Market insights and analysis

How dynamic, risk-managed investment solutions are performing in the current market environment

1st Quarter | 2024

Quarterly recap



Current market environment performance of dynamic, risk-managed investment solutions.

by David Wismer

Did you know that this April was the 20th anniversary of Financial Literacy Month?

Financial Literacy Month was designated officially in 2003 by the U.S. Senate to start the following year during the administration of George W. Bush. (Interestingly, Barbara Bush was passionate about many literacy causes and started the Barbara Bush Foundation for Family Literacy in 1989.)

In addition to educational initiatives this month by federal and state agencies, nonprofit MoneyFit notes,

“During Financial Literacy Month, financial institutions, nonprofits, and human service agencies amplify their focus on the importance of financial literacy through events, programs, and counseling. The goal goes beyond helping consumers learn more about finances; it aims to empower them to improve their personal and household financial stability and success.”

Why is financial education so important, especially at this time?

Says MoneyFit,

“… Inflation has reached levels not seen in the past 40 years, with recent geopolitical events further exacerbating the situation in various financial sectors. Rising fuel and energy prices have caused concern for households, making it crucial for individuals to learn how to combat inflation and offset some of the adverse impacts of escalating costs.”

We also know that volatile financial markets, rising taxes in some areas, all-time high household and credit card debt, and layoffs beginning in some major sectors of the economy are adding to an uncertain financial outlook for many consumers. It is little wonder that the University of Michigan’s reporting of consumer sentiment continues to remain at depressed levels relative to historical tracking—and all the more reason why financial knowledge is so important today.

Room for improvement in financial education

There is good reason for institutional concern over financial literacy in the United States.

Gallup research (based in part on Standard & Poor’s landmark 2014–2015 Global Financial Literacy Survey) has shown that almost half of all Americans do not grasp basic financial literacy concepts and that the U.S. ranks 14th in the world in financial literacy. It’s worth noting that survey respondents, who were asked questions about several major financial concepts to determine their financial literacy, rated “risk diversification” as one of the financial concepts they understood the least.

More current research cited by Goldman Sachs shows at least one positive trend in recent years. Generation Z consumers (those born between the late 1990s and early 2010s) are starting to save for retirement at an earlier age than the preceding Generation X and millennial generations, though these same Gen Z consumers have aggregate lower assets and see high barriers to future wealth building. Specific areas of concern are the day-to-day expenses of living, rising housing costs, and the overall difficulty of saving money.   

I found the following chart from Goldman to be very interesting—even though I personally do not use TikTok and had no prior knowledge of the leading financial-information influencers listed here for younger audiences, including Gen Z.

To the point illustrated above, a Financial Planning Magazine article addresses the challenges and opportunities for financial advisers among Gen Z and millennial consumers:

“‘…The 70 million-strong cohort [Gen Z] stands to inherit at least tens of billions of dollars and assets from their parents and grandparents in coming decades. Yet 1 in 3 members may get their financial advice not from professional wealth planners, but from TikTok and YouTube, platforms permeated with myths, misperceptions and outright falsehoods dispensed by so-called experts.

“The cohort, along with millennials (what Fidelity Investments calls “Gen Y”), comprised nearly half, or 47%, of the U.S. population in 2021, but only 14% of all advisory clients, Fidelity’s 2022 Investor Insights Study shows.”

The role of advisers in financial education

Many of the financial advisers I have interviewed for Proactive Advisor Magazine consider financial education to be one of their top priorities in working with clients. One adviser we interviewed told our publication,

“I consider myself a financial advisor by profession and an educator at heart. My job is to help my clients understand the various major financial aspects of the world that may impact them, as well as the pros and cons of different approaches to handling them. If I’ve done my job well, our clients will understand what I’m recommending and why—and build a sense of personal ownership of their financial plan.”

Several financial themes come up frequently from financial advisers as they describe the educational issues they discuss with clients, such as the following:

•  Helping clients understand their relationship with money from a behavioral finance perspective.
•  The importance of goals-based, holistic financial and investment planning.
•  Why investment risk management is so important, especially for clients nearing or in retirement.
•  The “power of compounding” and how that relates to the mathematics of bear market portfolio losses.
•  Why the “sequence of returns” is a critical issue in helping clients plan for retirement income.

Another adviser we have interviewed sums it up well:

“I believe that all people are fully capable of making sound decisions—even in the complex world of high finance—if they learn important financial concepts and can clearly grasp the implications of the choices they face.”

Flexible Plan Investments’ (FPI’s) focus on education

It is not a coincidence that the members of FPI’s team that directly work with financial advisers are called business consultants, not salespeople. They are dedicated to imparting information that will help advisers find solutions and build portfolios appropriate to each client’s goals and risk profile.

FPI’s educational focus can be found in many areas:

•  A continually improved and updated company website that provides both advisers and investor clients with a wealth of information. As FPI’s leadership has said, “It is important that our website, presentations, and our personal meetings clearly articulate ‘Who we are, what we believe in, why we do what we do, how and where we do it, and how our efforts can benefit advisers and their clients.’”
•  An ongoing program of webinars for advisers, reviewing new product or strategy offerings, the specifics of strategy performance over various time frames, or educational/practice management content. FPI’s consultants are also available for advisers hosting client educational events.
•  Sophisticated analytical tools to assist advisers. FPI’s materials include the Crash-Test Analyzer, Illustration Generator, Composite Performance Report, and OnTarget Investing process. Each of these tools helps advisers develop appropriate and effective client investment plans, while also adding value to an adviser’s practice. For example, OnTarget Investing helps advisers and their clients set and maintain realistic investment expectations, delivering a customized, personal benchmark for their portfolio or strategy in an easy-to-read format.

In addition, FPI’s customized My Business Analyzer (MBA) helps advisers to more easily view and analyze their aggregated or individual client accounts. (Many of the tools mentioned here are only available to advisers after secure log in to the FPI website.)

•  An extensive library of white papers on various investment topics (available to advisers after log in to the FPI website), as well as FPI’s weekly “In My Opinion” column, “Market Update,” and weekly strategy performance review. These provide timely information for both advisers and their investor clients.

Please check out FPI’s website, emails, webinar announcements, “Market Insights and Analysis” page, and press room for an ongoing stream of valuable communications. I think the information found there may help add to any adviser’s or investor’s “financial education.”

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