You Don’t Have a Plan

frank_randallFrank Randall, AIF®, Regional Director, Retirement Plan Services

People anticipate that they will finish their own tasks earlier than they actually do. Consider the following example. Employees who carry home a stuffed briefcase full of work on Fridays, fully intending to complete every task, are often aware that they have never gone beyond the first one or two jobs on any previous weekend.

The psychological term for this is called “planning fallacy” and it is the reason that we are often a day late and a dollar short. In a phrase, the planning fallacy is the human tendency to underestimate the time and resources necessary to complete a task. When applied to a lifetime of financial decision-making, the results can be catastrophic.

There are a variety of hypotheses as to why we engage in this sort of misjudgment about what it will take to get the job done. Some chalk it up to wishful thinking. A second supposition is that we are overly optimistic judges of our own performance. A final notion implicates “focalism” or a tendency to estimate the time required to complete the project, but failing to account for interruptions on the periphery.

Whatever the foundational reasons, and it is likely there are many, it is clear enough that the American investing public has a serious case of failure to adequately plan. Excluding their primary home value, 56% of Americans either have less than $10,000 or no retirement savings at all. 43% of Americans are just 90 days away from poverty and 48% of those with workplace retirement savings plans fail to contribute.1 Perhaps we think we are special. Maybe we are simply too focused on the day-to-day realities that can so easily hijack our attention. Without a doubt, we may wish that the need to save large sums of money for a future date would just resolve itself.

Solution: Antoine de Saint-Exupery famously said, “A goal without a plan is just a wish” and yet the majority (60%) of investors surveyed by Natixis in 20142 said that they had no formal financial plan or goals. If you do not have a formal, updated financial plan in your possession, you lack the road map necessary to begin the journey toward retirement. Most financial planners are happy to create such a plan for a small fee so start today!

For 10 years, Brinker Capital Retirement Plan Services has been working with advisors to offer plan sponsors the solutions to help participants reach their retirement goals.  The views expressed are those of Brinker Capital and are not intended as investment advice or recommendation. For informational purposes only. Holdings are subject to change. Brinker Capital, Inc., a Registered Investment Advisor.


1 “Myth of the Middle Class:  Most Americans Don’t Even Have $1,000 in Savings,”, Ben Norton, January 14, 2016.

2 “Getting to the Goal:  Markets, emotion and the risks advisors must manage,” Natixis, 2014

Has Quantitative Easing Worked? A Two-Part Blog Series Perspective (Part II)

Solomon-(2)Brad Solomon, Junior Investment Analyst

Part two in a two-part blog series discussing quantitative easing measures on a domestic and global scale. Part one published last week.

Transmission to Main Street has been dubious.

The Fed’s FRB/US model, which is the workhorse behind quantifying QE’s transmission mechanisms into the general economy, forecasted a 0.2 percentage-point drop in unemployment over a 2-year time horizon as a result of a $500 billion LSAP, according to then-Fed governor Stein in 2012. Given that the cumulative scale of QE in the U.S. totaled around $4 trillion over about 4.4 years, excluding intermittent periods between buying sprees, the FRB/US model would then forecast a reduction in unemployment of 1.6 percentage points. (This assumes that there are no marginally diminishing returns to QE dollars.) Building in a “lag” of six months, the actual U.S. unemployment rate fell by 4.0 percentage points during this period and currently hovers near 5%, right above what is often pegged as the natural rate of unemployment. To what extent that reduction is due to QE, though, is very difficult to answer—there is no “control subject” in real-world experiments. The next-best-option is the event study that looks at variables prior to and following some stimulus, although this risks blending the effect with some other variable. While unemployment has fallen near its natural rate, anecdotal evidence speaks to widespread underemployment

Other metrics look either ambiguous or decidedly impressive. Across the U.S., U.K., Eurozone, and Japan, industrial production growth has been significantly more volatile than it was pre-recession; unemployment has fallen, with exception of the Eurozone where it has marched further upward after a double-dip recession in 2013; household saving as a percent of disposable income has come down substantially. Lack of healthy inflation has proven to be the fly in the ointment. Nearly 30 countries have explicitly adopted inflation targeting (around half of those in the last 15 years), but the majority continue to be plagued by nagging disinflation or outright deflation. Consider the poster child Japan who pioneered QE over the 2001-2006 period in its commitment to purchase $3-6 trillion in Japanese government bonds (JGBs) per month until core CPI became “stably above zero.” While the Bank of Japan wrapped up with the program in March 2006 after witnessing year-over-year core CPI in Japan clock in just above zero for three consecutive months, this was more of a mathematical win. Headline inflation over the period picked up solely due to a rapid rise in the price of crude oil, which arguably has little connection to monetary policy. This is not to say that some commentators have not already called for an indefinite deflationary environment, or that QE’s effects on the money supply don’t appear ambiguous.

Getting back to using the U.S. as an example, income growth has not followed the drop in unemployment, and inequality has persisted. Annualized growth rates since 2010 have been near zero and well below their long-term averages, and the lack of growth is particularly pronounced in the lower income quintiles.


On another front, record-low mortgage rates are undoubtedly a product of QE but have not translated into pre-2008 home buying, even in the presence of rising FICO scores and real home prices that are hovering around their 10-year trailing average. In fairness to QE, though, there simply seems to be a lack of a relationship between the cost of borrowing money to buy a home, and the demand for borrowing that money, as evidenced by the chart below.


QE’s efficacy seems to have varied case-by-case, and there is a growing consensus that there are diminishing marginal returns to QE.

Of this last point, Japan and the ECB should take note. While the Bank of Japan refrained from expanding its QE program at its meeting this past Friday above the current $670 billion p.a. rate, such expansion remains on the table for its November and December meetings. A similar decision faces the ECB in December, and the rhetoric of ECB President Mario Draghi has been mostly dovish in tone. (The annual rate of asset purchases by the ECB currently stands at about $816 billion.) While both banks will ultimately adhere to their mandates in trying to combat deflation and negative export growth, perhaps expectations should be set low for how effective further QE will be in meeting those mandates.

Proponents of real business cycle theory would not be surprised at much of the above—that is, that aggressive monetary policy has failed to override a general shift in appetites for home-buying, tepid supply-glut disinflation, reduced appetite by banks to lend, and the preference by businesses towards doing nothing productive with bond issuance besides repurchasing their own equity. These “exogenous” factors may overpower the stimulatory nature of QE, or the problem may be one of model specification. (Getting back to the home sales/mortgage rate example, QE may do its job of lowering borrowing rates, but this may not ultimately stoke home-buying appetites, which is a failure of the assumed indirect transmission mechanism that underlies QE’s founding.) Whatever the case, while it has helped solve short-run liquidity problems by injecting cash into the financial system, QE has proven sub-optimal in terms of being a cure-all to the woe of general economic lethargy.

Further reading

  1. Fawley, Brett & Christopher Neely. “Four Stories of Quantitative Easing.” (2013)
  2. Krishnamurthy, Arvind & Annette Vissing-Jorgensen. “The Ins and Outs of LSAPs.” (2013)
  3. Klyuev, Vladimir et. al. “Unconventional Choices for Unconventional Times.” (2009)
  4. McTeer, Robert. “Why Quantitative Easing May Not Work the Same Way in Europe as in the U.S.” (2015)
  5. Raab, Carolin et. al. “Large-Scale Asset Purchases by Central Banks II: Empirical Evidence.” (2015)
  6. Schuman, Michael. “Does QE Work? Ask Japan.” (2010)
  7. Stein, Jeremy. “Evaluating Large-Scale Asset Purchases.” (2012)
  8. Williams, John. “Monetary Policy at the Zero Lower Bound.” (2014)
  9. Williamson, Stephen D. “Current Federal Reserve Policy Under the Lens of Economic History.” (2015)
  10. Yardeni, Edward & Mali Quintana. “Global Economic Briefing: Central Bank Balance Sheets.” (2015)

The views expressed are those of Brinker Capital and are not intended as investment advice or recommendation. For informational purposes only. Holdings are subject to change. Brinker Capital, Inc., a Registered Investment Advisor.

Investment Insights Podcast – May 28, 2014

Bill MillerBill Miller, Chief Investment Officer

On this week’s podcast (recorded May 22, 2014), Bill gives a review on the controversial book, Capital in the Twenty-First Century by Thomas Piketty:

What we like: Emphasis on returns to capital (savings); savers will continue to be rewarded.

What we don’t like: Modern-socialistic state belief using high tax rates in order to deal with societal inequalities.

What we are doing about it: We encourage opening savings accounts for children and grandchildren; fund 401(k)s to the max; watching if some of the societal inequalities as outlined by Piketty are dealt with sooner than later.

Click the play icon below to launch the audio recording or click here.

The views expressed are those of Brinker Capital and are not intended as investment advice or recommendation. For informational purposes only. Holdings are subject to change.

Spending Triggers

Sue BerginSue Bergin

One of the first steps to losing weight is to identify your eating triggers.  Hunger, boredom, sadness, anxiety, and habit are all called trigger feelings.  They are the emotions that set off overeating.

Certain environments also stimulate overeating.  These are specific social situations that lead to overindulgences.  For example, you’ve been getting popcorn at the movies since you were 10 years old.  You don’t even think about it.  You probably don’t even like it.  Yet, you do it each and every time.

By tuning into triggers, you can avert derailment. You can avoid the trigger or engage in a substitute substance or activity that won’t have a negative impact.

The same principles apply to over-spending.

Whether trying to reduce debt, save for the future, or live responsibly within your means, it is important to identify spending triggers.

spending trigger Converted

Like hunger is to eating, necessity is the purest motivation for spending.  Most of us, however, indulge in items and activities that far exceed necessity.

As I wrote about in my, “Impatience and Sadness: Two Costly Emotions,” post, people who are sad seek immediate gratification and are more prone to self-defeating financial decisions.

Pain can also lead to overindulgent expenditures.  As reported in a recent study, people perceive pain as a form of punishment.[1]  A typical response is to give oneself permission to indulge in a guilty pleasure.

While evaluating the connecting between pain and indulgence, a research team from the University of Queensland in Australia found that people who had to submerse their hands in ice water later took 73% more pieces of candy than those who hadn’t.

73% more candy is likely to impact the waistband more than the wallet; however, the concept holds.  We treat ourselves.  M&M’s probably won’t harm the wallet, but if a shopping spree is the salve of choice, there might be a problem.

We also spend more than is financially healthy out of a sense of entitlement, or we give in to peer pressure.  Sometimes a purchase sets off a ripple effect which some have dubbed the,  “I Got This So I Need That” conundrum.   For example, a luxury car often leads to higher maintenance costs, a more substantial tax liability and increased insurance premiums.

As with overeating, the key to controlling overspending is to recognize triggers for what they are and strategize ways to prevent them from allowing them to cause financial harm.

[1] Bastian, B., Jetten, J., & Stewart, E. (2012). Physical Pain and Guilty Pleasures Social Psychological and Personality Science

Phones Will Be Ringing by, Sue Bergin

For many advisors, the phone lines seem to simmer down just a bit during the summer months.  That is about to change, however, according to a recent survey conducted by Edward Jones.

In mid-July, 2012 Edward Jones interviewed 1,010 U.S. adults to determine the issues that will impact investment and savings decisions the most. They found that 90% of Americans plan to change their investment strategy in the next six months. 

The election was sited as the most significant reason for driving strategy changes.

39% percent of respondents indicated that the election was, again, the most significant reason prompting investment and savings changes.  The next most significant factor was healthcare costs, representing 30% of those surveyed.  Global economic issues were prompting 20% of the respondents to consider investment strategy changes.

96% of people earning more than $100,000 a year were the most likely to say that they will make changes to their investments and savings.[1]

Take advantage of these final few weeks of summer by proactively scheduling investment review meetings. This will give you more control over your calendar in the fall, and help you prepare for the discussions that will inevitably occur.

Sex Ratio In Economics

If you want men to open their wallets, make them think there aren’t a lot of women around.

The University of Minnesota recently released a study showing that when potential mates are scarce men will behave more aggressively with their money.

Researchers had participants read articles that described the local population as male-dominated.  Then, participants decided how much money they would save, and how much they would borrow using credit cards for immediate spending.

The savings rate plummeted 42% for men who believed women to be scarce.  These same men indicated that they would borrow 84% more money each month than their counterparts who did not perceive gender inequities.

In a related study, participants examined photos with varying gender ratios.  Some assortments had more men than women, others had more women than men, and a third group had a balanced sex ratio.  Participants then choose between receiving $20 immediately or $30 in a month.

Pictures with just a few women prompted the men to opt for the fast cash rather than wait a month for a higher return.

Women’s financial decisions do not appear to be impacted by sex ratios.  Their expectations, however, change.  In a predominantly male environment, both men and women expected men would need to spend more on mating efforts.

Researchers also calculated the sex ratios and evaluated debt levels of more than 120 U.S. cities.  Predominantly male communities had more credit cards and higher debt levels than those with balanced sex ratios.

For example, in Columbus, Ga., there are 1.18 single men for every single woman.   Consumer debt averaged $3,479 higher in Columbus than in Macon, Ga., where there were 0.78 single men for every woman.  Macon is less than 100 miles from Columbus.

Could the reverse be true?

If men perceive potential mates to be plentiful, would they save more and take on less debt?  Could the fact that women live longer than men subconsciously suggest to men that spending levels can taper off in later years because they may live in predominantly female retirement communities?

Source: January 2012 University of Minnesota’s Carlson School of Management Study, “How do humans compete for access to mates? What you find across cultures is that men often do it through money, through status and through products.”