Over the next few months, I will be writing about the three core tenets that underscore Alexis Advisor’s overarching mission: To engage, educate and elevate families, non-profits and small-businesses in making knowledgeable and intentional choices about how they earn, spend, invest, and give their money so they are informed consumers of financial services.
This month we will start by discussing our first Core Tenet, Be Informed & Intentional. In July we will provide our “usual” market update, followed in August by Core Tenet 2, how and why we seek to Manage Risk in client portfolios. In September, we will cover Core Tenet 3, how and why we strive to Invest In The Best.
Core Tenet 1: Be Informed & Intentional
Being informed and intentional can mean different things to different people. From our perspective, one of our goals is to encourage investors to be intentional about their life choices and informed about their money. You don’t need to know the details – that’s our job – but investors do need to pause long enough to “run your numbers” so you know if they are on track to met your goals and objectives.
Throughout history, successful civilizations have understood the importance of calculating profit and being accountable for balancing the books to ensure prosperity and sustainability of their cultures. The Dutch, inventors of the modern capitalism, developed a culture of financial accountability that led to the establishment of the first official stock market and the first publicly traded company. An interesting perspective on how various cultures utilized basic accounting principles and financial management to achieve sustainable prosperity and growth can be found in the recent New York Times blog No Accounting Skills? No Moral Reckoning by Jacob Soll. The author suggests that Americans, on the whole, have little understanding of the basics of finance, and that we need to get to a point of more financial accountability and greater understanding of the basic financial principals.
Richard Thaler’s article, Financial Literacy, Beyond the Classroom, supports the view that financial illiteracy in America is deep and systemic. A survey of Americans over age 50 conducted by the economists at George Washington University and the Wharton School, University of Pennsylvania, indicates that only a third of the respondents could correctly answer three basic question related to: compound interest, inflation, and the importance of asset diversification in one’s investments. The issue becomes even more pronounced when considering the complexities of student loans, mortgages and retirement planning.
So, as a society, how do we address these significant gaps? We think this involves multiple approaches:
- Financial Education in the Classroom While Thaler questions the efficacy of offering financial literacy courses in a classroom setting, we don’t agree with this perspective, and think this is a critical component to the solution. Junior Achievement of Central Virginia’s (JACVA) mission is “to empower young people to own their economic success and succeed in a global economy,” and to that end, offers financial education programs through schools across the region. JACVA has the data to support the impact of these programs –and as many of you know, I am “all about the data.” So, as mentioned, I don’t support Thaler’s perspective on this point. (See this week’s Metro Business Section, Daphne Walker Elevating the Importance of Financial Literacy. Daphne, CEO of JACVA, is an inspiration, given her enthusiasm for the mission of JACVA.)
- Just-In-Time Education However, we do agree with Thaler’s point that the solution requires a multi-pronged approach. As he suggests, just-in-time education, is a critical component. We are very fortunate to have this type of offering right in our own back yard, through JACVA’s Finance Park. Finance Park is located in the Richmond’s west end, and provides middle school and high school students the opportunity to engage in a simulated economy, providing hands on experience of creating personal budgets and making investment decisions.
- Role Modeling The third leg of the stool, so to speak, is likely the most important – role modeling. Role modeling can come from many sources and in many forms – parents, aunts, uncles, foster parents, mentors, etc. Role modeling is likely at the forefront of forming a child’s views on life and basic habits. However, we tend to forget the importance of this function – forgetting to be aware of the money messages are we sending our children, foster children, and those we mentor. If children see their role models in financial distress and/or arguing over money, then they will likely have financial stress and/or arguments over money. As children, we want to mimic those we look up to. We believe that leading by example and role modeling constructive money behaviors are the first steps in instilling healthy financial planning habits that will position a child for sustainable prosperous future.
Being “financially literate” may seem daunting, but it doesn’t have to be. All large endeavors start with yourself – what are your own money behaviors? If you are a parent, a foster parent or a mentor, what money behaviors are you exhibiting? And don’t forget, we have excellent resources right here in Richmond – through Junior Achievement’s class room programs and their Finance Park, which cover bullet point one and two above. And at Alexis Advisors, we strive to help support families with bullet point 3, encouraging the family to attend account review meetings with their children so they can see their parents engaging in constructive money behaviors.
If you would like to join the conversation, please visit our new LinkedIn page.
Otherwise, until next month…
Roberta
Information contained herein is for informational purposes only and is subject to various interpretations and time-frames, and should not be considered investment advice. Advice may only be provided after entering into an advisory agreement with Alexis Advisors, LLC (“Advisor.”) Advisor does not assume any legal liability or responsibility for any incorrect, misleading or altered information contained herein. Advisor shall not be liable for the improper or incomplete transmission of the information contained in this communication. Past performance is not indicative of future results while changes in any assumptions may have a material effect on projected results. Third Party Research Disclaimer: Third party research is provided for information purposes only and has not been prepared by Alexis Advisors, LLC. The information contained herein is based upon sources which we believe to be reliable, but no representation, express or implied, is made with respect to the accuracy, completeness or reliability of the information or opinions in the reports. About : Alexis Advisors, LLC is a Registered Investment Advisor with the Commonwealth of Virginia. Advisor’s current Disclosure Brochure is set forth on Form ADV Part 2 and is available for your review upon request. Please contact Advisor promptly if there are any changes in your financial situation or investment objectives, or if you wish to impose, add or modify any reasonable restrictions to the management of your account.