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Symposium III is in the Books…

Wednesday was our Personal Finance Symposium III: In Debt We Trust, Living in a Leveraged World.  It exceeded my expectations and I’ve had several calls and emails this morning from both speakers and participants indicating their agreement.   Many of you were not able to come, so I thought I’d pass along some quick kernels of information that I remember from each speaker.

Michael Dorigan, Ph.D. is the Senior Quantitative Analyst at PNC Capital Advisors in Philadelphia, Pennsylvania.  He spoke on “Interest Rate Risk Measurement & Management”.  This could have been a very dry topic but his sense of humor turned the talk into a very engaging presentation.  While some of the concepts were out of the reach of the lay audience, his didactic style led us to an understanding of how bond managers reduce the risk of your bond portfolio.  Besides telling us not to worry about large-scale municipal bond defaults, he opened our eyes to developments in the management of bond investments.  In particular, he covered how modifications in risk analysis by bond managers can help produce products that best suit investors’ tolerance for risk.  Yet, he concluded that understanding one’s risk tolerance is key and you know that understanding yourself is up to you.  Hence, we had the next speaker.

Ted Klontz, Ph.D., is an author and the Principal of Klontz Consulting Group, based in Nashville, Tennessee.  His talk was entitled “When Logic Leaves the Room: Understanding How Difficult Financial Decisions Are Made” and it grabbed everyone’s attention.  His research focuses on how each of us has “animal” brains that interact with our “Einstein” brain to make decisions.  Our animal brains make many more decisions than our Einstein brain and the animal in us worries about pain and pleasure and wanting to be a part of the tribe, as opposed to what is analytically the best course of action for our futures.  For example, we see the stock market go up, up, up.  We get excited.  We see our friends (our tribe) investing and we don’t want to be left behind, so we invest….at precisely the wrong time.  The same thing can happen when the market goes down, we panic and run (sell) when we need to be thoughtful and analytical.  Of course, the media feeds our animal brain as they know what makes us tick – fear and pleasure.  The bottom line, many people need to work with an advisor that understands how fears and pleasures interfere with our decisions and who can help clients use this understanding to make a plan for the future that works – and stick with it!

During lunch, the Honorable Robin Carnahan, Secretary of State of Missouri, addressed the group about the work of her office.  As you should be aware, her office is in charge of all the securities regulation in the state of Missouri, as well as investigating all complaints and incidences of potential fraud.  She was not only delightful to listen to but a comfort to hear speak about her passion for the citizens of our great state.

After lunch, “The Quest for Alpha” was presented by Larry Swedroe, Principal and Director of Research, Buckingham Asset Management, St. Louis, Missouri.  This was a show stopper.  His report on the mass of research supporting equity index investing, as opposed to active portfolio management by mutual fund managers, was eye opening.  It was also unsettling to some of the financial service professionals in the audience who provide actively managed mutual funds to their clients.  He did concede that the most important thing for people is, often, to have some help in dealing with the emotions of investing – taming their “animal” brains – which an advisor can provide.  Yet, if a person can stay on track, there are many ways a person can index; from ETFs to index mutual funds.  If you are interested, I would recommend you read his recently released book of the same title.  As I told the audience, next to Twain, Steinbeck, and Dickens; Swedroe is my next most read author – if you count books instead of pages!

Finally, “When Death Do Us Part:  Estate Planning Under the New Tax Law” was presented by Scott Blakesley; a partner with Spencer Fane Britt & Browne LLP in  Kansas City, Missouri.  Imagine for a moment what a challenge it would be to talk about taxes and dying at 3:00 in the afternoon.  Yet, Scott made it interesting and, while currently estate tax laws are in limbo, his presentation impressed upon the audience the importance of understanding the issues of estate transfer and helping your clients (or yourself) in making these decisions.   I agree.  To top it off, not only did the audience stay awake and attentive during his talk, he concluded by singing a song about estate planning that he had written.  I darn near cried, as it topped off a great day of interaction between students, faculty, financial professionals, and the public.  Each of us were left with much to contemplate – with respect to our own personal quest for financial success, our understanding of ourselves, what we don’t know, and what is inevitably our fate.

Please, join us for Personal Finance Symposium IV on April 25, 2012.    Mark your calendar, today.  In the meantime, don’t let the “animal” brains win!