The question of whether or not the U.S. President or a particular party has an impact–positively or negatively–on stocks, bonds, unemployment, inflation, the deficit, and GDP growth–has been flying around like crazy. But especially in the midst of a contentious election cycle, it’s never been harder to find clear answers.
But take a glance at this interactive chart that enables you to click on each U.S. President going all the way back to 1929 to see what the major market and economic indicators looked like for each presidential cycle. I think you’ll find that it’s conclusively inconclusive:
So, should you consider changing your investment plan ahead of the election?
Short answer: No.
And here’s the slightly longer answer from one of the brightest investment people I know (and a darn good guitar player), Jared Kizer, CFA, Chief Investment Officer, Buckingham Wealth Partners:
The last time I put a presidential campaign sign in my front yard was 2004. We lived on a small court, and we had just moved in that September. One of our neighbors was another young couple, but the other two families had lived there since the houses were built in 1960.
My political convictions were (and are) important to me, but one day, as I pulled into the court and saw the sign, it struck me that while it may have been a bridge to one neighbor, it could almost certainly be a stumbling block for another. I hadn’t even met all my neighbors in person yet—did I really want my vote to be the first impression I made?
I pulled out the sign, and I haven’t raised another since.
Sometimes I have to pinch myself, because as a financial advisor, my job is to meet people, learn about what’s most important to them, help them articulate those values as intentions and goals, and then help create and follow a plan designed to reach them. What a gig, and what a privilege!
One of the greatest gifts of my 20 years and counting in the business is the wide variety of people with whom I’ve been able to engage. While you might tend to think that there is a stereotypical financial advisory client, my experience has been anything but uniform. From teaching college students—one of the best educations I’ve ever received—to advising individuals and families, it’s the striking differences between people that have left an indelible mark on me.
Sure, aside from the college students, they all had something in common—they were blessed with means sufficient enough to hire someone to help in its stewardship—but that’s where the similarities stopped. And their political proclivities have ranged across a vast continuum.
Especially over the last decade, and increasingly over the past four years, I’ve also seen these political opinions manifest as convictions so gripping that I’d describe them as visceral. People seem increasingly concerned with the potential for politics to shape their lives externally, and these concerns are so deeply internalized that I can see, hear and feel the weight of them in the faces and voices of my clients.
These feelings seem just as strong across the political spectrum. It’s not uncommon for us, as advisors, to have a conversation with someone who is convinced that their livelihood is doomed and the very fate of our nation sealed if so-and-so wins only to find, in the very next conversation, that another person is convinced of something equally cataclysmic if such-and-such wins.
So what are we advisors supposed to do? How do we navigate these intense emotions with our clients? And how should we navigate the opinions we hold, knowing that our convictions are rarely, if ever, going to be entirely aligned with those of our clients?
1. Know your role.
Please note I did not invoke the ancient Greek aphorism “Know thyself” here. Knowing thyself is, of course, good and important, regardless of your occupation, and perhaps especially for people in the people business, like financial advisors. But if you’ve chosen to be a financial advisor—a true fiduciary financial advisor—you’ve taken on a duty to prioritize your clients’ best interest. That means you’ve also chosen to dampen, and when appropriate mute, your own opinions and prioritize those of your clients.
Our job as financial advisors isn’t to impose our values and goals and plans on our clients, but to explore their values and goals in pursuit of unique financial plans of their inspiration and creation. Sharing our opinions—or worse yet, trying to convince our clients of the worth of those opinions and the fallacy of their own—simply isn’t part of our job, and it’s possible, if not likely, that doing so will hinder our abilities as an advisor.
2. Know your client.
Do you remember the directive to KYC—Know Your Client—that showed up in the regulatory exams many of us have taken as advisors? Well, it’s always a good time to exercise this dictate, especially when clients raise their political opinions and concerns. Why especially? Because however they appear, political opinions tend to be driven by emotions, and emotions tend to illustrate motivations, and motivations are what drive successful financial plans.
It’s not the what of the opinion that matters to us so much as the why. Instead of hearing a phrase or slogan that might lead you to stereotype your client, see the interaction as an opportunity get beneath the words and find the feelings.
“Well, I didn’t get into this business because I was interested in discussing anyone’s feelings!” an advisor might be inclined to think. But whether you like it or not, what we’ve learned from the field of behavioral economics and science is that feelings and emotions are what drive financial decisions—more so than any numerical calculation or spreadsheet.
We have a choice, therefore, to ignore and avoid feelings and emotions in our work or to become more skilled at exploring and navigating them. And considering the increasing commoditization of the quantitative elements of our work, mastering the qualitative arts is likely also good business.
We can’t just be financial planners anymore—we need to be financial life planners.
What does this look like in practice? It involves the institutionalization of the following:
· Exploring—active listening, repeating and reframing what you’ve heard
· Silence—leaving enough space to allow clients to follow up on their own thoughts, even before asking questions
· Empathizing—putting yourself in their shoes
· Questioning—the more open-ended, the better
· Validating—acknowledging and affirming
· Connecting—emotions to intentions to plans
· Confirming—clarifying, using their words
· Reminding—refamiliarizing people who are prone to forgetting and changing
What doesn’t it look like? You know the big ones—talking, telling, lecturing, shaming. But you also have to be careful of a few other tendencies that are more common among advisors and seemingly less dangerous. Teaching, for instance, is often a one-way street, and while there are always times for educating with clients, it’s better done in response to expressed curiosity. Consulting is a transaction of knowledge and experience to the ignorant, whereas good advising is more collaborative and less condescending.
Simply put, there needs to be less of us and more of them.
As you can see, these principles apply to a lot more in our work with clients than just their political beliefs, but hopefully they also provide a roadmap for effectively navigating the potentially dangerous waters of partisanship.
Personally, I’ve tried to develop a couple habits to help me avoid a shipwreck:
I don’t talk about politics online and in social media. I know many phenomenal advisors who do, and I cast no judgement whatsoever on their decisions. For some segment of advisors, this may actually be a business decision, a way to engage a target niche client base. Regardless, one can certainly make the case that “we’re all adults here” and that we should be able to separate our business dealings from our personal opinions and expect that clients are capable of doing the same. I’ve just yet to see anyone convince anyone else of anything about any topic in the online arena, and to me, no tweet or post is worth creating relational dissonance.
It may, however, be easier to avoid offending than it is to avoid being offended in the emotionally charged landscape of conversation topics, especially right now. So how do I navigate it when a client shares something that I don’t agree with? First, I’ll try to find common ground, to connect to a shared belief, and this need not take place aloud. When that’s not possible, when I’m tempted to change my opinion of a client based on an opinion of theirs I find disagreeable, I’ll remind myself of something else that I admire about them, and when possible, I’ll share that affirmation.
We’ve chosen a vocational path—to be a guide, not a hero; to be a board member, not the boss; to be an amplifier, not the instrument; to be a coach, not the star. And when we know our role, it positions us to do a much better job of knowing and serving our clients—especially in the midst of, and following, a contentious election cycle.
It’s become almost passé to bemoan the exorbitant cost of a college education and the collective debt burden, now over $1.6 trillion, resting on the shoulders of U.S. students and parents. While it’s true that college tuition has risen at twice the rate of inflation, many academic consumers refuse to recognize their complicity in skyrocketing costs. Indeed, educational institutions charge what they do because we’re willing to pay for it.
Yet a perplexing antinomy exists—a college education can be excessively expensive, holding students and their benefactors financially hostage for decades, or it can be surprisingly inexpensive. Case in point:
Harvard Vs. Harford
Without accounting for any financial aid or scholarships, a student could trade one semester of Ivy League education for a four-year undergraduate degree from any number of excellent state universities. Specifically, if a student, living in Harford County, Maryland, were to commute from home to Harford Community College for two years and then commute to Towson University for the second two years, the total cost of tuition and fees—for an entire undergraduate degree—would be approximately $27,826 by my calculations, based on 2020 published estimates. That would buy you just a hair under 10% of four years of tuition, room, board and fees at Harvard–it wouldn’t even cover a single semester.
This is quite obviously a gross oversimplification, only factoring one of many important dimensions of the full college experience, and not accounting for the fact that few students at any college pay full price, but the illustration forces us to recognize that there are other educational options available aside from paying a fortune.
It also begs the question: In a day and age when the undergraduate degree has been largely commoditized and viewed as a prerequisite for virtually every white collar job available, do the intangible benefits to be derived from any collegiate scenario costing more than the $27,826 represent a good value proposition? Is the nearly $200,000 premium (in today’s dollars) you pay for the elite private or Ivy League undergraduate experience worth it? Is the $100,000 premium you pay to live on campus at an out-of-state, state university worth it? Is the $50,000 premium you pay to live and eat on campus at your state university worth it?
The answer for any of the above may very well be an emphatic and justifiable YES! but the value proposition for each student/school/benefactor combination will be different and worthy of exploration. Here’s a four step process that will help you make that determination and properly fund the resulting decisions.
Step 1: Can you?
This instruction is directed largely to parents, but the logic is identical and the process just as important for those flying solo in their educational endeavors. In developing your Family Education Policy, you must first ask the question “Can I?” What is a reasonable expense for your children’s education that your household could bear without unduly hampering your own financial plan, present and future?
It’s actually a selfish act to prioritize your children’s education over your retirement savings, because it will be much less costly for your children to pay off finite student loans than to bail out parents in the midst of a financial and health crisis in their old age. If you can’t, don’t; then set your pride aside and discuss this reality with your budding scholars.
If you’re having trouble answering the question Can I? without more of a frame of reference, let me give you a rough idea of how much you’d have to save monthly, from the day your child is born, for 18 years, assuming the cost of education rises at 5% and you’re able to earn 7% on your savings:
Community college / In-state State U commuter: $ 155/ mo
In-state State U resident: $ 542/ mo
Out-of-state State U resident: $ 857/ mo
Premier private / Ivy League resident: $1,618/ mo
Does that offer some perspective?
Step 2: Will you?
After determining whether you can, you should follow that with “Will I?” The financial entities who sell and administer education savings plans have seemingly colluded with academia to create an unspoken moral imperative for parents to fund their children’s college education. And while I have no desire to strip you of a healthy desire to pay for your child’s post-secondary schooling, I want to give you the freedom to recognize that it is your choice to make. This is an opportunity to parent, and to make a mark on your children based on your articulated personal principles and goals—the first step of every good financial plan. I urge you to capitalize on that opportunity.
Step 3: Develop a Family Education Policy
At this point, you can, with the aid of your co-parent, clearly set forth a Family Education Policy. This is your answer to the question your kids will eventually ask: “Hey, Katie’s parents told her they would pay [whatever] for college—what are you doing for me?” My hope is that you won’t even wait for that query to arrive, proactively communicating this message even before curiosity forces the issue. Maybe you’ll offer to pay up-to the four-year cost of an in-state state university education; or possibly up-to four years at your alma mater (although I’d warn you that this common directive seems less about them and more about you); maybe you’ll offer to pay the first two years of school, or a fascinating idea one client proposed—the second two years (to ensure her children were serious about the endeavor).
If you have the wherewithal and desire to offer your children the educational blank check—you can go wherever your heart desires that will accept you—by all means, do so. But if all you have is the desire and not the wherewithal, you’re doing no one a favor.
Step 4: Develop an Education Savings Plan
The number 529 has become nearly synonymous with education savings, and in part for good reason. 529 plans offer education savers options for hedging the future costs of education and/or tax privilege. Prepaid tuition plans give us the opportunity to pay for tomorrow’s tuition at today’s prices. The plans are state administered and typically only cover the cost of tuition in your state (although you may be able to use the equivalent of the tuition cost of your state’s universities in another state). If the cost of education continues to rise at its current pace, this would appear to be a good hedge, but the solidity of your prepaid plan of choice must also be considered. Since many states are enduring financial difficulties of their own, the solvency of some plans has been reasonably questioned.
A 529 investment savings plan is very different conceptually. It is an investment bucket of mutual funds you own that receives tax privilege similar to that of a Roth IRA. You contribute after-tax dollars to the plan, and the principal and growth can be distributed tax-free if used for a wide range of qualified education expenses. You may also receive a state tax deduction for a portion of your contribution. The contribution limits are quite liberal, allowing $15,000 per parent (or even grandparent), per child in 2020, also with an allowance to prefund up to five years. But since the funds invested in these accounts are subject to market volatility, a bigger concern over the past decade has been whether or not you are actually making money at all—much less over the college inflation factor.
If your children are very young and you can stomach the volatility, a college investment savings plan is an excellent tool, but I highly recommend using a no-load version of one of these 529 plans so you don’t start your investment in the hole via a brokerage commission. If your children are older and you live in a state with a strong prepaid tuition plan, that may be a good option to consider. But in either of these cases, I recommend you apply the 50% Rule. Save 50% of your expected education needs in education-specific 529 plans, but store the other 50% in conservatively invested taxable accounts (or even savings accounts and CDs) since there are so many other variables at work.
Does education have a price? Learning has inherent value which is incalculable. Education is one of the primary ways we learn. I taught at the college level for seven years and believe that it is one of my most important contributions; but while the educational process may be priceless, we must not ignore the associated price tag.
This article, updated in 2020, was originally published in my blog on Forbes.com.
Do you ever get so caught up in your own head, in your own stuff, that you lose perspective? I can’t imagine a time that would be more inclined to lead us to insular thinking, self-pity, conspiracy theorizing, and perspective losing than this season we’re trudging through.
So in this week’s Financial LIFE Planning weekly installment, you’ll get some perspective that I hope will give you peace and help you make wise financial, and other, decisions:
An exclusive FLiP video chat with Michael O’Neal, the Executive Director of global non-profit, ONEWORLD Health
A confounding Weekly Market Update with a side of cheese
A reminder about our capacity to overestimate our own capabilities
Oh, and Happy Mothers Day, to mine and all of you moms!
How to Get More Than You Give
Have you ever noticed that when you give to someone whose needs are greater than yours, you actually feel like you have more? Whether it’s a friend in need of a pick-me-up, an investment of your time at a soup kitchen, or a charitable contribution, this change in perspective is one of three major benefits of giving.
The other two? Well, in addition to our perspective being changed, we experience a biological phenomenon, an endorphin rush. Apparently, we’re biologically wired to feel good when we give. Cool, right? And pragmatically, depending on how (or if) you file your tax return, you may also get a rebate on a portion of your financial gifts…check with your CPA.
This week, I recorded a video chat I had with the Executive Director of ONEWORLD Health, Michael O’Neal, specifically for you! We discussed their unique approach to sustainable development work that has enabled them to survive the COVID-19 crisis–and the success they’ve had cultivating relationships with individuals, families, businesses, and even rock bands, like NEEDTOBREATHE, who alone has raised over $2.3 million for the work their doing.
He also explains why we always get more than we give. Click below to watch the nine-minute excerpt, or top off your coffee and click HERE for the full 23-minute interview.
And yes, if you’re jonesing to put that give-more-than-you-get business to the test right now, it’s easy–click HERE and hit the Donate button. And if you choose to give $50 or more, please let me know, because I’d like to send you a personal thank you.
Weekly Market Update:
After two marginally down weeks, the market had another week in the green, almost confoundingly so:
+2.56% DJIA (30 big U.S. companies)
+3.50% S&P (500 big U.S. companies)
+2.71% EFA (~900 international companies)
The biggest question for most people is, “How!? How is the market going up when the economic news is historically bad?” It’s true: Unemployment this week hit 14.7%–the worst since the Great Depression.
Although clearly indeed of a beard trim–sorry, Mom!–I joined Jill Wagner on Cheddar (an online TV channel) to discuss this seemingly odd phenomenon, and to offer some suggestions for the unemployed, under-employed, self-employed, and gainfully-employed in these challenging times:
Is the wind at your back?
I’m not a “cyclist,” but I do love to ride my bike. Last week, I took a new ride, recommended by my good friend–who is a cyclist–that stretched me a bit, and gave me another healthy dose of perspective.
I love to have a destination, so I set my course for the Bulls Island Ferry, a beautiful spot in Awendaw, SC. The total ride was about 20 miles, and on the way there, I felt like an Olympian, averaging about 18 mph. (“Maybe I can call myself a cyclist,” I was beginning to think.
With head held high, I took in the beautiful view, nodded proudly to the couple that I passed on the last mile, and headed homeward. Only then did I realize that I’d had a meaningful tailwind that I’d now be fighting the entire way home. The wind had been at my back.
And as I was thinking about a contingency plan on mile 15–suffering the embarassment of calling my wife and asking her to pick me up in the middle of nowhere, a length to which I thank the Lord I didn’t (quite) have to go–a question hit me like an easterly wind pounding route 17:
How much of whatever I’ve done well in life was actually just thanks to a solid tailwind? Being born into a great family? In the right zip code? Being on the right team? Having selfless friends? Working with amazing people?
How about you? Is it possible that your successes have been aided by a tailwind? If so, who is deserving of thanks? (In addition to your mother, of course!)
How about now? If you feel like a failure at the moment, is it possible you’re just facing the greatest economic headwind of a generation? Who can you ask for help?
Or if you’re fortunate enough to be cranking through this crisis at top speed, who can you help?
And if you think of the people who’ve been your tailwind, I hope you take a moment–why not now?–to thank them.
The spent lungs and sore butt were worth the perspective…and so was the view:
I hope you have a great Mother’s Day and find a healthy tailwind this week!
Are you a Complainer, Consumer or Contributor in the workplace? In Adam Grant’s book, Give and Take, he differentiates between three types of people–Givers, Matchers and Takers–categorizations that have implications in both our personal and professional lives.
But as an educator–and student–in the realm of financial advisory development, it struck me that Grant’s triumvirate may have an analogous trio of traits that accurately describes our posture toward learning how to be better professionals. (And people.)
I’m sure you’re not a Complainer, but I’ll bet you know how to spot one, whether that person is a friend, colleague or client. Complainers tend to have an eye for the imperfection in everything, and they almost seem to enjoy pointing it out. They seek to disagree and magnify their discontent. They capitalize on opportunities to provide criticism, but it’s rarely constructive. And they also tend to be vocal about it, creating dissatisfaction for others where it may not have previously existed.
“As you can see, we’re experiencing rough air at the moment. But as a reminder, we can’t predict rough air,” said the Delta airline pilot ferrying me from St. Louis to Charleston (via Atlanta—always Atlanta), “so please keep your seatbelts on whenever you are seated.”
Thank you, sir, for giving me precisely the hint of inspiration I needed to frame this week’s note of encouragement while in the midst of one of the crazier market stretches we’ve seen in a couple of decades!
DANIEL ROLAND/AFP/Getty Images
Of course, statistically speaking, this bout of stock market extremism is more the norm than the exception. No, it’s not particularly normal to have thousand-point-up or -down days for the Dow Jones Industrial Index. But volatility—market ups and downs—is, indeed, more typical than placid markets.
One of the very few market predictions I (or anybody, for that matter) can responsibly make:
The market is more likely to be volatile than not.
“I’m calling it — this is an Apple commercial,” said my 14-year-old son, about halfway into the visually stunning emotional appeal for educational experimentation that appeared on our TV while we were otherwise dedicating ourselves to one of the best college football games of the season.
Yes, it’s about that time again, when companies are rolling out new commercial campaigns in conjunction with some of the year’s most viewed sporting events–beginning with the college football playoff and culminating, of course, with the only spectator sporting event where no one wants to cede their seat during the commercials, the Super Bowl.
“I think you’re right,” I said to my son (especially gripped because the commercial featured a young man sharing a defining moment with his beloved parents via his smartphone), just as the musical crescendo sent a chill down my spine.
But then came the verdict.
It wasn’t Apple, after all, even though the tech company is known for its artistic commercial flair in imploring viewers to engage technology in the most relational ways. It was a mainstay financial company inviting us to bring the benefit of our long-term financial planning for the future into the present.
“Wait a minute, though,” I said to my boys, “These guys are notorious for hard-selling over-priced insurance policies for big commissions!”
“Whatever they are, it’s a great commercial,” my 12-year-old son concluded before the Oklahoma Sooners and the Georgia Bulldogs again filled the screen.
He was absolutely right. But as I reflected on the power of this particular message and medium, I’ve had this lingering sense that there’s a real danger present.
What better way to start off the New Year than in New York with the TODAY Show? Despite the 18 below windchill whipping through the city streets, I had a blast with Sheinelle Jones and Craig Melvin discussing the most damaging forms of debt, the top two budgeting apps, the best kinds of checking accounts, how you should respond to market highs–and lows–and how best to stay motivated to turn those financial resolutions into long-term habits!
Click HERE or on the box above to watch the segment.
I’m a sloooow reader–so I’m never going to impress anyone with the total number of books I read in a year (other than myself!). But I do try to immerse myself in as much reading as possible each year.
In the past, I’d try to read a lot of specifically financial books considering my vocation as a financial advisor and writer, and I confess I even suffered guilt about reading anything other than non-fiction until more recently. But because of my conviction that personal finance is more personal than it is finance, I’ve worked to broaden my base of reading.
This year in particular, I learned a lot about people (and therefore money) through biographies, historical non-fiction and fiction, books on charity and spirituality, and an increasing number of well-written novels, in addition to a couple financial books. (Otherwise, I’ve found that the world of financial planning is so ever-changing that I get the most current information I need from articles, white papers (zzzzzzzz), blog posts, podcasts and conferences.)
Below you’ll see my top three favorite books that I completed in 2017 with short reviews, followed by a list of the remaining books I read this year and links to my Goodreads reviews:
There’s not much more to say than, “Wow.” This book is a masterpiece, and it’s impossible not to leave it without concluding, again, that Lincoln was a mastermind. His ability to be civil while strong, conciliatory while persuasive, articulate without condescension, and especially to be a friend to political foes whom he knew sought to undermine him–all at the unquestionable height of our country’s political division–seems so far from what is exhibited in our present.
Doris Kearns Goodwin is certainly among those precious few non-fiction writers who craft a narrative out of lifeless facts that comes to life like a novel, without sacrificing any of its veracity.
To be clear, this book is neither new (it was published in 2006) nor short (944 pages–I “read” it on Audible), but it seems at no time more prescient–or necessary–than now.
“This was given to me, because that was going to kill me,” entrepreneur Lee Janik told me.
“That” was the job of owning and running a construction company he started in Ohio in the mid-2000s.
“This” was the sacred experience of fly fishing, and ultimately building a multinational craft rod-making company.
“It’s like going to church.” That’s how Janik describes fly fishing, his passion, which nursed him through the Great Recession as his commercial real estate development and construction company hung on for dear life.
The company survived, and ultimately thrived, but his therapeutic hobby grew into something more. At the moment, “this” has evolved into Clutch Fly Rods, the company Janik founded selling high-end fly rods that is fast becoming a disruptor in its space.