Volume 13 Issue 2 2014 www.journalofpersonalfinance.com
Journal of Personal Finance Techniques, Strategies and Research for Consumers, Educators and Professional Financial Consultants
IARFC INTERNATIONAL ASSOCIATION OF REGISTERED FINANCIAL CONSULTANTS
2014 National Financial Plan Competition
and the Winner Is... Bryant University
Bryan t L-R Ja Universitymie P epin, presents “f Laure i n Fay ctional” B r ne an d Kyle ewster fam ily pre Creed on senta ti
on:
First Place — Bryant Universitty Smithfield RI, team members Kyle Creedon, on, Lauren Fayne, Jamie Pepin and their instructor Mara Derderian
The results are in and the winner is Bryant University! So ended the 2014 Financial Plan Competition 2 day event in Las Vegas. On hand were the student finalists, their advisors, family, IARFC members as judges and professional presenters. The previous day’s activities of the Impact Branding Workshop and Reception gave the students an opportunity to network and get to know the financial professionals that were part of the event. “Coach Pete” D’Arruda, Les Anderson and Ed Morrow highlighted why branding is such an important part of the Financial Advisor’s public persona and how to build it.
The Results First place – Bryant University Smithfield RI, team members Kyle Creedon, Lauren Fayne, Jamie Pepin and their instructor Mara Derderian. Second Place – Shepherd University Shepherdstown WV, team members Bonnie Baily, Akhtar Khan, Avery Mendzela and their professor Nicolas Pologeorgis. Third Place – Bowling Green University Bowling Green OH, team members Dana Kaufman, Elizabeth Kevorkian, Becca Smoody and their professor Matthew Garrow. Contact: 800.532.9060
info@iarfc.org
www.IARFC.org
Volume 13, Issue 2
3
Journal of Personal Finance
Volume 13, Issue 2 2014
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Journal of Personal Finance
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CONTENTS Editor’s Notes ........................................................................................................................................................................................8
Portfolio Size Matters ........................................................................................................................................................................9 Gordon Irlam, Independent Software Developer & $
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........................................17 Janet L. Koposko, M.S., Doctoral Candidate, Oklahoma State University Douglas A. Hershey, Ph.D., Professor of Psychology, Oklahoma State University & +
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! " # $ ! % & ' ( " ...............................................................................28 Chad Smith, Ph.D., Associate Professor, Clarion University of Pennsylvania Gustavo Barboza, Ph.D., Professor, Clarion University of Pennsylvania # # = ( + ! = # ( + ! % # % ! &
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Š2014, IARFC. All rights of reproduction in any form reserved.
Volume 13, Issue 2
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' $ " ) ! " ' ' .........................................................................51 Ken Steiner, Fellow of the Society of Actuaries, Retired
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' & ' * + ( .........................................................57 David N. Swingler, Ph.D., Professor of Engineering, St. Mary’s University, Halifax, N.S., Canada %# = = %' # # & 8 # $% " % % % % L "
, , % ........................................................................................................................62 Terrance K. Martin Jr., Ph.D., Assistant Professor, University of Texas-Pan American Michael Finke, Ph.D., Professor and Director of Retirement Planning and Living, Texas Tech University Philip Gibson, Ph.D., Assistant Professor, Winthrop University : D M N - & $ O ! $ & + <# # & % % + " Q ( S # %
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# '- . ( - # ...........................................................................................................................72 Michael A. Guillemette, Ph.D., CFPÂŽ, Assistant Professor, University of Missouri Russell N. James III, Ph.D., J.D., CFPÂŽ, Professor and CH Foundation Chair, Texas Tech University Jeff Larsen, Ph.D., Associate Professor, University of Tennessee <# % + <# + & + & # & &
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©2014, IARFC. All rights of reproduction in any form reserved.
Volume 13, Issue 2
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JOURNAL OF PERSONAL FINANCE VOLUME 13, ISSUE 2 2014 ( H 5 ! The American College # %
! Tomlinson Financial Planning, LLC
Editorial Board / N" / % ! 5 "/"! ! 5[! York University G -" ( ! 5 "/"! 5[! ÂŽ Texas Tech # H" X *! 5 "/"! University of Georgia
X % ! 5 "/"! Iowa State University - % S ! 5 "/"! The Ohio State University X H" S $ ! 5 "/"! Montana State University / " S $! 5 "/"! Oklahoma State University \ E
N $! 5 "/"! The University of Akron / N % ! 5 "/"! University of Maryland Baltimore County G" N + ! 5 "/"! Utah State University " N$ ! 5 "/"! University of Illinois $ G ! G/! 5[! Life Planning Partners O ( G % ! 5 "/"! California State University, Northridge ' H" G ! 5 "/"! ÂŽ, Virginia Military Institute E G +! N:! ! ÂŽ, IARFC / & M ! 5 "/"! The American College Q ' G" )M
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Š2014, IARFC. All rights of reproduction in any form reserved.
—Wade Pfau —Joe Tomlinson
Volume 13, Issue 2
9
Portfolio Size Matters Gordon Irlam, Independent Software Developer, Los Altos, California
In contrast to target date funds that vary asset allocation by age alone, it is important to take into account both the client’s age and the client’s portfolio size relative to spending goals when determining an optimal asset allocation. Stochastic Dynamic Programming (SDP) is a mathematical optimization technique that can be used to determine optimal dynamic adjustments to asset allocation in response to evolving portfolio wealth and time horizons. Using SDP, portfolio size appears at least as important to asset allocation decisions as age. For a 25 year old, asset allocation using SDP requires approximately 20-34% less resources than traditional target date asset allocation approaches. Financial planners can provide much value to their clients by incorporating portfolio size into a dynamic asset allocation strategy.
Journal of Personal Finance
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Š2014, IARFC. All rights of reproduction in any form reserved.
Volume 13, Issue 2
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14
Journal of Personal Finance
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Š2014, IARFC. All rights of reproduction in any form reserved.