dsmWealth: June 15, 2023

BY STEVE DINNEN

Yes, it’s lunch. But the bimonthly gatherings of the Financial Planning Association of Iowa provide more than nutrition. They also serve opportunities for the people who manage billions of dollars in client assets to develop their expertise.

Anyone can call themselves a financial planner. But the money-management industry has created a specialist, a certified financial planner. They come from diverse backgrounds, with degrees in business or finance or even home economics, and have undergone a course of study and exam offered by the Certified Financial Planner Board of Standards. Passing the test is a mark of distinction that signifies that someone is especially knowledgeable in money matters and presumably can serve a client well.

To maintain their accreditation, CFPs continue their education, just like licensed lawyers or certified public accountants. This ongoing learning can come from online sessions, conventions or, around here, luncheons that the Financial Planning Association of Iowa organizes every other month at Des Moines Golf and Country Club.

The group’s president, Tyler Conley from the West Des Moines financial planning firm Syverson Strege, said the gatherings are actually threefold affairs, with food, education and networking. “That’s where I got my job,” he said.

The training subjects rotate among five themes: taxes, retirement, insurance, investments and estate planning. The group often discusses ethics, too.

Here are just a few of the recent topics:

Decumulation diversification. That’s how to draw down your assets and the impact on the Monte Carlo score, a popular modeling tool to predict the probability of a variety of outcomes when random variables are a factor.

Technology’s impact on aging. Financial planners are becoming longevity specialists, since most of us are living longer and need to nurture our assets.

Farmland values. Randy Hertz of Hertz Associates discussed investment opportunities in agricultural real estate.

Insurance-based risk mitigation tools.

Exchange-traded fund (ETF) structures.

Asset protection against long-term care costs.

Speakers come from a range of industries, including financial services and insurance. The best presenters are both informative and entertaining, which isn’t always easy. (Just try and put some sparkle on a 30-minute talk about draw-down diversification.)

You want your lawyer to be smart, maybe even smarter than you. So why not expect the same of people handling your money?

Buck the odds: Save more for retirement
BY STEVE DINNEN

When I was doing a little research for our recent story on changes to retirement savings plans, I spotted some truly bleak news: We are in desperate straits when it comes to saving for retirement.

Just 65% of employees who are eligible for workplace 401(k) programs actually participate. Among those who do, 40% take cash out of their plan when they change jobs. This both depletes their account and triggers a tax penalty that further reduces their income. Experts estimate that 20% of people who lost their jobs during the pandemic cashed out their 401(k) plans altogether.

According to U.S. Census Bureau data, 50% of women and 47% of men between the ages of 55 and 66 have no retirement savings. Zero.

Among those who have squirreled away some money, the Federal Reserve estimates that the average American has $65,000 in retirement savings. That bumps to about $255,200 by the time the average American hits retirement age. Statistically, about 10% of retirees have saved at least $1 million.

If you’re reading dsmWealth, you already know about the importance of saving. But if you need help or you know someone who does, contact a financial planner ASAP to get on the right track.

The pros' investment strategies for today's market
BY CORYANNE HICKS FOR KIPLINGER

Wall Street's most prevalent investment strategies looking out toward the rest of 2023 look much, much different than they did this time a year ago.

Around this time last year, the S&P 500 had just entered a bear market, putting an end to the 2020-2022 bull run.

Additionally, the Federal Reserve was on the cusp of instigating the third of what would become 10 rate hikes between the start of 2022 and today. But no one knew back then just how far or fast these hikes would go, leaving investors to balance on a precarious perch of uncertainty amid a world that was still trying to find its footing in the wake of COVID-19.

Today, the situation is hardly any more certain, but for different reasons. The Russia-Ukraine war has led to tremendous hardship and global uncertainty. And yet the S&P 500 is up by more than 13% year-to-date and the Nasdaq Composite Index has climbed nearly 30% since January. Spending is on the rise in the United States and the unemployment rate has remained low. Inflation, however, remains elevated with at least one more rate hike penciled in for July.

Meanwhile, the word "recession" is getting bandied about in the media, with experts arguing over the possibility of 2023 bringing one upon the U.S. — if it hasn't already begun.

How, then, should investors go about their business in this evolving environment? We've asked several fund managers and other industry experts just that — and in turn, they've shared a handful of the investment strategies they like for the rest of 2023:

Stay the course.
Focus on what companies can control.
Invest in bonds (but not just any bonds).
Bank on banks.

Read the full article to learn more.

Tigger or Eeyore: How your personality affects your portfolio
Neuroticism and openness, in particular, are closely linked to investors’ willingness to buy stocks

BY LISA WARD FOR THE WALL STREET JOURNAL

Can certain personality traits explain investors’ risk tolerance and investment decisions?

A forthcoming paper suggests they might. Specifically, the authors found that two personality traits — neuroticism and openness — significantly affect how investors perceive the economy, financial markets and their likelihood to buy stocks or stock funds, with those who are less neurotic and more open tending to have a higher allocation to equities.

While the authors primarily studied investors in the U.S., they also identified similar patterns among investors in Germany, Australia and China.

“Investors often have very different portfolios,” said one of the paper’s co-authors, Hongjun Yan, who teaches finance at DePaul University. “Traditionally, economists focus on risk aversion and market expectations, but in this paper we argue that well-known personality traits — extroversion, agreeableness, openness, conscientiousness and neuroticism — provide a new dimension to explain investors’ choices.

“In the Winnie-the-Pooh stories, Tigger is always excited and optimistic while Eeyore is always down and pessimistic. You might expect their investment portfolios to look very different and reflect their overall outlook.”

Read the full article to learn about the researchers' methodology and conclusions.