s). I knew what to do with investing but much less about long-term tax implications and insurance. For instance, I knew of life insurance to protect from the worst but had no idea of other, more complicated insurance products. You can do things with insurance that have significant long-term tax advantages, and if I knew earlier, I would have taken advantage of them.

Secondly, in my professional life, I wish I knew more about how to manage risk associated with being a partner in a private company. When working for a private business with no imminent exit on the horizon, what’s the best way to make personal finance decisions? For example, keeping more money outside the firm, in safe investments, proved to be useful, but I am not sure that what I did was particularly efficient. Knowing more about insurance coverage in the event that you can’t work or need to pay large expenses would have helped with peace of mind too. You can’t access your capital when it’s in the firm so understanding what tools and strategies can reduce risk is key.