Finding Financial Crisis Culprits; Selling Advisors Like iPhones: May Research—Slideshow

Smetters' strategy touches on numerous topics, including: how to maximize financial aid assistance; looking into student loans; and shopping around for the best deals on tuition, with an eye toward projected lifetime earnings. Smetters assesses the value and limits of getting kids involved in contributing to their own educational payments. He also discusses a possible "Plan B"—best avoided for most households—of withdrawing money from tax-deferred retirement accounts when college time arrives.

How Much in Risky Stocks vs. Safe Cash?

Annuity Analytics columnist Moshe Milevsky, in the latest installment adapted from his book The 7 Most Important Equations for Your Retirement (Wiley), recounts how economist Paul Samuelson (1915-2009) cast new light on the question of how to allocate between stocks and cash.

Samuleson's insight was that it is not a matter of how long an investor holds the respective assets—a position that may seem counterintuitive in light of the financial industry's emphasis on time horizons as key to allocation decisions. However, Milevsky argues, Samuelson's advice is compatible with what the industry doles out when one adds the concept of human capital. One's own expectation of earning power over time is a central consideration in deciding how much cash and how much stock is appropriate in one's portfolio.

Milevsky explains that "time is really embedded inside of Samuelson's equation, because the human capital value gets smaller, and eventually hits zero, as you age. Once you reach retirement—defined as the date when you stop working, permanently—and you have no more human capital, and all your wealth is tied up in financial capital, then perhaps stocks really are too risky for you. This is your call."

Your Model Day

Sales Seminar columnist Bill Good explains how to implement a "Model Day" approach to time management. A Model Day, he writes, "is a chart expressing your plan to perform certain kinds of actions at certain times. No chart? Your plan is just a wish."

Essential to a Model Day is its division into "mini-days," or time blocks allocated for particular purposes. For example, there is a planning mini-day, a meetings mini-day and a training mini-day. Once a mini-day is over, it is over, Good explains; moving on to the next time segment imposes a crucial discipline.

Writes Good: "The Model Day has three purposes that are constantly at war. Find the right balance, and your career will zoom: (1) Maximize sales contacts in the time available for work. (2) Develop a momentum in every area of business by grouping similar activities into their own mini-day. (3) Complete the most important tasks in each mini-day."

Good offers additional advice to financial advisors who are starting out in their careers and do not have teams of staffers to handle multiple tasks: "Because you don't have help, you will have many more mini-days than an established FA." He adds that this will require a 60-hour week. "If someone recruited you into the industry and told you that a rookie can work 40 hours a week," writes Good, "they lied."

Debased Currency

Global Economy columnist Alexei Bayer argues that monetary easing has exacerbated declines in people's purchasing power, even though inflation remains low as traditionally measured.

Labor markets are far more flexible than in the inflationary 1970s, notes Bayer, and companies generally have limited pricing power. Such developments translate into limitations on upward pressure on the Consumer Price Index.

However, with monetary easing going on at a heightened pace, liquidity may lead to unstable bubbles in the Treasury market and other markets, warns Bayer.

Moreover, although the CPI is rising only slowly, bayer writes, "if we attempt to construct a more complex measure—say, a basket of lifetime purchases of an average middle-class family, which will include a home, education for kids, medical care all the way through retirement, a number of motor vehicles, television sets etc.—we'll see that the value of the average salary has been dramatically reduced."

To access the May issue of Research, click here.