The Tony Steuer Podcast

Get Ready with Christine Benz: Simplifying Your Investment Strategy

October 09, 2020 Tony Steuer
The Tony Steuer Podcast
Get Ready with Christine Benz: Simplifying Your Investment Strategy
Chapters
The Tony Steuer Podcast
Get Ready with Christine Benz: Simplifying Your Investment Strategy
Oct 09, 2020
Tony Steuer

“Simplify and reduce the number of moving parts in your plan. Your investment portfolio doesn’t have to be complicated to be successful. That very few constituent holdings can get you to your goal.” - Christine Benz

In this episode of Get Ready, I spoke with Christine Benz, the Director of Financial Planning for Morningstar about being an investment minimalist and how it can improve your financial life. We also discussed how life stage impacts how people should think about their investments along with the financial complexity complex.

Bio: Christine Benz is Director of Financial Planning for Morningstar. In that role, Christine focuses on retirement and portfolio planning for individual investors. Christine is the co-host of Morningstar’s Long View podcast. She is  the author of 30-minute  Money Solutions: A Step-by-Step Guide to Managing Your Finances and  co-author of Morningstar® Guide to Mutual Funds: 5-Star Strategies for Success.  In 2020, Barron’s named her to its inaugural list of the 100 most influential women in finance. Crain’s Chicago Business named her a Notable Woman in Finance in 2019.

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Show Notes Transcript

“Simplify and reduce the number of moving parts in your plan. Your investment portfolio doesn’t have to be complicated to be successful. That very few constituent holdings can get you to your goal.” - Christine Benz

In this episode of Get Ready, I spoke with Christine Benz, the Director of Financial Planning for Morningstar about being an investment minimalist and how it can improve your financial life. We also discussed how life stage impacts how people should think about their investments along with the financial complexity complex.

Bio: Christine Benz is Director of Financial Planning for Morningstar. In that role, Christine focuses on retirement and portfolio planning for individual investors. Christine is the co-host of Morningstar’s Long View podcast. She is  the author of 30-minute  Money Solutions: A Step-by-Step Guide to Managing Your Finances and  co-author of Morningstar® Guide to Mutual Funds: 5-Star Strategies for Success.  In 2020, Barron’s named her to its inaugural list of the 100 most influential women in finance. Crain’s Chicago Business named her a Notable Woman in Finance in 2019.

Please subscribe to receive notifications of future episodes of the Get Ready with Tony Steuer podcast.

Speaker 1:

Welcome

Speaker 2:

To the get ready with Tony Stewart podcast. I'm pleased to be joined today by Christine Benz. In this episode, we'll be discussing being an investment minimalist and how can improve your financial life. Christine, thank you for joining me on get ready,

Speaker 3:

Tony. Thank you so much for having me on.

Speaker 2:

Yeah, it's a pleasure to have you. Um, so before we dive in, let me tell you a little bit about Christine. Uh , Christine Benz is the director of financial planning for morning star in her role. Christine focuses on retirement and portfolio planning for individual investors. Christina is also the co-host of Morningstar's long view podcast. She's the author of 30 minute money solutions, a step-by-step guide to managing your finances and coauthor of Morningstar's guide to mutual funds, five star strategies for success in 2020, Barron's named Christine to its inaugural list of the hundred, most influential women in finance Crain's Chicago business, named her as a notable woman in finance in 2019. So, Christine, thanks again for joining me. Sure. Um, so can you tell us a little bit then about what you do? Um, what's your role?

Speaker 3:

Yeah, my role at Morningstar is to provide financial information, financial education, if you will, to individual investors, some of them are operating as DIY investors. So they're trying to figure this stuff out for themselves. Some of them are individual investors who have financial advisors, but they just want to be well-informed as they go on the journey with their financial advisors . So they want to understand the concepts that go into their financial plans. So I write articles, I do videos. I do podcasts as you so nicely mentioned Tony. Um, and the basic ideas that we try to take the often daunting complex world of managing your financial plan and break it into actionable, understandable to do items. So I always try to explain things in excruciating detail, and I try to kind of go through that process and put myself in the shoes of an investor. Who's not super comfortable with that stuff with this stuff. So I try to explain things in really easy to understand steps, even if you're not steeped in the day-to-day investment world.

Speaker 2:

Well, and , um, I'm going to put links in the show notes for our listeners, but I would urge people to go out there because I, Christine, I think you do a wonderful job of explaining , uh, concepts in your columns and breaking it down. And I think that's exactly what's needed in the financial community that we take it for granted sometimes that people understand things where really sometimes they just need to start from the beginning. So I left the work that you do

Speaker 3:

Well, thank you. One thing I try to think about is I helped my mom and dad with their financial plan. My dad was always an investor, but I helped them as the years went by and then later on in their lives as , um, my dad could no longer manage their finances. I did that work for them. So I'd try to kind of serve that role as trusted adult child , um, for the people who read my articles. And that's why I love focusing on retirement planning and specifically retirement decumulation. How do you do this in the era of really low yields that we find ourselves in? And I find that kind of just serving that role of trusted adult child , um, is , is something that provides comfort to me now that I no longer have parents. I just like feeling like I'm fulfilling that role for some parents who might need kind of an extra set of eyes on their plan.

Speaker 2:

Well, that's great because that's definitely needed out there. Um, so you know, one of the columns I really enjoyed reading was your comment about being an investment minimalist. Uh, can you tell us , uh, what an investment millet men , if I can say what being an investment minimalist is?

Speaker 3:

Well, I guess the way I think about it is life is complicated. Financial planning is complicated. So to the extent that you can simplify your investments, it really is such a great help to you as an investor in terms of navigating this journey. And I think the issue is that the financial services industry often sells this message, that things have to be complicated, to be good, to be worthy, they need to be complicated and you may not understand them. And I guess I come at it from an opposing viewpoint, which is that sometimes the simplest lowest maintenance investment plans can be the most effective. So I really liked the idea of investors taking a hard look at all of their investment accounts, streamlining them, where they possibly can. So, you know, we're a nation of job, hoppers, many people are carrying these multiple accounts around that adds to the complexity that makes it difficult to see what you have and to know what you have in aggregate. So that's one step in the process would be sort of skinnying down the number of accounts that you have and then within the those accounts, see if you can't take steps to winnow down the number of investments even further. So maybe you have , um, a small IRA, for example, well, maybe a target date fund is a good solution there to just sort of , uh , get that account into a very streamlined position. I also love index funds and exchange traded funds for that reason. And that even though you can buy very narrow cuts of the market in index fund or ETF format, you can also buy very broad based market pass baskets. You can buy all of the stocks in the world in a single fund. So I liked the idea of investors trying to use fewer moving parts in their portfolio. And by the way, those low cost index products can also be very, very inexpensive, which is another advantage.

Speaker 2:

Yeah, well, I think that last part is so important that people oftentimes overlook is the expenses that they pay on their investments. And I think your strategy also leads to lower costs

Speaker 3:

For sure. And, you know, I focused on mutual funds for many years in my role at Morningstar was actually had of our us research team on mutual funds before I took on my current role and all of the research that we've done during my tenure and in subsequent years points to the virtue of low costs that there's actually no more predictive data point in terms of how your investments are apt to behave. Then starting with low costs that low costs tend to predict better than average performance within a peer group. So it's counterintuitive because we all live in a world where a $40,000 vehicle is better than a $20,000 vehicle. Well, this really turns that whole idea on its head where as Jack Bogle, who founded Vanguard often said what you get, what you don't pay for when you're investing so cheaper is oftentimes better.

Speaker 2:

Definitely. Well I'd even we could discuss cars another time, but I'd even say sometimes you probably are just as good at well off with a $20,000 cars. You are with a $40,000 car, no car

Speaker 3:

Expert . So I won't weigh in on

Speaker 2:

That. Yeah , that's a different show. So anyway, that , I think that leads us into the next question. And which you also write about the financial complexity complex. Why do you feel that most financial products don't actually help to improve investor outcomes?

Speaker 3:

Well, I don't know that I would say most, but I would say many. And it gets back to this idea of , um, I think that there's a sort of a motivation in the F in some sections of the financial services industry to sell complicated products, because sometimes they can be more costly. And I think sometimes investors might feel that they need to keep paying for this advice because they don't really understand the product that they have. And so I think that , um, there are a few why this sort of financial complexity complex goes on. Um, but I think that costs and, and the fact that it's remunerative for the financial services industry is a big reason why. So I think consumers being empowered and really asking hard questions. I mean, sometimes I think that , uh, individuals are sort of disempowered as they approach approach these relationships. They really think, well, I don't understand that he or she is the real expert there. And my advice is even though it might not feel comfortable ask all your stupid questions and I put that in quotes because you really need to be an informed participant in the process. And if you ever get to the point in the process where the person who is advising you to buy a certain product, can't explain it in very concrete terms that you can understand. I think it's time to back away from that engagement. Um, so I think people should get comfortable asking questions. This is particularly true in the realm of more complicated investment types, like annuities, that can be very complicated, difficult to understand often sold and not bought. Those are spots where investors should feel comfortable asking all of the questions that they have and not feel that , um , it's not their place to ask those questions.

Speaker 2:

Yeah. I completely agree with that. I think that people should always feel comfortable to ask the question and I think that's always one easy way to , um, smoke out a financial predator is when they can answer questions or when they steer you away from answering questions. I think, you know, it serves so many purposes and like you said, is, is you need to be an informed consumer. That's so important, right?

Speaker 3:

Yeah. If they're giving you any, even any sort of body language about your questions are taking too much time. I think that, that that's a signal that maybe that's not the right relationship.

Speaker 2:

Yeah , definitely, definitely. Uh , so, you know, as we talk about it and , uh, you mentioned earlier as , you know, people go through stages , um, how do you feel that life stages impact how people should think about their investment portfolio?

Speaker 3:

Yeah, it , you know, it's interesting. Um, I do think that as we get closer to retirement is probably , uh , a life stage where you probably do want to seek help because it's so much more complicated. Really. I think about the process of accumulation and assuming someone can stay employed and have a somewhat disciplined savings rate and invest in a semi sane fashion where they have a fair amount of exposure to the stock market. It's not difficult to accumulate assets for retirement, but w as you approach retirement, I think that's where you do need to start getting a second set of eyes on your plan. Even if you're not hiring of an all-in advisor who you're paying throughout the year for their services. I do think that that's a life stage where things start to get more complicated because you, first of all, you have to know, can you retire? When can you retire? And when you begin retiring, how much can you safely take out of that portfolio without running the risk of prematurely, depleting it over your retirement time horizon. And then in addition to that, you have to figure out, well, what's a good way to allocate that portfolio so that it meets my goal throughout my retirement years. So that's a lot of moving parts. That's one reason why as much as I appreciate and try to support do it yourself, investors. I do think that the retirement years, the pre retirement years are an ideal juncture to get some help also. Um, you know, as you go through life changes, as you have children, as you'd put your children through college, as you might encounter job loss or income disruption, those are also good times to sort of do a checkup on your plan and just to make sure that whatever suppositions you were making about it ,

Speaker 2:

True, that's really important. I think you hit on so many valuable points is , you know, as your life changes as you approach retirement , um, that, that you do want a second qualified second opinion. Uh, I know sinks because they are big decisions. And especially as you mentioned, withdrawing down for retirement is you don't want to make a mistake there because you , you don't get a do over on that one. Right?

Speaker 3:

Exactly. And same goes for social security. Even though there are a little maneuvers that you can do to undo your social security filing decision. That's such an impactful decision for so many households that it really is a good spot to get some advice too . And oftentimes people will hear, especially if they have longevity on their side to potentially delay filing, but you know, a good advisor can help you look at all of those variables together because it really is a mosaic of different variables that we're dealing with in retirement.

Speaker 2:

Definitely, definitely. Um, so it, you know, we're getting into open enrollment time here in the fall. Um, when, which , what do you think that people should consider when they're deciding what to do with their employer, retirement plan contributions? What factors should they be thinking about?

Speaker 3:

A couple of things. One is check how much you're able to save. And we've certainly seen a lot of people who have encountered income disruption in their households through this period with unemployment still being so high. But if you are still employed and you haven't had any changes to your households , cash flows , it's a great time to see if you can't potentially even bump up your savings rate if you possibly can. So that's always something to have on your dashboard. Also revisit your allocation, what investment choices you're making with your plan. There may be new additions to your plan. There may be changes to actually how your plan operates. So increasingly over the years, we've seen plans add the Roth option, which may or may not be the right option for individuals. It's , um, you know, tends to be a better idea for people who think that they're in a lower tax bracket today than they will be when they are drawing down from their portfolio. And you might have younger people who are listening, who might say, I have no idea about my tax bracket now versus in the future. But if you're sort of in the upward trajectory of your career, that's often a good reason to consider making Roth contributions. So paying taxes at your fairly low tax rate today in exchange for tax-free withdrawals and retirement. Um, so those are a few key things to look at. Um, I do take it a look at your allocations though, just to make sure that they're appropriate given your life stage. If you're in that older age cohort where you're getting close to retirement, you haven't taken a look at that recently, you may be too stock heavy given your life stage. We've seen such a great recovery in the stock markets since this , since the first quarter of 2020. Um, and I think that many of us who are in that sort of baby boom cohort, feel very comfortable with equity risk, but we're getting closer to retirement. We're actually getting closer to needing our funds. So you want to make sure that you have, de-risked a portion of your portfolio. So check out your total portfolio allocation as well. And then I also like to say, check up on your beneficiary designations too , as you are reviewing your 401k less is more in terms of checking up on your account balance and so forth. But while you're in there checkup on your beneficiary designations, just to make sure that they reflect what your wishes are today and what your family situation is today.

Speaker 2:

Oh, I'm so glad you said that is because that's something I've been trying to hit on is , uh , for people and really point out is don't forget about the beneficiary designations on your retirement accounts, you know , go back and take a look at them because that's so often something that I've seen or heard about is, you know, it wasn't changed, you know, from 20 years ago when I first started working at the company, or like you mentioned, is, you know, when people have collected all their investments across the way,

Speaker 3:

Right. And people change employers a lot and employers change providers a lot. And sometimes I've seen that those , uh , designations don't necessarily transfer over automatically. Sometimes you have to go in and do that if your provider has changed. So lots of reasons to check up on that. And one thing people don't know Tony, or sometimes don't know is that even if you've created a will and a whole estate plan, that specifies what you want to happen with your assets, what you've laid out in those beneficiary designations in court actually supersedes what might be in those well-laid estate planning documents

Speaker 2:

A hundred percent. That is definitely something people don't realize or think about. And I think it's those little things that really always make a difference, you know, as we've talked about with the expenses and the beneficiary designations , uh, you know, I think you mentioned that when you laid it out , lay out a detailed process. I think that's why the details are always so important , um, to go through all those things. So you don't miss something , uh, people may become heavily focused on the return , uh , but it's really about so much more than the return. Um, so can you share with us what your number one tip is , uh, for people on being financially prepared?

Speaker 3:

I think my number one tip is to simplify and reduce the number of moving parts in your plan , um, that your investment portfolio doesn't have to be complicated to be successful. That very few constituent holdings can get your, get you to your goals. So that would probably be my key piece of advice. Take my advice to be a minimalist. I think that that's a great way to go about managing a plan on an ongoing basis.

Speaker 2:

I think that's wonderful advice. I, I love it. Uh, completely agree. So Christine , um, where can people learn more about you? I'll also be posting links on the web site .

Speaker 3:

Wonderful. So I'm on morningstar.com a lot writing articles and doing videos on Twitter. I try to be active on Twitter because it's just kind of a fun community of people who are into financial matters. So my Twitter handle is Christine underscore Ben's and , uh , then if you're a podcast listener, the long view is the name of our Morningstar podcast. And it's an interview style format like this one.

Speaker 2:

Fantastic. Well, thank you so much for joining me today. It's been a wonderful conversation. Thank

Speaker 3:

You, Tony. It's been my pleasure

Speaker 2:

And thank you everybody for watching or listening to get ready. Uh , please. Sure. To subscribe.