PLANADVISER - September/October 2018 - 2

editor's letter
Burying the Lead?
W
e recently wrapped up our PLANADVISER National
Conference (PANC), and, as always, I came away
with pages of notes and story ideas. This was-
again, as always-thanks to all the amazing presentations,
speakers and interactions I had with advisers, broker/
dealers (B/Ds) and aggregators, investment managers and
recordkeepers.
One of our speakers, Morgan Housel, a partner at The
Collaborative Fund, gave a presentation called " The Messy
World of Risk. " I found it fascinating and have already cited
bits of the speech probably a dozen times in a matter of days.
Morgan began by telling the story of Grace Groner, who
was born in 1909 near Chicago, and died at age 100. She left
$7 million to her alma mater, Lake Forest College, from which
she had graduated in 1931. By all accounts, this woman led
a rather humble life, working at Abbott Laboratories for 43
years and, according to an article in the Los Angeles Times,
getting her clothes from rummage sales; outfitting her
house with inexpensive furniture, some mismatched dishes
and an old television; and walking rather than buying a car.
The Grace Groner story has some hints of urban
legend-when you search her name, you'll find plenty of
articles saying that the millions are from a $180 purchase
of three shares of Abbott Laboratories stock she made in
1935. All articles agree this started the wealth accumulation.
Where they diverge is on how much more she needed
to contribute over time, on top of the reinvesting of dividends,
the stock splits, etc., to wind up with the vast sum
she had upon her death.
But the details and nuances of the events aren't necessarily
important. Morgan contrasted Grace with a man
named Richard, who, despite what you'd expect based
on his curriculum vitae (CV)-a bachelor's degree from the
University of Chicago and Masters of Business Administration
(MBA) from Harvard Business School, experience
at investment banks, including a vice chairmanship at
one of the largest of them, who retired at age 49-filed for
personal bankruptcy because the financial crisis wiped
him out, and any wealth he had was illiquid.
In making these comparisons, Morgan said that
investing is the only industry in which " someone with no
education, no background and no experience can vastly
outperform someone with the best background, the best
education, the best experience. " And while I agree with
that-and his point that investing is about how you behave
more than it is about what you know-I also think those
two stories bury the lead a bit, if you will.
We absolutely know that saving money, adding to it
over time and letting it sit through market cycles without
withdrawing from it will yield results. To set it and forget
it, or set it and add to it, depending on which version of
the Grace Groner story you find, allowed her and will allow
people today to amass wealth. This is part of why participant
education has changed over the years, no longer
spending so much time and money focusing on the differences
between various mutual fund categories but instead
moving toward financial wellness topics such as budgeting
and debt management. It isn't
going to matter if people understand
small-cap or large-cap if
there isn't any money to invest.
However, look at the first
sentence about Grace Groner in
the Los Angeles Times story: " Like
many people who lived through
the Depression, Grace Groner was
exceptionally restrained with
her money. " Compare that with
articles
about Richard, which
discussed his multiple properties,
debts and hopes to avoid
bankruptcy by selling one of his
homes for nearly $14 million.
It's much easier to save if one
Investing
is about
how you
behave
more than
it is about
what you
know.
isn't worried about paying off large debts or trying to keep
up with a particular lifestyle that's outside of one's means.
I'm not saying to eliminate all spending, but there's a big
difference between past savings rates-which peaked in
May 1975 at 17% before beginning a decline-and those
in the last 10 years when we have occasionally seen it
rise above 8% in certain months, according to the Federal
Reserve.
While there is some awareness by Millennials that
they don't want to take on large mortgages as generations
before them may have, many face ballooning student
loan debt. There is still the image of needing a new car
every few years, or taking a big vacation (a recent article
cited extravagant bachelor and bachelorette parties as
doing harm to long-term savings potential), all of which
have put our national savings rate much lower now than
it was decades ago. Remember, Grace Groner wasn't even
saving in a tax-advantaged plan, considering she began
her investment in the 1930s.
Ordinary people amassing millions of dollars can
happen, and can happen for many ordinary, average participants,
but it may come at the expense of passing up a lavish
lifestyle. Behaviorally, our industry has to continue to help
people overcome the need to purchase things that are
unnecessary, now, and prioritize their future selves.
-Alison Cooke Mintzer, Editor-in-Chief, PLANADVISER
2 | planadviser.com September-October 2018
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PLANADVISER - September/October 2018

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