Partners for Prosperity

Nuclear Family Financial Models

Kim Butler — Wed, 01 Feb 2012 15:00:54 +0000

Nuclear Family Financial Models,
Extended Family Realities

Look at this picture of the silver-haired couple. It is a stock photo, one that could be used as the advertising background for any number of products or services. But since this is a newsletter about personal financial issues, what topic is most likely associated with this image?

Can you say “Retirement Planning”?

You should, because that’s the tagline that appears with this photo on the homepage for a prominent financial services company. And since a picture is worth a thousand words, there’s a lot more being said in this image than just those two words. For instance, it would be easy to imagine…

The couple is married. While they are obviously older, they are healthy, attractive, well-dressed and self-confident. They are moderately wealthy, have led successful, happy lives and are optimistic about their future together.

With a bit more imagination, it would also be logical to assume…

The couple’s two or three children are independent, successful adults who have careers and families of their own, and wonderful grandchildren that love to come and visit. With family, career and financial objectives completed, this wise, contented couple is now ready to plan a rewarding and relaxing retirement.

In summation, the unspoken message this photo presents is the picture-perfect financial conclusion for the ideal nuclear family. It’s the last snapshot in a social motif that advertisers have been selling since the 1940s. The image sequence begins with boy meets girl. Soon after, the photos show they are working, getting married, having kids, and buying a house (the order may vary). Then, for the next two decades, there’s a montage of raising children, establishing a career, and accumulating a nest egg. Finally, the sequence comes full circle, as the silver-haired boy and girl live happily ever after. It’s the American Dream.

There’s a lot to like about this idealized version of nuclear family life in the United States. Who wouldn’t want to look and feel good after 60, have well-adjusted independent adult children, adorable grandchildren, and finish with both the money and companionship to enjoy a relaxed and rewarding retirement? That’s not a bad life at all.

In the financial services field, it’s no surprise that a lot of the marketing is designed to resonate with these nuclear family themes. Life insurance is often associated with protecting your nuclear family. College funding plans tap into the parental desire to help your children become successful nuclear family units of their own. Long-term care insurance is there so your nuclear family unit will not be a burden to other family units, particularly your children. And most retirement planning occurs within a nuclear family paradigm; the computer models and portfolio analyses are focused on guaranteeing you and your spouse have enough to live on for the rest of your lives.

But ironically, when advertisers in the financial services field focus their marketing efforts on nuclear family success, they may be making it harder to achieve it – and overlooking some great opportunities.

The Nuclear Family is an Anomaly in History

The concept of the nuclear family unit – broadly defined as “a household consisting of a father, a mother and their children” – didn’t exist before the 20th century. (The Merriam-Webster dictionary first listed the term in 1947.) Nuclear families have certainly existed, but in the past, they were typically identified as components of extended families. One’s true family unit included parents, siblings, grandparents, grandchildren, and other close relations. To a great extent, the well-being and obligations of any nuclear family units were intimately connected to the well-being and obligations of the extended family. The extended family owned property, provided a structure for transferring wealth to successive generations, and offered protection and support. In fact, prior to the Industrial Revolution, it was almost impossible for nuclear family units to be financially viable – a single family couldn’t own enough property or provide enough labor or protection to function independently.

In Western societies, the Industrial Revolution freed nuclear family units from the need to remain connected to an extended family. Factory workers didn’t need land to make a living, didn’t need to become apprentices to find work, and didn’t need to stay in their hometowns. Instead, nuclear families found they could derive extended family benefits from what Stanford professor Avner Greif calls “corporate” institutions, such as fraternal organizations, unions, large employers and governments. Since the end of the 19th century, these corporate entities have provided many of the institutional benefits that once could only be found in the context of an extended family. These developments allowed nuclear family units some freedom to determine how they will construct an extended family – who would assist in childcare, protect their employment rights, provide a retirement, care for them in their old age, etc. One hundred and fifty years later, most of us see this corporate model of social support simply as the way things are. But Greif points out that “providing institutions through corporations is a novelty.”

The Persistence of Extended Family Connections

Even as industrialized modern society has mitigated much of the financial necessity for extended family connections, it has also brought forth other issues that create new financial and social concerns between nuclear families and extended families.

Increased longevity makes for circumstances where adult children must become caretakers for their parents, perhaps even as these children are nearing retirement. Divorce, while no longer having a social stigma, often results in the realignment of nuclear families through remarriage and can result in major shifts in financial obligations and inheritance. “Boomerang” children – those who leave only to return because of a divorce, job loss or other disruption – can dramatically alter the nuclear family storyline. And because the health of corporate extended family units is closely connected to the economy and demographics, many of the financial supports once provided by corporate entities may no longer be available; there are no lifetime employment guarantees, government assistance programs may be slashed, and pensions may diminish or disappear. In short, even in “modern” society, it is difficult for a nuclear family to remain unaffected by its extended family connections. To make financial plans without considering one’s extended family is short-sighted and unrealistic.

The Reality of Extended Family Connections

In some ways, the idealized nuclear family financial scenario is unrealistic. In order for a nuclear family to succeed “on its own,” every nuclear family with a connection to it has to succeed as well – the parents need to be self-sufficient and so do the kids. It really helps if there’s no divorce, no unemployment, no disease or disability, and no untimely deaths among the three generations – and it helps if the nuclear family plan consists of an only child, so there aren’t any siblings who might have issues. That’s a lot of variables that have to go right, and many are beyond individual control.

Consider just three statistics:

In 2008, data compiled by the National Alliance for Caregiving from the U.S. Health and Retirement Study found that 28% of women in the United States were providing care for an aging parent.

A 2005 report from the Census Bureau on disability determined that 2 in every 7 families reported at least one member with a disability.

The same report stated that one in 26 American families is raising children with a disability.

Bottom line: The numbers say it is likely that your financial world will be impacted by your extended family.

The Value of Extended Family Connections

In this era where the cultural focus is on the nuclear family, it’s easy to downplay extended family connections. It’s the stereotypical mother-in-law who always interferes, the ne’er-do-well brother who hits you up for a loan that will never be repaid, or the crazy uncle who says the most embarrassing things at family gatherings. But even today, extended family connections can be valuable assets in making a better financial life – for everyone involved.

There may not be the same binding sociological factors of 200 years ago, but kinship allegiances still matter. Most people have a keen interest in the well-being of family members, and given the right circumstances, have great incentive to help, even to sacrifice. Successful grandparents may be sources of financial wisdom and capital, perhaps assisting children and grandchildren with the costs of education, or subsidizing the purchase of a home. Siblings can often become great business partners. Specialized living arrangements for elderly family members may offer them a level of care and dignity that could never be obtained elsewhere.

Including extended family considerations in financial programs is not the prevailing mindset today, but historically, extended families have been powerhouses for wealth accumulation because there are strong incentives for long-term, multi-generational planning. Unlike a nuclear family perspective, an accumulation plan isn’t intended simply for consumption in retirement. Rather, the extended family perspective is often about building, accumulating and passing wealth, as well as enjoying some of it today. If that mindset is maintained over several generations, the cumulative financial benefits can be tremendous.

Of course, there can be challenges to extended family financial arrangements; one of the attractions of keeping your financial program “nuclear” is that you don’t have to worry about anyone else’s behavior. But considering how much might be accomplished when the finances of extended families are coordinated instead of separated, the possibilities are worth exploring. For example…

Could you borrow from extended family at terms more favorable than a bank?

Could you lend to extended family and receive a higher return than a financial institution is paying?

Could pooling assets make it possible to acquire and enjoy a long-term asset (like a vacation property) that you can’t afford on your own?

Could a small amount invested today on behalf of your children and grandchildren be a legacy that reaps huge dividends long after you are gone?

The modern perspective may have changed a lot of our social and financial arrangements, but it hasn’t eliminated the impact of extended family. Given today’s nuclear family focus, we may see most extended family incidents as impediments to our financial well-being. However, it would be misguided to overlook the opportunities that might come from planning and operating with one’s extended family in mind – particularly one’s children.

DO YOUR FINANCIAL PLANS EXTEND BEYOND YOUR NUCLEAR FAMILY?

Inflation Distortions

Kim Butler — Wed, 25 Jan 2012 15:00:29 +0000

INFLATION DISTORTIONS

A bit of financial trivia that received a lot of attention in November was the increased cost of Thanksgiving dinner this year. According to the American Farm Bureau Federations’ survey, a turkey dinner for five with all the fixings cost about $49.20 this year, a 13% increase over last year. This price jump seems significant until it’s compared with the cost of the same meal during the Great Depression.
In a November 26, 2011, article for the Salt Lake City History Examiner, Rachel Quist did some research and calculated the cost of a similar turkey dinner in 1934. The amount: a mere $4.38 – until you adjust for inflation. In today’s dollars, the 1934 meal cost $72.73 – a difference of $23.53. Put another way, a 2011 Thanksgiving dinner cost 32% less than it did in 1934. Who would have expected that?
We all know inflation exists. In fact, we expect it and accept it as part of our financial lives. Some of us can remember when gas was $1.00/gallon and hamburgers were 50 cents, and recognize it’s unlikely we will see those prices again. But over time, inflation makes it hard to determine where we stand. Here’s another example:
According to the Internal Revenue Service, Americans filing a joint tax return in 1953 paid a top marginal tax rate of 92% on taxable income in excess of $400,000. A 92% tax rate is steep in any time period, but it’s the $400,000 threshold that might be worrisome to many people – until you adjust for inflation. According to Department of Labor statistics, $400,000 of taxable income is equivalent to $3.4 million in today’s dollars. So while the top-end tax rates were obviously high in 1953, a very small percentage of Americans reached that level of taxable income.
Inflation’s greatest distortions of perceived value occur when longer time periods are involved. This is one of the reasons calculating a “retirement number” is a dicey proposition. Suppose you are age 45, and want to retire at age 65, with an accumulation that can provide 75% of your annual pre-retirement income. What’s the inflation factor for 20 years? In short order, you find that if inflation averages 3%, $1 million in today’s dollars must increase to almost $2 million to maintain purchasing power. Suddenly, it occurs to you that $1 million is no longer a big number. And the task of reaching your financial goals may suddenly seem overwhelming. But don’t despair. It’s helpful to remember that inflation also tends to bump up incomes as well as costs – although not always to the same degree.
Given the capricious history of inflation, you can’t really “plan” for it, even though you are aware of its financial impact. The only psychologically healthy and rational strategy is to guard against risks, consistently maximize your present transactions, and adjust as you are able. Meanwhile, enjoy the things that are less expensive today, even if inflation makes the price higher.

APPLES AND ORANGES: The Chance To Get Rich vs. The Guarantee of Avoiding Poverty

Kim Butler — Wed, 18 Jan 2012 15:00:58 +0000

APPLES & ORANGES:
The Chance to Get Rich vs. The Guarantee of Avoiding Poverty

“The more things change, the more they stay the same.”

Every now and then, a look backward can be enlightening. That’s the case with the on-going debate about how whole life insurance fits into individual financial programs. Because whole life insurance is a unique financial asset, the challenge for professionals and consumers has always been to properly evaluate its value in relation to other alternatives.
Life Insurance Selling is a professional trade publication with a long history of reporting on issues and trends relating to life insurance. In its November 2011 issue, LIS published an excerpt from a November 1967 article titled “Apples or Oranges – A Meaningful Comparison?” by R. Earl Denman. Although Mr. Denman’s commentary was written 44 years ago, his words remain relevant today; the same issues are still being discussed, and the same distinctions still apply. Here’s the excerpt:

There is such a to-do these days about life insurance versus mutual funds, common stocks, etc., that unless an agent is careful, he finds himself comparing life insurance as an investment with a lot of other things or becoming involved in a long discussion of the history of the stock market, mutual funds, and investment trusts, in which people have put surplus cash in years past, only to find that age did not fulfill the promises of youth.
It has been helpful to me in the past year or so, when the [individual] wanted to compare life insurance with these other things, to remind him that he is comparing apples with oranges.
Life insurance is a guarantee that he and his dependents will not be poor. All the other institutions offer is a chance to get rich. After 45 years of observing people and reading financial results obtained by my friends and acquaintances, I’m convinced that 99 out of 100 need the guarantee that they won’t be poor more than they need the chance to get rich.

Denman’s last paragraph neatly summarizes the apples-and-oranges issue in evaluating whole life insurance: Which objective is more valuable, the guarantee of avoiding poverty or having the opportunity to get rich? Both paths offer the prospect of greater financial security, but address the objective in markedly different ways. And in spite of the many changes in products over the past five decades, consumers today face the same decisions about saving and accumulating: Should I take the risk or play it safe?
Mathematically, the determination of which approach to follow depends on how the variables are manipulated. The results of any mathematical analysis between whole life insurance and another investment and/or combination of investments and term insurance will hinge largely on the projected rate of return, tax assumptions and length of time used for comparison. Of course, the math isn’t the whole story; there are also the intangible aspects of the risk-vs.-guarantee issue.
Historically, Americans’ response to investment risk has hinged on their perceptions. When double-digit annual returns were an every-year expectation, money flowed into all sorts of equity products. Sure, it was possible to lose money, but it seemed so many people were profiting that the risk of loss seemed minimal. Conversely, the performance of many equity products in the past decade has driven many investors to re-evaluate their risk tolerance, and guess what? Whole life is back in the discussion again. Insurance companies run television ads during football games promoting whole life insurance, and the Wall Street Journal features articles like “Honestly, What’s the Best Policy?” explaining why Baby Boomers and their children may want to invest in whole life insurance.

Psst!… It’s not an either-or decision

In real life, no one insists that you decide between apples or oranges; you can have both. Likewise, although there is a tendency for experts to make an exclusive declaration in favor of one option over another, many American consumers would benefit from a financial approach that included both the guarantee of avoiding poverty and the chance to get rich. In fact, having the guarantees against poverty might make it easier to take advantage of chances to get rich.
Whole life insurance is a unique financial product, but one with a proven track record in the market place. Just because comparing whole life to almost everything else may be an apple-and-oranges endeavor, shouldn’t mean you don’t want whole life. The key to a successful whole life program is properly positioning it among your other financial assets, – i.e., finding a place where the apples and oranges can grow together.

WANT TO LEARN HOW TO MAKE WHOLE LIFE FIT IN YOUR FINANCIAL PICTURE? CONTACT US TODAY FOR IDEAS AND DETAILS

Research Shows Financial I.Q. Declines – Just When You’ll Need It Most

Kim Butler — Wed, 11 Jan 2012 15:00:53 +0000

RESEARCH SHOWS FINANCIAL I.Q. DECLINES – JUST WHEN YOU’LL NEED IT MOST

For many Americans, their most important financial decisions come at the end of their lives. They must decide when to retire, when to take Social Security, how to make retirement distributions, which Medicare supplemental insurance to buy, to keep the house or downsize, which investments to choose, how to update the will or establish a trust. These decisions not only involve large dollars, some of them are irrevocable. Yet a new study shows that, regardless of gender or education level, Americans’ financial literacy diminishes rapidly after age 60.
On a 16-question test measuring knowledge of investments, insurance, credit and money basics, scores fell about 2% each year starting after age 60, according to Michael Finke, an associate professor at Texas Tech University and a co-author of the study. For those 80 and older, this decline represented a 50% decrease in financial understanding compared to 60-year-olds.
This information has an additional twist: Finke found that peoples’ confidence in their financial decision-making abilities rises with age. As MarketWatch’s Robert Powell noted in an October 27, 2011, article, this means…
We are not older and wiser. Rather, we are older, less smart and over-confident.
Finke’s research is confirmed by other studies. Experts say the process of making financial decisions relies heavily on two forms of intelligence. The first is crystallized intelligence, which involves both memory and problem-solving skills. The second is fluid intelligence, which is the capacity to think logically and solve problems in novel situations, independent of acquired knowledge. Applied to financial decision-making, one must have fundamental knowledge of basic financial concepts and products, then be able to adapt this knowledge to match one’s unique circumstances.
In 2009, Harvard’s David Laibson reported that cognitive performance improves from youth to middle age, at which point it peaks before beginning a steady decline. Finke confirmed this finding, but added “the decline in cognition is due to a decline in financial literacy.” In other words, as people got older, they had a harder time deciphering financial information.
Given their combination of life experience and mental acuity, middle-aged adults are in their decision-making prime. But what if your big financial decisions are still a few years away? Are there steps you can take today to minimize the likelihood of making a poor decision in the future? Here are several suggestions.

Admit your weakness. First and foremost, acknowledge that your ability to make financial decisions will decline after age 60. Don’t think, “This won’t happen to me!” At some point, it will. Just like you won’t be able to run as fast, or jump as high, it’s reasonable – and responsible – to anticipate a decline in your mental capabilities.
Educate early and often. Most financial concepts and products are detailed applications of basic ideas. Life insurance, estate planning, retirement and the like can be understood by the average consumer – it isn’t rocket science. The more you are exposed to both the concepts and the details, the easier it is for you to maintain understanding. It sounds simplistic, but most people would dramatically increase their financial literacy if they just read a personal finance publication on a regular basis. Even better would be scheduling regular meetings with your financial advisors, not every week, but perhaps once a quarter. Regular discussion conversation keeps you sharp.
Prepare a plan today – and put it in writing. No one says you have to wait until the event is upon you before making a decision. For example, since you know the likelihood of diminished capacity in old age, it makes sense to develop a retirement-income plan that won’t require ongoing complex decision-making in the future. Putting these plans in writing serves as a ongoing reference for you, and can instruct others who may offer help or advice.
Find help. Cultivate relationships today with those you might consider delegating some decisions to in the future. If you know your decision-making may slip in later years, begin working with someone who will be 60 when you’re 80. Meet with a family member, knowledgeable friend, or financial expert who has your trust and understands your priorities. Ideally, you want an individual who is younger than you working at a firm that’s older than you – it’s a combination of youth and experience that can stay with you over time.
Annuitize. Like many other economists and financial behaviorists, Finke recommends planning to annuitize a portion of your assets, preferably in a straightforward immediate annuity, or perhaps using a mix of annuity and investment products (but don’t make it too complicated, right?). This “pre-set” strategy takes pressure off you andyour financial advisers.

Whether the topic is saving for retirement, executing a will, applying for life insurance, or some other aspect of personal finance, an accompanying statement is often “Do it now!” because procrastinating may result in a missed opportunity. But the value of acting today is more than simply completing a task and crossing it off the list.
One of the major themes from the Millionaire Next Door, a 1996 book that studied the habits and priorities of prodigious accumulators of wealth (PAWs), was that wealthy Americans invested considerably more time and energy discussing, executing and reviewing their financial plans – long before retirement. The comparative success of PAWs was due to a solid foundation of knowledge and preparation. They knew more, and had more successful experience to draw on.
Acting today, when you are most lucid and capable of making a good decision, is the best way to secure your financial future. You don’t want to delegate your financial decision-making to the 80-year-old version of yourself, who may not be as capable as the 60-year-old version. And in order for the 60-year-old you to make the best decisions, the time to prepare is now.

TO BE AT YOUR DECISION-MAKING BEST, WHAT NEEDS TO IMPROVE?

YOUR BASIC PHILOSOPHIES OF WEALTH AND MONEY?
A CLARIFICATION OF YOUR GOALS?
KNOWLEDGE OF FINANCIAL CONCEPTS AND PRODUCTS?
REVIEWS OF YOUR CURRENT POSITIONS?
THE RELATIONSHIP WITH YOUR FINANCIAL PROFESSIONALS?

How Will The ‘Great Recession’ Change Your Perception?

Kim Butler — Wed, 04 Jan 2012 19:58:02 +0000

HOW WILL THE ‘GREAT RECESSION’
CHANGE YOUR PERCEPTION?

When it comes to money, the financial climate in which you grew up can have a life-long impact on your financial perceptions and behavior. The influence appears to be particularly strong if the financial events are extreme, such as those occurring in a boom or bust period and especially impactful for people who are between the ages of 18 and 25 when the major event occurs. A research paper published in September 2009 by Paola Guilano and Antonio Spolombergo (Growing up in a Recession: Beliefs and the Macro-Economy) reported that “recessions do alter perceptions,” and that these changes in perspective tend to persist throughout one’s life.

Looking back on 20^thcentury American experiences, it is possible to see how significant financial events shaped the behavior of different generations. The generation that came of age in the Great Depression placed a high priority on frugality, steady employment, and saving. They had strong aversions to almost all debt (and unsecured credit in particular), and were reluctant to take risks in the stock market. Guilano and Spolombergo concluded that because “recession-influenced respondents…tended to believe that success in life was more a matter of luck than hard work,” they also displayed a greater preference for government intervention, in the form of entitlement programs and progressive tax rates.

In contrast, the authors found that “birth cohorts that experienced high stock market returns throughout their life report lower risk aversion.” They are “more likely to be stock market participants, and, if they participate, invest a higher fraction of liquid wealth in stocks.” This observation describes the Baby Boom generation that was born following World War II, as well as the Boomers’ children. In addition to taking greater investment risk, these generations embraced easy credit, longer mortgages, and became comfortable using financial leverage (credit) for almost every transaction.

Will there be prominent perception shifts as a result of the Great Recession (or as economist Paul Krugman likes to say, the “Lesser Depression”)? Based on previous experience, the past few years qualify as an extreme period in financial history, so it seems likely that major attitude shifts might follow. From a broad survey of current financial commentary, here are some possible perception changes that are in the making:

Eighty (80) is the new 65. For the generation that grew up during the Depression, the magic number for retirement was age 65, when fully vested pension payments and maximum Social Security benefits began. For awhile during the 1980s and 1990s, that magic number dropped into the 50s as a high-flying stock market led many to believe they could accumulate enough to retire early.

But today, age 65 has “become irrelevant,” according to a November 17, 2011, wire report from Moneynews.com. Longer life spans, rising healthcare costs, falling stock market values, and heavy debt loads have led many Americans to conclude that continuing to work as long as possible is their only retirement option. A November, 2011, Wells Fargo study showed almost one fourth of middle class Americans now see age 80 as “a good age to shoot for when it comes to retirement.”

A trend toward prolonged working lifetimes could result in a fundamental change to many financial dynamics, from accumulation and distribution strategies to the cost of employee benefits, required minimum distributions, tax credits, and eligibility for government programs like Social Security and Medicare.

“Sure things” aren’t sure things.Two financial clichés that were popularized in the late 20^thcentury and persisted up to 2007: (1) “Stock markets may fluctuate, but the long-term trend is always up,” and (2) “Buying a home is the best long-term investment a person can make.”

For awhile, the numbers seemed to support these assertions.

And then the sub-prime bubble burst. The market for housing dried up, foreclosures skyrocketed, and prices plummeted. Now, as the November 10, 2011, headline from the Wall Street Journal states: “Home Prices Keep Dropping.” The actual numbers vary with the location, but a 30-40% decline in home prices since their 2007 peak is not uncommon. What’s worse, says Paul Dales, an economist for Capital Economics, it will take “years rather than days for a proper recovery to get going.”

Meanwhile, the past decade has not been good for stocks. While there have been significant ups and downs during this period, the net result over 10 years from most market indexes is slightly better than break-even. Even though many financial professionals continue to remind consumers that stock market investing is a long-term project, a 10-year period with almost no return (or a loss) is hardly reflective of an upward trend. What’s worse, markets have become more volatile – even if the overall return is flat, fluctuations are higher and more frequent.

Insurance matters. With fewer assets and lower returns, more Americans find themselves living on a thin financial margin where one unforeseen incident can unravel everything. Suddenly, it seems financial discussions – in the media and around the dinner table – are as much about protecting oneself from poverty as getting rich. People know they need insurance.

Right now, health insurance is the front-and-center topic, one that will apparently require a Supreme Court ruling to determine how the nation will address both affordability and protection. But other insurance issues need to be resolved as well. And much like health insurance, it will be interesting to see whether private or government programs will win the day.

As defined benefit pensions have been replaced by 401(k) accounts, retirees face the challenge of turning their accumulation into a steady income stream. In the marketplace, this concern has meant the revival of immediate annuity purchases, allowing individuals to exchange a lump-sum for a guaranteed stream of payments. From the government side, public policy advocates have floated several ideas to reshape Social Security or establish national retirement accounts.

Where once a popular strategy for life insurance was to buy cheap term insurance to cover one’s working years, increased life expectancies and a lack of retirement assets have prompted many Americans to take a second look at life insurance designed to stay in force for their whole lives. Additionally, hybrid financial products that combine either life insurance or an annuity with long-term care insurance are also attracting consumer interest. Going forward, insurance will play a larger role in individual finances.

Employment is a fluid condition. Once upon a time, the average American graduated from high school or college and settled into a lifetime of steady employment, often staying with the same employer until retirement. At least, that’s how we imagined the story went. The reality is much different, both then and now.

“For the great majority of American workers, so-called ‘career jobs’ never existed, and they certainly do not exist today,” says Craig Copeland, an Employee Benefit Research Institute senior research associate and author of the study “Job Tenure Trends, 1983-2010.” “A distinct minority of workers have ever spent their entire working career at just one employer.” The median job tenure for Americans is slightly more than five years, and considerably less for younger Americans, but this number hasn’t changed much over the past 20 years. What is different today are the reasons for job change.

In periods of high employment and prosperity, people changed jobs to pursue better opportunities. Today, job change is more likely the result of layoffs or downsizing. People aren’t moving from job to job, they are moving from employment to periods of unemployment. Furthermore, due to the high ancillary costs that come with hiring full-time employees, more businesses are meeting their labor needs with contract and temporary workers. As a result of the Recession and the subsequent changes in employment, census data released in September 2011 showed US households earned less in 2010 than they did 13 years ago (see chart).

Obviously, this on-again-off-again work format has the potential to disrupt or complicate efforts to achieve financial security.

Adjusted for inflation, real household income has dropped to 1997 levels. Outstanding debts must eventually be repaid. One of the reasons economic recovery has been so slow to take hold is because there has not been a bounce-back in consumer spending. Shaken by the events of the past few years, many Americans are coming to the conclusion that they can’t always outgrow, out-earn, defer or restructure their debts. Instead of borrowing for a new car, or refinancing the mortgage to add an addition, more Americans are paying off credit card balances, cleaning up their student loans, and trying to build cash reserves as a hedge against employment and investment uncertainties. Some observers wonder if those who have grown up in a culture of leverage – always borrowing today, and hoping to pay tomorrow – can truly embrace a new paradigm, but as was mentioned at the beginning of this article, recessions alter perceptions. And it appears many Americans have embraced an austerity program as a way to stabilize their financial status.

If only governments were so responsible. Whether it’s Greece or the United States, deficit spending cannot continue indefinitely. The optimists may still believe it is possible for a national economy to outgrow its obligations, but when debts get too large, a tipping point is reached, and the only solutions are decreased spending, higher taxes, or bankruptcy. None of these options are good ones. But somehow, the debts must be resolved.

Adjusting to Changing Perceptions: Recapitalize and Restructure. In the business cycle economic model, bust follows boom, which precipitates a recapitalization and restructuring that lays the foundation for the next boom. The events of the Great Recession certainly have the characteristics of a bust. The question is how best to recapitalize and restructure.

In the Great Depression, much of the restructuring came from government initiative. Employment programs like the Civilian Conservation Corps and the Works Progress Administration stepped in to put Americans to work. Social Security was established to assist with retirement. The funding for these programs came from higher taxes and deficit spending (i.e., borrowing). Today, it is an open question as to whether voters will accept either higher taxes or deficit spending as a way to facilitate government solutions to these financial issues.

There is a second problem with government intervention: Even if the electorate approves these steps, lenders may not. Look at Greece. While the Greek population seems strongly in favor of maintaining the country’s entitlement programs, the government is finding it can no longer borrow to pay for the programs. In effect, outside creditors are determining national economic policy; while the Greek government may want to provide for its citizens, its credit card is maxed out. When governments reach their spending limits, the only recourse is individual initiative to develop and implement individual solutions.

In any phase of the business cycle, people who are paying down debt and rebuilding their savings are recapitalizing, and better prepared to prosper in the future. But what is often overlooked is how efficiently this recapitalization is taking place. New perceptions may require changes in strategies as well. For example:

If your future employment may be characterized by periods of unemployment, should you adjust how you contribute to a qualified retirement plan, such as a 401(k)?

If your house isn’t the best investment you’ve ever made, are you sure you want to make extra principal payments to pay off the mortgage earlier?

If you are ready to retire, should some of your accumulation be used to purchase a guaranteed stream of income?

If it is likely your current employer will not be your employer 10 years from now, should you consider portable, personally-owned disability and/or life insurance benefits?

This discussion is a bare-bones overview of some projected long-term effects of a significant financial event. The challenge for individuals is determining how best to respond to these changing financial perceptions. Effective financial management has never been a set-it-and-forget-it program; even if you are well-positioned right now, some changes may be necessary in the future.

IN LIGHT OF RECENT EVENTS, COULD YOUR FINANCIAL PROGRAMS BENEFIT FROM RECAPITALIZING AND RESTRUCTURING?

ARE YOUR FINANCIAL PERCEPTIONS IN LINE WITH THE AFTERMATH OF THE GREAT RECESSION?

“Deleveraging” vs. Saving

Kim Butler — Wed, 28 Dec 2011 20:05:10 +0000

“DELEVERAGING” VS. SAVING

With the economic turmoil of the past few years still roiling their personal finances, many American households have made a focused effort to “deleverage,” that is, to pay down their debt balances. And while the average American consumer may have given lip service to reducing their indebtedness in the past, this time it appears they are serious about it. The Federal Reserve reported that revolving credit debt for Americans (mostly in the form of unpaid credit card balances) was at its lowest level since 2004. The Fed also determined that total household debt dropped 8.6% since 2008.

Because consumer spending is also down, it seems that most of the accelerated debt payments are primarily because people are reducing or eliminating purchases, and instead applying those unspent dollars as additional payments on their credit cards, loans and mortgages. But some financial commentators are also touting the idea of redirecting funds previously allocated to long-term savings toward paying off debt. Their logic is as follows:

With the volatility of the stock market and diminished real estate values, paying off debt is a good “investment,” with a rate of return equivalent to earning the interest rate charged. In other words, paying off a credit card balance which charges 12% interest is akin to earning 12% – guaranteed.

Mathematically, this is an enticing perspective. It’s simple to picture, simple to calculate. But a closer look at some of the other issues involved (instead of just the simple parts) should prompt most people to think twice before they divert too much of their savings to increased debt reduction.

Paying down debt is not the same as saving.

Sometimes financial commentators confuse the two ideas, or view them as interchangeable. They are not. When you save, you accumulate money under your control. You can decide where to put it, when to take it, what to use it for. When you repay debt, you reduce the control the creditors have over you. But just because the creditors control you less, doesn’t mean you have more financial control.

If all your earnings were put toward debt reduction, and you had no savings and no capital, how would you be able to take advantage of a financial opportunity? Either you couldn’t, or you would go back to your creditors — you’d run up the credit card to its limit, or see the bank for another loan. When you must rely on borrowing to participate in a financial opportunity, the ultimate decision-making power (control) lies with the lender, not you. Paying off debt is not saving.

Debt is really about control.

When you owe a creditor, the creditor exercises a measure of financial control over you until the loan is satisfied. As long as there is a lien, they can lean on you. Paying the debt faster (such as making extra principal payments) without paying the balance in full, does not decrease the creditor’s immediate control over a portion of your finances. Even with extra principal paid, you still have an obligation to make next month’s payment. The lender’s control is not removed until the loan is completely repaid.

In fact, you could argue that making additional periodic payments on debt obligations actually gives greater immediate control to the lender. Not only do you still have another monthly payment coming, but the additional debt repayment means more of your “discretionary” dollars are also in the lender’s hands.

From a control perspective, a better approach to reducing debt could be to systematically fund an account for the purpose of accumulating enough to make a single balance-clearing payment. Rather than sending an extra $500 on the credit card balance, the “controlled alternative” is to deposit that same amount into another savings vehicle, while continuing to make the regular minimum monthly payment. When the savings account equals the remaining balance, you would pay the balance off.

Some may be quick to point out that the interest earned in the savings account will most likely not be equal to the rate of interest charged by the lender, thus arguing that you “lose money” by not paying the additional amount to the credit card account. That’s probably true, and saving in an outside account might take a few months longer to fully pay off the obligation. But the key financial issue here is control, not rate of return. Keeping the money under your control gives you greater current financial security and opportunity than if you send those dollars to a creditor.

Integrating Deleveraging and Saving

Under almost all circumstances, paying off debt is a good thing, and so is saving. Being debt-free gives you financial freedom, savings allows for financial opportunity. And the two actions are not mutually exclusive – you can pay off debt and save at the same time. Furthermore, you may find a financial advantage in integrating the two activities by saving in a format that can eventually reduce or eliminate debt.

IF YOU ARE INTERESTED IN WAYS TO COMBINE SAVING AND DELEVERAGING IN YOUR FINANCIAL PROGRAMS, NOW MIGHT THIS BE THE BEST TIME TO EXPLORE NEW IDEAS OR ADJUST YOUR CURRENT PLANS.

THE “GOOD OLD DAYS”?

By some measures, the past four years have been the worst economically since the Great Depression of the 1930s. But while today’s financial difficulties are real, there are some positives. For example…

According to statistics from Freddie Mac, the average interest rate on a 30-year fixed rate mortgage was 18.45% in October 1981 (i.e., 30 years ago). The average interest rate on a 30-year fixed rate mortgage last week on Thursday, 10/13/11, was 4.12%. The former mortgage rate would produce a $1,544 monthly “principal and interest” payment on a 30-year fixed rate mortgage for $100,000 while the latter would cost just $484 per month.

Have You Scheduled Your Check-Up?

Kim Butler — Fri, 23 Dec 2011 07:15:08 +0000

HAVE YOU SCHEDULED YOUR CHECK-UP?

December 31, 2011 represents the fiscal year-end for individuals and many businesses. In short order, this means collecting financial information, preparing tax returns, and compiling other accounting summaries, such as profit/loss and net worth statements. With this information fresh in your mind and readily accessible, now might also be a good time to schedule a review with your financial professionals.

Besides the advantage of starting the year with a renewed understanding of your financial condition, scheduling a review also gives you time to make deliberate decisions about any financial transactions that may need to be executed before April 15th or any other deadline throughout the year.

Start the year right. Get the knowledge you need, update your strategies, and give yourself the best opportunity to prosper in the coming year. Sounds like a resolution! Call or email us if you’d like help as we have an annual checklist as well as our Prosperity Economic Strategies list for 2012.

Retirement Income Insurance

Kim Butler — Wed, 14 Dec 2011 17:42:36 +0000

RETIREMENT INCOME INSURANCE:
How to Make the Key Factor More Than Just a Guess

“What’s my number? – That is, how much do I need to retire?”

These are pressing questions for individuals whose major financial objective is saving for retirement. And no matter how complex and sophisticated the process used to answer these questions, every retirement projection has at its core a calculation of Present Value. Interestingly, most of the time, the critical factor in the generation of a Present Value calculation is nothing more than a guess.

Present Value

Present Value (PV) is defined as “the amount of cash today that is equivalent in value to a payment, or to a stream of payments, to be received in the future.” If most people kept their retirement savings in a mattress, calculating Present Value would be easy. For example, if a person wanted to be assured of receiving $1,000 a month for 35 years (i.e. 420 months), the amount of cash needed today to be present in the mattress would be $420,000.

But very few individuals will put their money in a mattress; instead they will place the unused principal in a financial vehicle with the intention of earning a return – through interest, dividends, capital gains, etc. – which can be added to the accumulation. And this is where PV becomes a guessing game; how do you choose a rate of return that will reflect the future performance of your savings?

The projected rate of return – the present value factor – is the one component of a PV calculation that impacts everything else. Higher PV factors result in lower PV calculations, and vice versa. Using numbers from BTN Research, here is an example of a Present Value Retirement Calculation, the type that might be part of a moderately sophisticated retirement plan.

Suppose an individual wants to determine the lump sum amount required to fund a 30-year stream of retirement distributions. The annual income will begin at $100,000, and to maintain purchasing power, the income will increase 2.5% each year to keep pace with the historical rate of inflation. What’s the PV number? It depends…

• If the assumed annual rate of return is 5% for each of these 30 years, the amount needed is $2.21 million.

• If the assumed annual rate of return is 6% for each of these 30 years, the amount needed is $1.96 million.

• If the assumed annual rate of return is 7% for each of these 30 years, the amount needed is $1.75 million.

A fair number of financial experts would probably consider present value factors between 5-7% to be “reasonable” expectations; based on historical rates of return, these numbers aren’t outrageous projections that require risky investments to pay off. But note the Present Value amount required with a 5% projection is 26 percent greater than the PV with a 7% projection. That’s quite a difference. So which number should you choose? You can’t know for sure.

When the assumed rate of return on your retirement accumulation is just a guess, there is a ripple effect of uncertainty. First, since the present value factor is speculation, you really don’t know your “number.” And even if you feel confident about your projections, there’s the issue of how to handle deviations from your projection that might occur in the future. Because if the earnings from your retirement accounts under-perform the target rate of return at any time during retirement, you are facing either a reduction in annual income or the prospect of running out of money.

But what if you could make your present value factor a guarantee instead of a guess?

A Present Value Factor with Guarantees

One of the practical challenges for individuals approaching retirement is identifying financial products that can deliver a reliable and consistent income over an extended period. There are some debt instruments that promise regular payments over longer time periods, but for the past hundred years, the principal long-term retirement income products have been annuities.

With an annuity, an individual gives an insurance company a lump sum in exchange for a guaranteed stream of payments. These payments can be guaranteed for specified periods of time, including periods that last as long as the annuity holder is alive. The present value factor used by the insurance company will depend on the type of payment the prospective annuity buyer is seeking, but the key element is this: the insurance company has now assumed the risk of making sure the payments are made. For the individual, the guesswork and uncertainty of the PV calculation has been eliminated.

“Okay, I like the idea of guaranteed retirement income, but…”

In August and September of 2011, Synovate Research conducted a retirement survey of 1,000 non-retired Americans. When asked which factors related to creating a more secure retirement, 86 percent of the respondents chose “having a guaranteed stream of income in retirement.” In the press release accompanying the survey results, Allianz Life Insurance Company, the sponsor of the survey, noted:

Especially in an environment where equity markets – and therefore 401(k) balances – can swing wildly within a week or a day, it is not surprising to see Americans expressing far more interest in the need for guaranteed retirement income versus the balance of their retirement account.

But even though almost 9 out of 10 Americans want retirement security, the press release also acknowledged this reality:

Although the idea of a guaranteed stream of income continues to resonate with Americans, most pre-retirees don’t own annuities or are apprehensive about adding one to their retirement plan.

Economists call this the “annuity puzzle” – even though they want the features of an annuity, most Americans don’t buy them. Why? According to Richard Thaler, a prominent financial behaviorist and author of “Nudge,” the problem is how annuities are “framed,” i.e., how they are presented. Even though annuities are a form of insurance, “most people seem to consider buying an annuity as a gamble, in which one has to live a certain number of years just to break even.” Writing in a June 4, 2011, New York Times column (“The Annuity Puzzle”), Thaler enumerates several advantages that annuities have over other retirement alternatives:

• Using standard assumptions, economic studies (going back to the 1960s) have repeatedly shown that buyers of annuities are assured more annual income for the rest of their lives, compared with people who self-manage their portfolios. One reason is that those who buy annuities and die early end up subsidizing those who die later.

• Annuities provide clear information about when to retire. An annuity quote translates a lump sum into a monthly

income, allowing individuals to determine whether they have accumulated enough to stop working.

• Not having an annuity (specifically fixed immediate annuities, not variable annuities) adds layers of complexity to people’s financial lives. Retirees who choose not to annuitize must acquire the knowledge and assume the risk of investment managers, making allocation decisions and calculating the optimal drawdown rate over time. And since most of their decisions will be based on guesses/assumptions, Thaler’s research shows that many retirees actually tend to underspend in retirement.

When it comes to providing income security in retirement, Gary Bhojwani, Allianz president and CEO declares: “the simple fact is that annuities are the only retirement income products that pool risk, and thereby can guarantee that all annuity owners will have income for the rest of their lives, regardless of how long they live.”

If you want security in retirement, it is prudent and logical to consider the income insurance that only annuities can provide.

DOES YOUR RETIREMENT PROGRAM INCLUDE AN ANNUITY?

Hindsight Shows: Three Days Have Mattered Most

Kim Butler — Wed, 07 Dec 2011 16:56:39 +0000

HINDSIGHT SHOWS: Three Days Have Mattered Most (But which three?)

Math never lies, but sometimes you wonder what it says.Consider the following statistics, compiled by BTN Research:

Stat #1: – The S&P 500 is down 1.1% (total return) YTD through Friday 10/14/11. If you were out of the market for the 3 worst trading days of 2011, your YTD gain is +16.5%.

Stat #2: – The S&P 500 is down 1.1% (total return) YTD through Friday 10/14/11. If you were out of the market for the 3 best trading days of 2011, your YTD loss falls to 12.7%.

This data is the “80-20 Rule” on steroids. Instead of 80% of the results coming from 20% of the activity, the ratio is more like 98.5% to 1.5%. During the time frame mentioned, the stocks that comprise the S&P 500 index have been trading approximately 200 days. As an investor, if you had been prescient enough to determine which three of those days were the worst days to be invested, your portfolio could be significantly fatter right now – and you’d probably have your own TV show on MSNBC.

This stock market analysis appears to simultaneously support two diametrically opposed views of investing: market timing and buy-and-hold. On one hand, the data shows that, over time, a small number of days have an outsized impact on investment results. Having the framework or insight to determine which days are “special” could mean incredible profitability (or the avoidance of large losses). When viewed through the prism of “what could have been,” developing a model for market timing – stepping in and out of the market to maximize profits – seems a worthy pursuit.

On the other hand, this information also points to the difficulty in achieving the potential profits that are hypothetically possible with market timing. If avoiding three bad days would cause a significant increase in profitability, the downside is almost as great from missing the three good days. Since the future is unknown, any decision to get out of the market could be made on the very day when being in the market would be most beneficial. When just three days of staying invested would have cleared away almost 9 months of losses, how bad would it be to miss those three days? The buy-and-hold paradigm proposes that staying invested ensures you will always hit the good days, and there will be enough of them to overcome the bad ones. Historically, this approach has also been validated by the data. Over long holding periods, say 10 years or more, most stock indexes have shown positive gains that equaled or exceeded many other accumulation options.

But the efficacy of buy-and-hold is being challenged by two factors: the long-term results from the past decade (2001-2011) have not been as good, and increased volatility has made investors more skittish about riding out the bumps. An October 18, 2011, Wall Street Journal article by Tom Lauricella and Gregory Zuckerman reported that the Dow Industrial Average stock index rose or fell more than 1% in 14 of the past 19 trading days. These are significant swings, ones that have spooked many investors into stepping out of the market completely. Fewer investors in the stock market lead to fewer trades among shareholders, which also tends to exacerbate the fluctuations.

When the long-term trends aren’t favorable, and the short-term fluctuations are dramatic, many investors have decided they don’t have the stomach for the game – whether they use a timing approach or buy-and-hold. An October 21, 2011, Associated Press article noted that in four of the past five months, investors “scarred by volatility” have liquidated more than $20 billion from stock mutual funds.

But “playing it safe” may also have an opportunity cost – the potential gains that investors will miss by leaving the market. The AP article notes that the S&P 500 has produced losses in “only four out of 76 different 10-year periods since 1926.”

DO YOU HAVE A CLEARLY DEFINED STRATEGY FOR HANDLING MARKET VOLATILITY?

Does Your Income Have “High Beta”?

Kim Butler — Fri, 02 Dec 2011 16:11:00 +0000

DOES YOUR INCOME HAVE “HIGH BETA”?
(And if it does, what are you going to do about it?)

     Recently, the paradigm for a lot of financial discussions has been making distinctions between the 1 percent of Americans who earn the highest annual incomes and the other 99%. In some conversations, the 1 percent has been characterized as the “millionaires and billionaires,” with examples of huge salaries and additional compensation that are almost beyond comprehension, particularly when compared to the average American’s take-home pay.
     While these off-the-charts examples of annual income may seem outlandish and far out of proportion to the value of the products they produce or services they provide, this type of anecdotal information distorts the real picture of the top 1 percent that some call “the rich.”
     In a CNNMoney column by Tami Luhby published on October 20, 2011 (“Who are the 1 Percent?”), the annual adjusted gross income threshold for qualification in the top 1 percent is not a million dollars. It’s not even $500,000. According to the most current statistics from the Internal Revenue Service, anyone who earned more than $343,927 in 2009 was part of the top 1 percent. And while this number represents a significant annual income, the 1 percent threshold has actually declined 19% in the past two years. (see Fig. 1). In fact, you might say the rich are not getting richer.

Fig. 1

If you make a visual comparison between the income graph in Fig. 1 and a graph of the performance of the S & P 500 stock index over the same time period, there are some interesting similarities. (See Fig. 2). And these similarities have led some financial commentators to interesting conclusions, not only about the income of the “1 Percenters,” but everyone else as well.

Fig. 2

Understanding Beta
Financial analysts use a variety of mathematical metrics to evaluate the performance of individual stocks and indexes. One of these terms of evaluation is “beta,” the measure of a stock’s volatility in relation to a broader benchmark, usually an index. By definition, the benchmark index or market has a beta of 1.0, and individual stocks are ranked according to how much they deviate from the benchmark. A stock that swings more than the market over time has a beta above 1.0. If a stock moves less than the market, the stock’s beta is less than 1.0. Thus, if a stock has a beta of 2.0, it means its performance tends to be twice as volatile as the benchmark; if the index goes up 5%, the stock will increase 10%. The same proportional difference will also magnify losses – a 5% drop in an index would predictably result in a 10% loss for the high beta stock. Historically, high beta stocks are riskier but provide a potential for higher returns; low beta stocks pose less risk but also offer lower returns.

High Beta Incomes of the “1-Percenters”
Robert Frank is a senior writer for the Wall Street Journal and author of an upcoming book titled “The High Beta Rich.” In an October 22, 2011, WSJ article adapted from his book, Frank reports some interesting findings about America’s high-income 1-Percenters:

The American rich, who used to be the most stable slice of the personal economy, are now the most volatile, with escalating booms and busts.
During the past three recessions, the top 1% of earners (those making $380,000 or more in 2008) experienced the largest income shocks in percentage terms of any income group in the U.S., according to research from economists Jonathan A. Parker and Annette Vissing-Jorgensen at Northwestern University. When the economy grows, their incomes grow up to three times faster than the rest of the country’s. When the economy falls, their incomes fall two or three times as much.

     From statistical analysis, Frank says the beta for the top 1 percent of income earners was .72 for the 35-year period from 1947-1982, meaning their incomes moved generally in line with the overall economy, but with slightly less ups and downs. However, in the succeeding 25 years (1982-2007), the beta for these 1 Percenters has “soared more than three-fold, meaning the incomes of today’s rich have higher betas than many of the riskiest gambling stocks.”
     Why the sudden change in beta for the 1-Percenters? Frank says research from several sources points to a range of possibilities: technology and globalization (making businesses and industries more sensitive to changes in demand and economic conditions), rising debt levels (having less ability to withstand income changes), increased consumer consumption (resulting in lower saving levels), and greater “financialization,” which means high beta income and wealth is tied to the stock market, either in the form of compensation (such as stock options) or assets (shares of stock). This explains why the graph of the 1-Percenters’ income looks very much like the graph for the stock market.
     But whatever the cause, Frank sees the income volatility of 1 Percenters as having a significant trickle-down effect on everyone else:

As go the high beta rich, so goes America. Their hyper-cycles will become our own, as the consumer economy, financial markets and tax revenues experience more rapid and extreme spikes and crashes.

Is Your Income “High Beta”?
     Even if your annual adjusted gross income doesn’t quite reach the 1 percent level, the issues of income beta are relevant. For example, how much has your household’s income increased or decreased in the past few years? Have there been significant income fluctuations due to a job loss, reduced work hours, or diminished bonuses? How has this affected your ability to maintain your lifestyle, or stay on track with your long-term financial objectives, such as retirement, saving for college, buying a vacation property, or leaving a financial legacy?
     If your income history is showing the same volatility as a high beta stock, it might also alter your long-term financial priorities. Much of the conventional retirement accumulation model is built on steady, predictable employment, i.e., you can afford regular contributions to a qualified retirement account because you have the expectation that your regular employment will provide enough to meet today’s living expenses. But what if you’re not sure about the source or amount of next year’s income?
     This uncertainty might compel you to consider building larger cash reserves, or wonder what you could do if you lost employer-sponsored insurance benefits. And if your future income seems less stable, perhaps it seems prudent to pursue less aggressive investment strategies, because how bad would it be to lose income and accumulation value at the same time?
     One of the underlying observations of Frank’s reporting is how much income fluctuation affects other aspects of individual, corporate and governmental finances. When incomes were stable, lenders were more liberal in their approval standards, and consumers felt more confident about buying, even if they had to borrow. Businesses could invest in new facilities and hire more workers, knowing people could afford their products and services. And municipalities could budget for infrastructure improvements and community services, knowing the tax base could support these items. But high beta fluctuations of income cause major disruptions in the ability to systematically plan for your financial future.
     If an assessment of your personal income situation finds you with a high beta, now is the perfect time to reassess both your financial strategies and your ability to carry them out. Income uncertainty doesn’t mean you can’t reach your objectives, but it may require you to take a different approach.

IF YOUR INCOME IS “HIGH BETA,” WHY NOT FIND SOME WAYS TO OFFSET THAT VOLATILITY IN OTHER PARTS OF YOUR FINANCIAL LIFE? A CONSULTATION WITH YOUR FINANCIAL PROFESSIONALS COULD UNCOVER EXCELLENT STRATEGIES TO BALANCE YOUR “HIGH BETAS”.