Transforming IDEAS into ACTION
IMPACT 2006
Gregory T. Busch
September 2006
Alan Greenspan, Liz Ann Sonders, the Capitol Steps, Thomas Friedman, and Ken Dychtwald. These were a few of the speakers from Impact 2006, an educational conference I attended last week in Washington D.C. Cokie Roberts was expected to speak Wednesday morning, but due to the late night election returns, we did not get to hear her political analysis.
Schwab Institutional hosts this educational event each year for financial advisors throughout the U.S. Schwab packs so much useful content into the two days that I thought it would be good to share some of it with you. This year’s theme was “transforming IDEAS into ACTION” which I think has personal and professional application. First thing Monday morning we were treated to Alan Greenspan – Unplugged; unplugged because he can now speak “more” freely (and commonly) after retiring from the Fed. Dr. Greenspan told the 3,000 in attendance that the biggest event in recent history was the fall of the Berlin Wall. This in turn caused other countries, such as India and China, to drop centralized planning in favor of more open free market economic models. He also said that he believed that while we have passed the worst of the housing crisis, we were not totally out of the woods. He then added that there have never been recessions in environments of high and rising corporate profits. His final words were about entitlements. Surprisingly, he felt Social Security was solvable, politics aside, but that Medicare was a far more serious matter given the baby boom generation is not far away from eligibility.
We next heard from Thomas Friedman, who wrote The World is Flat. Like Greenspan, he referred to the fall of the Berlin Wall as one of the three most important days contributing to flattening the world. Friedman’s thesis is that because of technology, power, influence, and commerce will no longer be siloed into vertical compartments, like ABC, NBC, and CBS, for example, but rather be “horizontalized”. A perfect “flattened” example of this is blogging or weblogs. Bloggers have effectively neutered the insular power of the “Big 3” because they can “upload” news and opinion to the web in real time and have it read and reacted to or modified almost instantly by a virtual worldwide audience. This revolution, he says, is just beginning. Like electricity which took years to impact, this revolution will create huge boosts in productivity in the coming years.
On Tuesday we heard from Ken Dychtwald, author of The Age Wave and The Power Years: A Guide to the Rest of Your Life. Dychtwald told us how the concept of retirement will be redefined by the baby boom generation. He said the current version of retirement is over hyped, purposeless and generally results in leaving no legacy. With 2/3rds of all people who have ever lived past 65, alive today – things will change. Dychtwald encouraged us to question our boomer clients about how they want to retire. Do you really want 25 years of retirement? Would you consider part-time work in another field? His contention is that what boomers really want is freedom and that our planning needs to help them visualize their future for them.
The educational sessions were grouped into those helping us to better serve our clients and to strengthen our businesses. One of the most talked about sessions was titled, “Why Alternatives are the New Traditional Investments”. Mark Yusko presented statistics from a number of sources in order to support increasing the amount of “alternative” investments in client portfolios. While alternative investments have received some negative press over the years – think of the collapse of Long Term Capital Management in the 90’s and recently that of Greenwich, Connecticut’s Amaranth Advisors. Yusko believes there are appropriate ways to use this asset class for clients. Alternatives have been primarily used by institutions, high-net worth families and endowments. Yusko says the fund of funds approach now makes it possible to access this strategy for a lot more investors. The bombshell was that Yusko believes that a 5 – 10% use of alternatives in a portfolio is ineffective. He promoted a much larger percentage even up to 70%! This had everyone in the room gasp. I was even questioned by a reporter from Barron’s about it after the talk.
The morning after the election, the general session opened with a short performance by The Capitol Steps. Their satirical skits and song parodies about politics were just what I needed after such a contentious election season. The political roundtable which followed basically assured the audience that the changes in Congress were unlikely to affect Wall Street.
Summarizing all the great content from IMPACT is a difficult task. But, I’ve tried to give you a sense of the depth and breadth of the information we all took away. My job is going to be transforming the best of these ideas into action for you and our firm!