Values & Core Beliefs
Empowering the Individual
We believe that individuals should have more access to the tools and resources that they need to provide for their retirement, giving them greater control. People should take ownership of their finances, and not simply do what a financial advisor tells them to, without question. They need to become educated on the issues, research available products and strategies, ask questions, and challenge recommendations before adopting a strategy.
Objectivity & Aligning With Our Client’s Interests
Financial services is an industry where trust in the professional is crucial to a firm’s success. However, the industry evolved in such a way that the business models currently in place create a natural conflict of interest with their clients, leading to greater distrust.
Most financial advisors are essentially salesmen, compensated based on commissions from the companies whose products they sell. This has moved the financial advisor community towards a transactional business, and away from what it should be – an advisory business.
Furthermore, compensation arrangements are often complex and not well-disclosed. We have steered clear of compensation arrangements that create a divide between our interests and those of our clients. We are strong proponents of the fee-only financial advisor model – one that is more transparent, honest, and aligned with the interests of the individual.
Retirement Income: The Next Great Social Crisis
We are passionate about retirement income because we believe that it is a social crisis not receiving the attention that it should. Not only are today’s retirees facing a headwind from poor stock market returns, low interest rates, high unemployment, reduced retirement benefits from employers, escalating healthcare costs, depressed housing values, and the questionable viability of social security; they have undersaved for retirement, primarily because of lack of awareness of what the financial requirements are. Most are also not making responsible decisions on how to finance their retirement income. Too many people are drawing down their savings based upon life expectancies not realizing that there is approximately a 50% chance that they will live beyond this age. This means that even those who have saved enough are needlessly at risk.
The Power of Specialization
Retirement income planning is perhaps the most complicated field of financial planning. Think about it – you are dealing with an uncertain time horizon, with uncertain investment returns, inflation, and spending requirements. Furthermore, the actions that you take in the first few years of retirement will have a dramatic effect on your financial well being many years in the future.
It is also an emotional and sensitive phase as we move away from a steady paycheck and become increasingly dependent upon a finite nest egg. It’s not surprising that retirees are therefore highly risk-averse and engaged with financial issues like no other previous time in their lives. At Nested Interest, we understand the unique nature of this need and believe that you are better served by a firm that specializes in retirement income planning, which is why this is all that we do.
Simple Investment Strategies
While it’s true that Benjamin Graham’s Value Investing principles can lead to above-market returns, it requires a lot of training, experience, a long time horizon, significant time and energy to execute, and extreme discipline and mental stamina.
If you think all you need to do is find a good investment manager, forget it – it is even harder to identify a good manager than it is to find a good investment!
We believe that the majority of retirees are better served by pursuing simple, low cost index investing strategies. Various studies have demonstrated that indexed funds outperform actively managed funds over the long run, so why give yourself one more thing to worry about? Even Warren Buffett said “Most investors, both institutional and individual, will find that the best way to own common stocks is through an index fund that charges minimal fees.” What the heck?!?
A Balanced Approach to Managing Risk
When it comes to protecting against risk, people tend to fall into the trap of paying too much attention to avoiding risks that have smarted them in the past, and not enough attention to other risks that they have not encountered.
This behavioral tendency leaves investors overexposed to risks that they have mentally discounted, and overprotected against others. Examples are the reluctance to purchase products that protect against longevity risk, such as annuities, because it is a risk that is far in the future and difficult to grasp; and moving savings out of stocks after a market drop, even though this locks-in losses and does not allow your nest egg to grow to meet income needs in the later years of retirement.
Therefore, investors need to be more thoughtful regarding the risks that they may encounter, and take a balanced approach to mitigating them. Build a portfolio to include products that can act as a hedge, such as annuities, put options, and TIPs. At Nested Interest, anyone can learn how.