Employee Education and the Ostrich

    I read many articles about ERISA plan governance, including articles about fiduciary duty, proposed changes to legislation, and the delivery of advice.  One article, in particular, did an excellent job describing the ineffectiveness of employee education.  Admittedly, I was a little off put by the premise, especially considering how hard I work as making these meetings interesting.  But by the time I finished reading, I had to agree with the author.  The author describes education material that includes an overwhelming amount of charts and graphs with a delivery filled with industry jargon and terms that the average person cannot understand.  What does work, however, are personal stories and relating the topic in plain English.

     Story telling also helps to pique interest, especially when the story is memorable.  One such story I tend to share is how people often act like ostriches.  An ostrich is a very fast bird, among its other notable characteristics.  We too are like ostriches, in that we are often distracted by the speed of life.  Our daily routine is predictable and busy.  We wake, we work, we pick the kids up from their extracurricular activities, we go to bed, and then we do this all over again.  Rarely do we take five or ten minutes out of our day to focus on other important matters.  Rather we will put it off for another day. 

     Retirement plan participants are often very driven by their work schedules and things that need tending to after work.  The education meeting, if structured properly, serves as motivation for the participant to take action with a sense of urgency.  After all, if something is not addressed immediately following the message or shortly thereafter, then the attitude of “take care of it tomorrow” will turn into next week and next week will turn into next month, and so on.

     So what can we do?  Start by having meaningful conversations and consider changing the way participant education is delivered.  It’s okay to open up and share personal stories if it helps deliver the message.  Have fun with the presentation because humor helps take the edge off serious matters.  Most importantly, be available to answer questions.  Participants are more likely to seek advice after the education meeting, especially when they know you’ll hang around to answer any questions.

Neal Nolan CFP(R), AIF(R)
Director of ERISA
Senior Financial Advisor

Share this:

College Savings for the Kids, or Retirement?

Many a financial advisor has been asked how to balance saving for retirement while also funding a child’s college education. Which brings up the question: Is it a parent’s responsibility to pay for their child’s education? And is it possible to do both? As with most difficult questions, there are no black and white answers.

While I’m not a parent myself, I’ve heard passionate positions on both sides of the argument. Some parents didn’t receive any college financial support and feel pride in having paid their own way, working and going to school part time in order to earn their four-year degree. Others, myself included, felt fortunate enough to receive monetary support from their parents, and the gift of graduating with a four-year degree debt-free. In a perfect world, most parents would choose to provide for their children’s education but unfortunately not everyone has the income to do it. In that case, what is the best course of action?

Before tackling that question, there is some good news. A recent Gallup Poll shows that expensive, prestigious colleges don’t necessarily produce happier people who lead more fulfilling lives. Specifically, graduates of colleges in the bottom-ranked U.S. News & World Report schools faired just as well as graduates from top-ranked colleges in terms of overall well being. The poll looked at several quality of life factors, including income level and “engagement” in graduates’ careers. See the article here. Of particular note, high college debt loads had a meaningfully negative impact on graduates. Sadly, 70% of students who borrow have a national average debt balance of $29,400.

I would tend to agree with these findings. As a state university graduate (go Gators!) I received a great education, learned and worked with some world-renowned scholars, and feel pretty darn satisfied in my life and career today. All-in, college cost my parents about $12,000 a year. Granted, that was seventeen years ago. Today, attending the University of Florida costs about $21,000 a year, including room and board; still a pretty attractive price tag considering sky-high tuitions at some of the top private colleges and universities. Don’t get me wrong, if money had been no option and my grades were a little better back in high school, I would have jumped at the chance to attend an Ivy League school. Such were not my cards. The point, however, is that state schools often offer a phenomenal education at a fraction of the cost of many private schools which can make the dilemma of whether to save for your retirement or your child’s secondary education a little less challenging.

However, different students have different needs and may be searching for what those more expensive colleges offer – whether that’s a smaller setting, specific academic programs or special facilities. So if your child is interested in what the pricier schools have to offer, consider applying even if you don’t have all the funds available to pay. Some of the most expensive schools have a tremendous amount of scholarship money available for qualified students in need. It’s a great reason for your child to stay motivated with grades and extracurricular activities throughout high school.

But back to our main question: should you save for your retirement or your child’s college education? Ideally, everyone would do both, but given a median US income of about $51,000, this isn’t always possible. Taking an economic perspective, the classic airplane analogy comes to mind: when the oxygen masks come down due to a drop in air pressure, air regulations require parents to first secure their own oxygen mask before helping their child. Why? Because we can’t take care of someone else, children included, until we’ve first tended to our own needs. I believe the same holds true regarding retirement savings and a child’s college education. Funding your child’s college education at the expense of your retirement savings plan implicitly shifts the financial burden of retirement from parent to child. Essentially, parents who first try to support their child at the expense of their own retirement are making the bet that their child will earn more than them, or at least enough to provide for them in their twilight years. While parents may have good intentions, this dynamic can ultimately prove unhealthy for all parties involved. As with the oxygen mask analogy, a sound strategy would suggest first meeting your own retirement savings needs and then, as you’re able, contributing to a child’s college fund. In the end, you’ll have peace of mind regarding your own financial security and likely be in a better position to further support your child – who may just be thriving on her own.

Carrie A. Tallman, CFA
Director of Research

Share this:

Market Update Through 5/15/2014

as of May 15, 2014
                                                                           Total Return
Index 12 months YTD QTD MTD
Russell 3000 15.33% 1.39% -0.57% -0.69%
S&P 500 15.17% 2.02% 0.21% -0.53%
DJ Industrial Average 10.25% 0.15% 0.30% -0.57%
Nasdaq Composite 18.72% -2.09% -2.90% -0.95%
Russell 2000 12.33% -5.40% -6.45% -2.67%
MSCI EAFE Index 7.81% 1.65% 1.83% 0.94%
MSCI Emerging Markets 4.45% 2.11% 2.58% 2.72%
Barclays US Aggregate 1.43% 3.58% 1.71% 0.85%
Barclays Intermediate US Gov/Credit 0.80% 2.12% 1.11% 0.59%
Barclays Municipal 1.94% 5.71% 2.32% 1.10%
  Current Prior
Commodity/Currency Level Level
Crude Oil $101.50 $99.74
Natural Gas $4.47 $4.82
Gold $1,293.60 $1,295.90
Euro $1.37 $1.39

Mark A. Lewis

Share this:

Paralysis from Analysis

This month, I celebrate my 500th year at Parsec.  OK – it is really 22 years, but sometimes it feels like 500 years.

During that time, I have been involved in a lot of highly technical projects.  With one project in particular, I was really stressed out about the details.  I analyzed every piece of data so much that I made little progress.  Bill Hansen, one of our Managing Partners, said I suffered from “paralysis from analysis.”  After some reflection, I realized he was right.  At some point, I had to let go and realize nothing would ever be perfect.

In my lengthy career here, I have seen the effect of “paralysis from analysis.”  Some investors may be reluctant to act based upon the endless stream of information available now.  One can flip on the TV at any hour and hear the opinions of investment commentators.  Peruse the Internet, and one can find a vast amount of data about the stock market and the economy.  With so much information and contradictory opinions, it is easy to sit on the sidelines and do nothing.

In some cases, inaction can be as devastating as making the wrong choice.  Consider this scenario.  On March 9, 2009, the S&P 500 hit bottom.  A lot of people panicked and sold all holdings, leaving the proceeds in cash.  Five years later, the index was up 205.84 percent or 22.6 percent annualized (total return).

At the bottom point, there were probably a few people on TV who claimed the end was near.  One could probably find endless charts and articles foretelling great doom to come.  If an investor was paralyzed by this data overload, sat on the sidelines, and did not invest during that five-year period, he or she could have missed an opportunity to recover from deep losses.

What should a person do?  For starters, it helps to leave emotion out of the decision as much as possible.  Then, develop an investment plan that will not lead to sleepless nights.  The real test will come when the market has wild swings – either up or down.  One must commit to the plan and not deviate based upon the mood of the moment.  It is fine to alter the plan if goals or needs have changed, of course.

We at Parsec try to help our clients develop these plans and weather the inevitable market fluctuations.  Communication is a key factor in success.  We encourage our clients to tell us their goals, their changing life situations, or anything that is relevant to staying on target.

So, let’s switch off the talk shows, put down the business magazine, and take a nice walk.  Let’s try to enjoy life instead of obsess over every little detail.

Cristy Freeman, AAMS®
Senior Operations Associate

Share this:

The Challenges of Initial Public Offerings

This is a blog post of ours from 2012 that we thought was worth re-posting.


There have been many headlines recently regarding initial public offerings (IPOs) of technology companies.  These headlines tend to generate media buzz and excitement from investors eager to make a quick profit or get in on the next big thing.

The first issue investors face is access to IPOs. In an IPO, the company sells shares to one or more investment banks.  These firms then market the shares to their clients at a slightly higher price known as the Public Offering Price or “POP.”  These clients are typically large institutions rather than retail investors looking to buy relatively small amounts.

You can look up the prospectus, or S-1 registration statement, for any IPO at www.sec.gov.  If you do this, you will notice that the price and number of shares are blank until the last minute. These are filled in right before the registration statement is declared effective by the SEC and the shares start trading.  You do not know the price while you are reviewing the information to make an investment decision.

When trading opens, the shares may sell for above or below the POP.  It all depends on the supply and demand for shares.  Recent technology IPOs have tended to significantly underperform the overall market.

Some recent companies have come public at valuations of over 100 times trailing earnings, while the market as a whole currently trades at about 17 times trailing earnings.  What does this mean from an investment standpoint?  Mathematically, these new companies must continue to grow at a much faster rate than the overall market for a long time in order to justify their current stock prices.  If there is an earnings disappointment, these high-projected growth companies will tend to fall in price more than a company trading at a more reasonable valuation.

You may love the product, but that may not make for a good investment.  Let’s take the airline industry as an example.  I love the idea that you can get on a plane and go almost anywhere in the world.  But the industry has been plagued with bankruptcies, with many examples of common stockholders being completely wiped out and losing their entire investment.

How about the auto industry?  I love the product, and everyone has one.  In the early 1900’s in the US, there were thousands of auto manufacturers.  Now there are three.  What are the chances that you as an investor would have picked one of those three?  And two of them went through bankruptcy in the past three years.

In addition, there are many quality companies currently trading at valuations below that of the overall market that have increased their dividends each year for 25, 35 or over 55 years.  While we invest in technology companies, we prefer to focus on established companies with solid balance sheets that have the potential for long-term growth of earnings, dividends or both.


Bill Hansen, CFA

Managing Partner

February 12, 2012

Share this:

Portfolio Construction: The Way We See It – Part 1

In this ever changing world we live in, there are “advisors” everywhere. Flip on the TV, pull up a news app on your mobile device, or even the national paper. I came across a gem a few weeks ago from the NY Times archives.

SUNDAY, June 5, 1994; Picking Stocks by the Stars

Published: June 5, 1994

For those who missed the recent conference on “Astrology and the Stock Market” in Manhattan (about 40 people attended), here are some tips from several of the hot sessions:

The Art of Timing: Combining Astrological Indicators — Graham Bates, London financial astrologer. “I’m worried and confused about the eclipses in November. I don’t know what they’re going to do, but I know they’ll be important.”

Stocks, Planets and Solar Cycles — Richard Mogey, executive director of the Foundation for the Study of Cycles. “There’s a 23 percent gain the fifth year of every decade because of the Jupiter-Saturn cycle. I’d expect the same in 1995.”

The Cosmic ‘Inner Winner!’ — Paul Farrell, author of “Think Astrology and Grow Rich.” “When Uranus and Neptune go into Aquarius, I look toward information and technology.”

Beyond Cycles: Using Interpretive Astrology to Identify Key Turning Points in Markets — Charles Harvey, president of the Astrological Association of Great Britain. “When there is a new moon in the eighth house, Placidus system, in New York, there is always a major change in interest rates. That happens July 8.”

Want something more specific? Henry Weingarten, who heads the Astrologers Fund (the conference sponsor), predicts, “Novell will be at 30 next May.” But, “If it hits 35 before then, I’m out.”

There will always be very smart individuals that develop complex theories of why and how the markets work. This is part of human nature and our innate desire to understand how our world works. This is why we have departments in government and universities dedicated to studying human behavior. Our investment approach at Parsec is incredibly simple. We accept that markets behave irrationally in the short term. We feel that it would be a breach of our fiduciary duty to attempt to predict short term market movements.

Fiduciary duty is extremely important to us. This duty is a very old idea, which was defined here in America with Harvard College v. Amory in 1830. The decision of this case scolded the trustees and instructed them of their duty to manage the trust as they would manage their own affairs. This is known as the “Prudent Person Rule.” Here at Parsec, when evaluating an investment, we ask ourselves first is this in the best interest of our client and secondly would we invest in this particular security.

Be on the lookout for further posts on this topic.

Share this:

Market Update Through 4/30/2014

as of April 30, 2014
Total Return
Index 12 months YTD QTD April
Russell 3000 20.78% 2.10% 0.12% 0.12%
S&P 500 20.44% 2.56% 0.74% 0.74%
DJ Industrial Average 14.44% 0.72% 0.87% 0.87%
Nasdaq Composite 25.20% -1.15% -1.96% -1.96%
Russell 2000 20.50% -2.80% -3.88% -3.88%
EAFE Index 11.80% 0.70% 0.87% 0.87%
Barclays US Aggregate -0.26% 2.70% 0.84% 0.84%
Barclays Intermediate US Gov/Credit -0.24% 1.52% 0.51% 0.51%
Barclays Municipal 0.50% 4.56% 1.20% 1.20%
  Current Prior
Commodity/Currency Level Level
Crude Oil $99.74 $103.75
Natural Gas $4.82 $4.57
Gold $1,295.90 $1,300.30
Euro $1.38 $1.38

Mark A. Lewis

Director of Operations

Share this:

Living Small

Living large has been the mantra for many over the years. However, I don’t know if you’ve noticed, but there is growing interest in living tiny. And by tiny, I mean 84 square feet of living space tiny. There are books and blogs and magazines dedicated to this burgeoning movement. In fact, Charlotte recently hosted the Tiny House Conference geared to help educate and train people interested in building their own Lilliputian domain. The conference sold out in short order.

So what’s so appealing about living in a home smaller than 500 square feet? In her book “The Big Tiny: A Built-it-Myself Memoir,” Dee Williams details her journey from a Craftsman-style bungalow to a 95-square foot home on wheels. Williams had been diagnosed with congestive heart failure in her 30’s and after suffering a heart attack at 40, she realized cleaning gutters and tending to the mundane chores that go with home ownership were no longer important. So she sold the Craftsman, built her tiny house and parked it in the yard of her good friends where she has lived happier and much longer than the doctors predicted.

Tiny House enthusiasts have multiple and varied reasons for going small. Some want to live sustainably, others want to be self-sufficient and off the grid, while others are just looking for a way to simplify their lives and focus on the things that matter to them most. That was Dee Williams’ motivation. She realized that it wasn’t stuff that made her happy, but spending time being with friends and doing the stuff she loved that mattered most.

While I don’t think my husband and I and our two cats would be very happy in 95-sqaure feet of living space, I do think we could be quite happy in 1000 square feet. When I look at these tiny houses, I think about how much less there is to clean, and to heat and air-condition. That means more time and money to do the things I like to do, and that equates to more happiness.

But, after living in the same house for more than 20 years, we have accumulated a lot of stuff. Some of that stuff has not seen the light of day in years. In order to move into a 1000 square foot home, I am going to get rid of about 1000 square feet of stuff. And I, like a lot of people, have a hard time doing just that. Never mind that I haven’t used those brown-and-white transfer ware platters in years, or that my Princess Dianna style wedding gown will never fit my much more petite daughter. And what about the drawer of fabric my mother-in-law gave me when she downsized? I don’t even own a sewing machine!

And yet, I know it is time for me to start on this goal. The kids are on the opposite side of the country (and they’re not moving back in!). I love my garden, but I am really beginning to hate maintaining a 50+ year-old house. And someday, making it up those stairs will not be as easy.

I think those platters are heading to the consignment shop this weekend.

Tracy Allen, CFP®
Financial Advisor

Share this:

Market Update Through 4/15/2014

as of April 15, 2014
Total Return
Index 12 months YTD QTD MTD
Russell 3000 22.03% -0.02% -1.96% -1.96%
S&P 500 21.25% 0.29% -1.49% -1.49%
DJ Industrial Average 14.10% -1.27% -1.12% -1.12%
Nasdaq Composite 27.05% -3.10% -3.89% -3.89%
Russell 2000 25.03% -3.46% -4.53% -4.53%
EAFE Index 11.56% -2.21% -2.04% -2.04%
Barclays US Aggregate -0.22% 2.58% 0.73% 0.73%
Barclays Intermediate US Gov/Credit -0.08% 1.51% 0.50% 0.50%
Barclays Municipal 0.65% 4.32% 0.97% 0.97%
Current Prior
Commodity/Currency Level Level
Crude Oil $103.75 $101.58
Natural Gas $4.57 $4.37
Gold $1,300.30 $1,283.80
Euro $1.38 $1.37

Mark A. Lewis

Director of Operations

Share this:

Market Update Through 3/31/2014

as of March 31, 2014
                                                              Total Return
Index 12 months YTD QTD March
Russell 3000 22.61% 1.97% 1.97% 0.53%
S&P 500 21.86% 1.81% 1.81% 0.84%
DJ Industrial Average 15.66% -0.15% -0.15% 0.93%
Nasdaq Composite 30.18% 0.83% 0.83% -2.45%
Russell 2000 24.90% 1.12% 1.12% -0.68%
EAFE Index 15.88% -0.18% -0.18% -0.43%
Barclays US Aggregate -0.10% 1.84% 1.84% -0.17%
Barclays Intermediate US Gov/Credit -0.13% 1.00% 1.00% -0.30%
Barclays Municipal 0.39% 3.32% 3.32% 0.17%
  Current Prior
Commodity/Currency Level Level
Crude Oil $101.58 $98.89
Natural Gas $4.37 $4.43
Gold $1,283.80 $1,379.00
Euro $1.37 $1.39

Mark A. Lewis

Director of Operations

Share this: