Field Work

Conference Will Guide Financial Advisors

At a dinner next Monday night, finance professor Zvi Bodie at Boston University and his co-hosts will kick off their third conference geared toward educating financial professionals about cutting-edge thinking in the field. “The Future of Life Cycle Saving and Investing” will focus on serving low-income individuals. However, Bodie said in this recent interview that the conference lessons apply to all financial consumers.

Zvi BodieSQUARED AWAY: Is this an annual conference?
BODIE: No. The first one was in 2006, the second in 2008. Truthfully, what inspired me to have these conferences, among other things, was the strong support of MIT economics professor Paul Samuelson. I decided I was sick of the baloney about personal investing that is served up on websites, brochures, etc. – all of which is designed for the benefit of the service providers rather than the customers. So much of it flatly contradicts what I teach. We’re dedicating the dinner to the memory of Paul Samuelson, who died last year.

SQUARED AWAY: What baloney?
BODIE: Say you’re a beginning investor. You go to any website – go to It’s a really nice looking website. This is the Securities and Exchange Commission, so you’d think, ‘Wow, I can trust this.’ But, actually, all this material was fed to the government by the investment industry.

Click on “Ready to Invest?” and then “Road Map to Saving and Investing.” It says that if you have 35 years until retirement, you may want to consider riskier investment products. This is what I call the convention wisdom. It’s all wrong. A finance or investments professor would start off talking about the term structure of interest rates and would say that if you have a short time horizon, then the safest thing is short-term, inflation-protected bonds. If you have a long time horizon, like 30 years, maybe you would want inflation-protected bonds that mature in 30 years.

SQUARED AWAY: Does this mean no one should invest in stocks at all?
BODIE: No. Investing is all about trading risk and expected reward. The most sensible place to start is: what if I don’t want to take any risk? If I don’t want to take any risk, I’ll earn a low rate of return, but I’ll earn it for sure. If I want a higher rate of return, I’m going to take risks in the stock market. But first you have to define what is safe and what is risky.

SQUARED AWAY: Why is the conference geared toward financial professionals?
BODIE: Academics don’t bother to communicate with the professionals, so the professionals essentially ignore us. When professionals have to produce educational materials for their clients – for the general population – they’re flat-out wrong in many cases.

SQUARED AWAY: Does this conference cover the gamut of financial consumers?
BODIE: This particular conference is focused on low-income individuals. The previous two were focused on the average person. Most professional financial advisors devote some of their time to pro bono work. The CFA Institute prides itself on helping people who can’t afford to pay for these services.

SQUARED AWAY: Can you give us a preview of highlighted speakers or cutting-edge research at the conference?
BODIE: There are all sorts of experiments going on that provide special services for low-income people. We’re going to hear about those. We’re having all the top researchers in the area of trying to help low-income people gain access and financial independence. For example, Harvard University’s Peter Tufano is going to be there, along with Dartmouth College’s Annamaria Lusardi.

Another big body of research that will be discussed is by two individuals from the Urban Institute in Washington who’ve been studying how to help people increase their earnings – developing careers, entering the workforce, etc.

To read another interview with Professor Bodie, in the
Journal of Financial Planning, click here.



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