Market insights and analysis

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

4th Quarter | 2023

Quarterly recap



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

By David Wismer

April 2024 marks the 21st anniversary of National Financial Literacy Month, “a time dedicated to empowering individuals with the knowledge and skills necessary for sound financial decision-making,” notes Money Fit.

Many federal and state agencies host educational initiatives to mark the month, but “the scope of participation is broad, encompassing a diverse array of activities designed to educate people of all ages,” says Money Fit.

Why is financial literacy important?

Doug McMillon, CEO of Walmart, and John Hope Bryant, founder of Operation HOPE, wrote an article in 2022 for Time magazine that advocated for promoting financial education:

“Even as our country continues to move past the worst effects of the COVID-19 pandemic, supply chain issues persist, there is growing inflation, labor and wage pressure, and rising interest rates. While Americans work to make sense of all this—and plan around it—lack of financial literacy makes it difficult for many. Over the long run, this lack of knowledge puts the American Dream at risk for millions. We believe the private sector has an opportunity and a responsibility to help address this by providing employees, families, customers and communities with increased access to financial education.

“There’s a big need for this kind of effort. Today, only about one-third of Americans have a working understanding of interest rates, mortgage rates and financial risk, according to the Financial Industry Regulatory Authority (FINRA). And this measure of financial literacy has fallen 19 percent over the past decade.”

Several studies cite other compelling statistics:

•  Lack of basic financial literacy is “estimated to have cost Americans $415 billion in 2020 alone,” according to a National Financial Educators Council (NFEC) survey from 2021.

  A 2023 survey by CNBC reported that “three quarters of working Americans (74%) say they are stressed about their personal finances. …” The same survey found “more than half of Americans (61%) consider themselves to be ‘living paycheck to paycheck.’”

•  According to FINRA’s research, people with higher financial literacy were more likely than those with lower financial literacy to do the following: 1. Spend within their means, with income exceeding outflows. 2. Set aside adequate money for emergencies. 3. Take steps to actively plan for retirement income.

It should be noted that socioeconomic factors play a big role in the surveys informing many statistics about financial literacy. It is a “chicken and egg” question on whether financial literacy drives economic/educational status or the opposite. More likely, it is a combination of the two.

Stages of financial education

It seems to me that financial education develops over several stages, from foundational concepts to advanced strategies. The following broad categories offer a brief overview of the types of areas people might encounter on their journey to financial literacy:

Financial foundation: Learning basic financial concepts such as the importance of savings and compound interest, the effects of inflation, safeguarding personal information, and sound spending habits.

Early financial planning: Mastering more complex financial concepts such as how to manage debt (including educational debt), establish credit and use credit responsibly, navigate benefit plans, contribute to a retirement plan, and formulate a realistic budget.

Wealth building: Comprehending strategic financial decisions such as buying property; evaluating mortgage options and insurance coverages; managing household cash flow, emergency funding, and tax planning; maximizing prudent wealth accumulation (qualified and nonqualified accounts); setting up a living will; and planning for the needs of any dependents.

Retirement planning: Understanding concepts that will affect your ability to retire such as investment planning and allocations related to retirement income streams; advanced strategies for tax management and required minimum distributions (RMDs); Social Security, Medicare, and long-term care options; legacy and trust planning; charitable giving strategies; and funding of a desired retirement lifestyle.

Financial advisers can play an important role in guiding and educating people—and their family members (including children)—in these areas and many more. Virtually all of the financial advisers we have interviewed for Proactive Advisor Magazine consider financial education to be one of their top priorities in working with clients. One adviser we interviewed put it this way: “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.”

When educating clients, advisers often discuss the following important financial themes, among others: 

•  The significance of understanding your relationship with money from a behavioral finance perspective. 

•  The importance of goals-based, “holistic” financial and investment planning. 

•  Why understanding diversification, market cycles, and investment risk management is crucial, especially for clients nearing or in retirement. 

•  The “power of compounding” and how it relates to the mathematics of bear market portfolio losses and subsequent recoveries. 

•  Why the “sequence of returns” is a critical concept in helping clients plan for retirement income.

FPI’s focus on education

It’s no coincidence that the members of the Flexible Plan Investments (FPI) team who collaborate closely with financial advisers are known as business consultants. Their role centers on providing vital information to assist advisers in identifying solutions and constructing portfolios that align with the unique goals and risk profiles of each investor client.

FPI’s educational focus can be found in many areas (note that many of the tools mentioned here are only available to advisers after logging in to the FPI website): 

•  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 interactions 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 construct appropriate client investment portfolios, 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. 

  FPI’s My Business Analyzer, a customized dashboard that helps advisers to more easily view and evaluate their aggregated or individual FPI client accounts. 

•  An extensive library of white papers on various investment topics (available to advisers after they 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 analyses, and press page 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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