Jesse Anderson, CFA and CEO of Snider Advisors, wants to upend traditional strategies for saving and investing for retirement.
"Investors' results are terrible," he says. "Evolution did not wire our brain to be good savers or investors."
Humans are concerned about our well-being currently; not five, 10 or 15 years down the road. At any sign of trouble, our emotional reaction is to flee; largely because we have a stronger negative reaction to loss than we have positive emotions to a gain of an equal amount or more.
"It takes patience, control and consistency to be successful at investing," Jesse adds.
And while in the past, the government and employers had the responsibility of Americans' retirement, now the end of the defined benefit plan coupled with a rise in fiscal irresponsibility means that future generations will have to be responsible for their own financial health.
That's why Jesse and his colleagues at Snider Advisors believe in helping their clients get a solid financial education.
Here, we talk to Jesse about the Snider Investment Method and the best and worst money management strategies. Read on:
Tell us the story behind Snider Advisors.
It was founded by Kim Snider on the principle that the No. 1 job of a portfolio should be to produce a paycheck. After handing her money to financial advisors, she watched it dwindle away. From this, she learned you alone are responsible for your financial health and well-being. She went out and gathered the necessary knowledge to manage her money, but quickly realized others could benefit from this wisdom as well. It was from this our focus on financial education was born.
Can you give us an overview of the Snider Investment Method?
It isn't some secret, magic formula Wall Street isn't telling you about. It is a combination of sound investment principles in a specific order to generate a greater probability of success.
At its core, it is built with stocks, selling calls and put, and dollar-cost averaging. The most important feature may be the systematic nature in which it is applied and how it accounts for the emotional (and irrational) decisions that lead investors to poor results.
How does your philosophy on investing differ from other investment advisors?
The first difference is our educational approach. We believe investors should know exactly what is in your portfolio and why it is there. Next, very few advisors are focusing on income investing. This is particularly true as it relates to the stock market. Over 50 percent of our clients take monthly distributions each month. I don't see many investment advisors creating strategies to meet this need. With more and more baby boomers retiring each day, advisors need to create investment strategies that will generate income throughout a client's retirement.
Why do you place a premium on cash flow?
One of the quickest ways to crater a portfolio is by selling assets in a bear market to meet withdrawal needs.
Through our use of options, we generate monthly income that matches our client's monthly withdrawal needs. Our ability to generate income through option sales reduces the possibility of selling assets in down markets and permanently damaging a portfolio. Having confidence that their portfolio can create a paycheck allows our clients to sleep easier in rough markets.
Describe your typical client. What's their investment history? Why do they come to you?
They are at or near retirement looking for income when they retire. They've worked hard all their life and accumulated a nice size 401(k) or investment account, but aren't extremely wealthy. In many cases, we guide our clients through their first stock trade. We appeal to a DIYer with a desire for rules and a strong process. This often sparks a lot of interest from the engineering community.
Why do you think starting off your clients with a sound financial education is important?
An investor that understands the mechanics and potential outcomes of their investment approach will have more realistic expectations for their money. Understanding the risks and working through examples help clients better grasp the process and think rationally while investing. Even with all the education in the world, no one is prepared for their first real bear market.
What areas of money management do you find your clients need the most help with?
They wait too long to plan for retirement. They are forced to make-do with what they have rather than confidently retire knowing their nest egg will last the rest of their life. A strong savings plan and wise investments in the years prior to retiring can have a strong impact on dramatically improving someone's lifestyle in retirement.
What common investment practices today make you cringe?
I could go on forever... salesmen (cashing big commission checks) who claim to be financial advisors and market timing.
What are some investment best practices you think everyone should implement?
Save 20 percent of your income while working, Know the basics of your investments, match your investments to your objectives, and finally, know ALL the costs/fees involved.