Posts Tagged ‘Economists’
Wednesday, June 2nd, 2010
Earlier this month, new research was released on how to talk to seniors about their investments.
Titled “Behavioural finance and the post-retirement crisis” and sponsored by Allianz Insurance, this report compiles findings on how older investors perceive risk and make financial decisions .
Ten top psychologists, consumer behaviour experts and behavioural economists contributed to this report. Here’s how US advisor site Horsesmouth summarized some of the suggestions on how to frame conversations with seniors around risk and investing.
Hyperaversion to loss:
Be very conscious of the sensitivity to loss. In general, investors experience the pain of a loss twice as strongly as the benefit of a gain. For retirees, however, the pain of a loss is five times stronger than the equivalent gain.
Desire for control: Given their fear, you’d expect retirees to opt for protection and guarantees — but studies show the reverse is true. Many retirees shy away from products with guarantees because they don’t want to give up control.
The safety of “monthly income” When presented as providing income, 70% of investors over 50 chose an annuity. Only 21% chose the exact same annuity when positioned as an investment solution with monthly returns for life.
The impact of inflation Unless helped to think this through, there is a tendency for many seniors to focus on the nominal amounts they’ll be receiving and to ignore the impact of inflation.
Getting the math You need to be sure that your conversations are at a level clients can understand. Research shows that math ability starts declining at age 53; by 80, almost half of seniors have difficulty making sound financial decisions.
Here’s a link to the full research report
And here’s a checklist from the report on having effective conversations around retirement income planning:
|Checklist||Inspired by the Work of Professor…|
|Is the retirement income strategy framed in terms of the monthly income a retiree will receive?||Brown on Framing|
|Are the implications of today’s financial decisions vividly presented so employees see how their lives will be affected?||Goldstein on Vividness|
|Is the strategy appropriate for retirees who are hyper-sensitive to losses?||Johnson on Hyper Loss Aversion|
|Can retirement income decisions be made before the onset of cognitive impairment? Are the number and complexity of choices manageable for older individuals?||Laibson on Cognitive Impairment 2|
|Does the retirement income strategy offer multiple accounts to facilitate different goals, such as paying the rent or spending money on vacations?||Loewenstein on Tangible Mental Accounts|
|Are employees, carried by inertia, assigned to a customized default that is appropriate to their situation?||Madrian on Inertia|
|Does the language used to describe the retirement income strategy make it easy to evaluate its features?||Payne on Evaluability|
|Does it encourage individuals to make active choices?||Previtero on Active Decision-Making|
|Does the retirement income strategy provide some inflation protection?||Shafir on the Money Illusion|
|Will it be perceived as fair by most retirees?||Shu on Fairness|
Tags: Allianz, Allianz Insurance, Annuity, Consumer Behaviour, Conversations, Dol, Economists, Guarantees, Impact Of Inflation, Investment Solution, Math Ability, Older Investors, Psychologists, Retirement Crisis, Retirement Income, Rfi Response, Seniors, Sound Financial Decisions, Tendency, Volatility
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Friday, December 18th, 2009
As prefaced in today’s newsletter:
During this period of heightened requirements for communications to your clients, keeping in touch with your network of clients and prospects is critical. While there is no substitute for one-to-one meetings and phone calls, weekly or periodic emails are an effective way of staying visible and developing frank and open discussions with both clients and prospects.
Starting today, and every Wednesday from today, as a service to you, we will be sending a listing of 3–5 articles from high value sources (e.g., G&M, WSJ, NYTimes) that you may use to send to your clients and prospects as part of your communications strategy. We will also include some helpful prefacing notes that you may use as well.
Keep in touch, and , by the way, if and when you find useful articles, we would be extremely grateful for your submissions.
Below is this week’s selection of articles that you can send to clients.
Here are three articles that I thought you might find interesting which discuss the economic outlook of Lakshman Achuthan, one of the foremost economists in the US, the outlook for stocks from the Wizard of Wharton, Jeremy Siegel, and an article from the Wall Street Journal about the opportunity in income/dividend paying stocks (as a general heading).
The Recession is Over!
ECRI declares the recession over with the US economy tracking up to 2.4% in the third quarter…
Source: Slate.com/Washington Post
There is a great deal of skepticism about the economy, and many mixed offerings in terms of opinion on outlook. The Slate.com article, The Recession is Over!, discusses the contrasting view of Lakshman Achuthan, of ECRI (Economic Cycles Research Institute), one of the most highly regarded independent economists, known for a long list of accurate and prescient economic forecasts, who points out that three significant leading indicators are currently flashing green.
They’re (ECRI) the Spocks of the economic forecasting crowd—unemotional, uninvested in anything but the logic of what history and their dashboard tell them. “From our vantage point, every week and every month our call is getting stronger, not weaker, including over the last few weeks,” says Achuthan. “The recession is ending somewhere this summer.” In fact, it may already be over.
Jeremy Siegel: ‘The Market Will Stage Another Recovery’,
Knowledge@Wharton, June 24, 2009
Jeremy Siegel, Wharton School Professor, Director of Wisdom Tree ETFs and author of the investing classic, Stocks for the Long Run, says that now that the recession will not turn into a depression call stocks are poised for a recovery.
Siegel: Well, of course, we had a tremendous downturn from January to March, a plunge. And we’ve had recovery back to those January levels, basically. So year-to-date, we’re sort of even on the market. Actually, in Asia, we’re well above it. Markets are about 20% higher than the year-end. For the emerging markets and the Asian markets, there’s been a much better recovery, because there’s been a better economic recovery.
It’s always very hard to predict the stock market. It’s certainly taking a breather now. I maintain that if we can keep oil at the $70 level, and if interest rates on long-term bonds, 10-year bonds, don’t go much above 4%, the market will stage another recovery that could bring it up another 15% to 20% — really, by year-end. It’s hard to know exactly when that will take place. But I think people really see [that] the recovery is coming. Again, just like they were relieved that, “Oh, it’s not a depression, it looks like it’s ending,” [they see] we are getting some recovery. I think if the [price of oil] and interest rates … remain stable and low, we will put more money in stocks. There’s still over $4 trillion in money funds that are earning about 1% or less, which is not as attractive as rates that I believe could be moved into the market, once prospects of the recovery seem more certain.
Bright Outlook for Income Investors
July 4, 2009 — Wall Street Journal — By Tom Lauricella
Out of last year’s turmoil in markets a bright spot has emerged for investors looking for income — The payout on dividend-paying (or income-paying) stocks has gone up as a result of share prices falling further than payouts.
The main point of this article is that battered high quality dividend stocks as well as government bonds are now offering higher real rates of return as a result of inflation running at 2% or lower.
Yes, dividends may have plunged — but share prices have fallen further. Translation: The percentage payout of many dividend-paying stocks has actually gone up. Some traditional yield plays — such as utilities — look attractive. Bond funds, aside from U.S. government bond funds, offer other options.
And investors shouldn’t dwell too much on yields that seem low. What matters is how they compare to inflation.
“When investors see a yield of 4% or even 3.5%, it looks like a low-yield investment,” says Fran Kinniry, head of the investment strategy group at Vanguard Group. “But with inflation running at 2% or lower, the yields on fixed income or even equities aren’t that poor.”
Tags: Communications Strategy, Dashboard, Dividend Paying Stocks, Dividend Stocks, Earnings, Economic Cycles, Economic Forecasting, Economic Forecasts, Economic Outlook, Economists, Income Dividend, Jeremy Siegel, Lakshman, Leading Indicators, Offerings, Open Discussions, Periodic Emails, Prospects, Recession, Skepticism, Slate, Spocks, Vantage Point, Wall Street Journal, Washington Post, Wharton, Wsj
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