Tag Archives: CFA Society Minnesota

Event Recap: “Inclusion in Investment Management: Beyond Checking the Diversity Box”

· · Leave a comment

By Amanda Carter, CFA and Charles Hannema

The CFA Society of Minnesota hosted a panel discussion on the topic, Inclusion in Investment Management: Beyond Checking the Diversity Box on October 4, 2017. The panel was facilitated by Kim Brustuen, CFA, SVP and National Sales Manager – Corporate Treasury, US Bank with Colin Lundgren, CFA, Global Head of Fixed Income at Columbia Threadneedle, and Paul Smith, CFA, President and CEO of the CFA Institute, as panelists.

In response to questions prompted by Bruestuen and the audience, Lundgren and Smith articulated how Columbia Threadneedle and the CFA Society defined diversity within their respective organizations, how definitions vary across different global constituents, and how having a diverse talent pool has benefited the investment management community.

Kim Brustuen referenced a McKinsey & Company white paper, Diversity Matters , in her comments and questions. The McKinsey paper cited analysis showing a statistically significant relationship between a more diverse leadership team and better financial performance. Much of the discussion centered on gender diversity and why, although strides have been made at entry level for women, there are still significant concerns about gender diversity in senior management. Paul Smith noted that female candidates outside the United States comprise a much larger percentage of candidates in the CFA Program.

The discussion, in our opinion, prompted more questions than it answered, particularly with respect to diversity that is not gender related. The evening reinforced the value of deliberate inclusion of diverse thought and background while prompting the need to expand the discussion.

    

Additional event photos are located on our society Facebook page https://www.facebook.com/cfaminnesota/ 

Distinguished Speaker Series featuring Jason Trennert – Event Recap

· · Leave a comment

By Brad Lee, CFA Society Minnesota Intern

On Thursday, June 22, 2017 CFAMN hosted Jason Trennert, Managing Partner, Chairman and CEO at Strategas Research Partners. Mr. Trennert is the author of multiple books on investing, and is widely quoted in the press, and is a regular on CNBC and Bloomberg. He shared his perspective on a diverse group of topics including his viewpoint on current economic trends, investing in the Trump era, and the growing discrepancy in the beliefs between the average citizen versus experts in these subjects.

The Base Case

Mr. Trennert is forecasting real GDP growth of 2-2.5% in 2017 and ~3% in 2018. He believes deregulation will focus on energy and financials, and the budget will focus on increases in defense and infrastructure spending. Small business confidence is growing. Therefore, policy changes are believed to help small and mid-sized businesses more than large businesses.

Economic Outlook

His presentation featured a segment on the greatest story never told. This was the serendipity of the election results in November 2016, coinciding with a turn of positive  S&P 500 trailing 12-month Y/Y earnings growth in 4Q’16. This adjustment of increased earnings came after 6 months of negative earnings, which ultimately stimulated the current rally. Mr. Trennert concluded this is perhaps the most unloved bull market of all time since its inception in 2009. The era of low interest rates also may finally be ending. Currently he is bullish on the economy and the market in the foreseeable future.

Four 4 Main Items to Trump Agenda

There were four key points in Mr. Trennert’s presentation he believes investors should focus on, which are highlighted below:

  1. Increasing velocity of money
  2. More drilling
  3. Increased spending of infrastructure and defense
  4. Tax reform

The last seven years has been a period of easy money but tight regulation. An unforeseen issue with this has been marginal companies staying in business, especially in the retail and energy space. Mr. Trennert foresees looser restrictions on stress tests and increased velocity of money going forward with the new administration. As for the current priority of deregulation and the U.S. exporting more in energy, this will result in more drilling by companies and will benefit companies who are prepared for the shift. However, Mr. Trennert is actually more bearish with lighter controls in the industry. He also specified only three of the NATO members (U.S., the U.K., and Estonia) are spending the expected 2% of their GDP on defense spending. Thus, he is bullish on defense stocks and believes this is a growth industry even in an era of populism and heighted concerns about national security. As for tax reform, he believes there are four major goals for the Trump Administration. It includes tax simplification, flattening the effective corporate rate, shift to a territorial tax system, and encouragement of CapEx spending.

Revenge on the Nerds

Mr. Trennert stated his research in 2016 had been “…actually being in the research” or discussing with others to find their perspectives. Thus, he concluded there is a growing trend of how “average ordinary” people are starting to question experts on investments and the economy. Some of these include the open borders, the Affordable Care Act, low interest rates on savings, and over-diversification of investment accounts.

Conclusion

From an investment perspective, Mr. Trennert is overweight financials, industrials, and technology. He believes small to mid-cap financials have more to gain from deregulation than large caps, and likes technology stocks that as he simple stated, “…do not have triple pricing multiple earnings valuation…” He also believes it’s a good bet there will be a tax cut on repatriated profits and any future financial repression favors passive investing, although active investing will always play a major role in the investing world.

 

A Letter From Our Society President

· · Leave a comment
Joshua M. Howard, CFA

Society Members –

The Board of Directors of the CFA Society of Minnesota has spent the last few years diligently improving our strategic planning and governance processes. This commenced four years ago with a review and restatement of our mission and vision, followed by the creation of a new 3-5 year strategic plan. I have shared the outcomes of those activities with you in the past, and I will be sending a status update on the strategic plan sometime in May or June.

We are now working on the next step in the process to improve how the Board functions. The Executive Committee and full Board are in the midst of revising our bylaws, which haven’t been updated in many years. Some of the changes are non-material, such as updating our office location, but some changes will have material effects on Board processes and committee structures. We are undertaking this revision to make sure we are adopting best practices in governance, as well as to better align with our current mission, vision and staff structure.

In late spring, we will be sharing our proposed revisions of the bylaws with the full membership, as well as highlighting the material edits. Changes to bylaws require a 75% vote from our entire membership, a very high bar, so I strongly encourage everyone to take a minute to review the changes and provide any feedback before we put the bylaws out for a vote. When the proposed revisions are released to Society membership, please take time to vote yes or no. We have more than 1,300 members, which requires us to get consent from almost 1,000 members before the new bylaws can be approved.

The Board and staff have worked very hard on making sure your local Society is operating efficiently while still providing value-add programming and fellowship. We also care deeply about putting in place proper governance procedures along with the right amount of oversight of staff and Society finances. The bylaws revisions, which may seem modest at first glance, will help us be an even more effective organization in the future.

Josh Howard, CFA
President, CFA Society of Minnesota

P.S. Please take a few minutes today to log in and update your CFA Institute profile – especially your email address, which we’ll need for voting.

A Letter From Our Society President

· · Leave a comment
Joshua M. Howard, CFA

Society Members –

I write to you at the end of a very eventful year, especially for economies and governments. There were unexpected results in many elections and referendums, and the extent to which markets and pollsters misjudged major votes was astounding. Brexit, the Columbian Peace Deal, the US presidential election, the Italian constitutional referendum – the models and analysis that seemed to work so well in the past were upended by new trends and patterns that will require a major revision to the way political scientists, economists and investment professionals model the world. It is a good reminder to those of us who rely on quantitative models to continually test our assumptions, be skeptical of small sample sizes and not rely too heavily on historical data when predicting the future.

Another theme in 2016 was the dismal reputations that bankers and asset managers have in society right now. Each candidate in the presidential primaries and the main election seemed to get the loudest cheers when bashing Wall Street and hedge fund managers. But members of the CFA Society are helping to counteract this reputation. Besides our adherence to a Code of Ethics we have Society members providing financial education in high school classrooms with BestPrep, a partner program of CFA Society Minnesota. Other charterholders mentor younger colleagues through our professional mentorship program. Some help develop CFA curriculum through the Program Practice Analysis process, or teach our Level I, II and III prep classes, or do a myriad of other volunteer activities that help determine the future of finance and its reputation in the country.     

I sincerely appreciate all of the volunteers who support CFA Society Minnesota initiatives. I also want to thank each and every one of our members for the work you do each day for your clients, and for adhering to the highest ethical standards despite the turmoil that sometimes surrounds us. I am constantly impressed and inspired by the work being done by charterholders in the region, and I appreciate your commitment to our Society and the industry.

As 2016 comes to a close, I want to wish all Society members and their families a very happy New Year.

Josh Howard, CFA
President, CFA Society of Minnesota

Don’t Get Thrown for a Loss

· · Leave a comment
Craig Popp, CFA

CFA Society Minnesota encourages its members to contribute to Freezing Assets.  This is piece written by one of them to help individuals identify a trustworthy investment advisor.

On October 23, 2016, 60 Minutes aired a story titled “Thrown for a Loss” that detailed how dozens of NFL players lost over $40 million in an investment brought to them by their financial advisor. These individuals invested in a risky entertainment and gambling complex built in Alabama. Mistakes were made that caused the losses. One of the biggest was also the first—the individual these NFL players hired to advise them. Catastrophe may have been avoided had more time been taken to vet their financial advisor.

The financial advisor you choose to work with is among life’s important decisions. I believe the vast majority of us are trustworthy; however, bad apples do exist. Unfortunately, the process of selecting an advisor is intimidating. Therefore, people make their decision based upon uninformed criteria such as:

  • He/she goes to my church.
  • I see their ads on TV or hear them on the radio.
  • I’m related to him/her.
  • He/she drives a nice car (or has another other status symbol), so he/she must be good at what they do.

The fact is none of the above offer insight into the person’s integrity, competence, or qualifications. A good financial advisor will tell you the questions you should be asking. If not, here’s a list to get you started.

  • What is your wealth management process?
  • What is your investment management process (the two are different)?
  • How are you paid?/What are your fees?
  • Do you earn incentives from the products you recommend to me?
  • Do you have any business relationships with any outside financial firms?

The above questions can provide meaningful insight. The first two questions allow you to compare between multiple financial advisors. Their process should be disciplined, repeatable, and remove human emotion. The final three show transparency, or lack thereof. Watch how these questions are answered. The advisor should be comfortable describing fees. Every professional (doctor, lawyer, accountant) receives compensation for their services. Many investment products contain fees that aren’t prominent to the investor. If a financial advisor tells you there’s no cost, it’s a red flag.

The direct method of asking questions is effective. However, there are also indirect red flags to watch out for. Be aware for the person that sells past performance rather than a process. Also, many advisors offer seminars to the general public and/or to their clients. Unfortunately, the intent of these seminars is to sell you a product rather than provide education. That’s financial sales, not financial planning.

With the above in mind, it can still be a daunting task choosing among the 285,000 financial advisors in the United States (according to Reuters). To narrow that list, consider working with a CERTIFIED FINANCIAL PLANNER™ professional or Chartered Financial Analyst. Members of these professional organizations sign an annual ethics pledge. It states they will act with integrity, independency and objectivity, and put your interests first. Individuals who attained either designation completed a rigorous education and examination process they don’t want to jeopardize.

Finally, utilize tools to help you in this process. One such is BrokerCheck. It’s from FINRA (Financial Industry Regulatory Authority) and helps you research the professional backgrounds of brokers and brokerage firms, as well as investment advisor firms and advisors. Your attention should be placed on the disclosures section. Disclosures can be any customer complaints or arbitrations, regulatory actions, employment terminations, bankruptcy filings and any civil or criminal proceedings the individual was a part of.

Look how often the individual has switched firms. My personal opinion is that this is also a red flag. Reasons for departure are not given, so I would suggest asking. This industry heavily recruits, often paying the advisor to switch firms. Those who do that often are probably looking out for themselves rather than you.

The process of hiring a financial advisor should be completed with the same diligence as buying a home, car, or television. With the tools to perform the proper research and ask the right questions, you can find someone who puts you first.

 

Craig Popp, CFA is a Financial Advisor with Raymond James Financial Services, Inc. Member FINRA/SIPC located at 115 Litchfield Ave SE, Willmar, MN. Craig Popp can be contacted at craig.popp@raymondjames.com. Any opinions are those of Craig Popp and not necessarily those of RJFS or Raymond James. Expressions of opinion areas of this date and are subject to change without notice. Investing involves risk and investors may incur a profit or a loss. There is no strategy that ensures a profit or guarantees against a loss. Past performance is not a guarantee of future results.