Welcome to the CFALA e-newsletter, a periodic publication with stories about noteworthy events and programs sponsored or hosted by the society, guest articles by members, book reviews, and other items of interest to CFALA members. Click on the headlines below to read the full stories. And if you’d like to contribute a story suggestion or, even better, write an article, we’d love to hear from you. Please email Executive Director Laura Carney at laura@cfala.org.

*Please note that the content of this e-newsletter should not be construed as investment advice, nor do the opinions expressed necessarily reflect the views of CFA Society Los Angeles.

In this issue ...

• Women's Member Community Hosts Speaker Series

• Risks and Resources for Advising Older Clients

• ESG Investing Member Community Analyzes Criticisms of ESG Investing

• Streaming Media Scholarships for Service Members and Disabled Veterans are Available

• How To Get And Stay Ahead In The Robo Race

• CFA Institute and FINRA Foundation Study Debunks Common Myths about Millennials and Investing

• AI in Banking - An Analysis of America's 7 Top Banks

• Alexa, Should We Trust You?

• AFP Jargon Watch: Amara's Law

• Swedroe: 2018 Good For Gurus 

Women's Member Community Hosts Speaker Series

The CFA Society Los Angeles Women’s Member Community has heard the expressed interest of our members for networking and career development events that take place at convenient times and in convenient locations. We are responding with a new monthly event series called An Intimate Chat. This series will feature guests from a curated list of dynamic, successful and engaging local women who have an interesting story to tell and valuable advice to share. Attendance will be limited and will allow all participants to engage in active dialog with our featured guest and each other.

The idea for this series came to me as I considered certain truths: 1) Although we are few, we are mighty; 2) United we are strong, divided we are weak; 3) We must build on the backs of those before us; 4) Everyone is unique, yet we are all the same.

Every woman has a story to tell that includes success, defeat, sorrow and joy with twists and turns that could not have been foreseen. From this comes wisdom. By sharing these stories with those on a similar journey, we gain insight and strength and learn that none of us has to be alone on this journey. The Intimate Chat series will provide a forum for women to come together, share their stories and learn from and support each other.

We will feature women from across institutional asset management, wealth management, banking and retail. We will feature those with roles in portfolio management, research, distribution, operations and advisory across asset classes and across the experience and age spectrums. We anticipate gaining traction from each event and the referrals garnered from the additional participation. We hope additional women will step up to coordinate a future event at their office or local meeting spot or even their home. So many women tell me that they have nothing special or unique to share. However, I hope that this series shows them that every story is valuable and important in its own unique way.

The series will move about the Greater LA area and between lunch and evening times to allow the greatest access to the greatest number of people. The first event, featuring Monica Erickson, CFA, of DoubleLine, was sold out. The next event on November 15, we welcome Jennifer Murphy, CFA, of Western Asset Management. The chat will take place at the Western Asset Management office in Pasadena. We will continue to spread the locations around downtown, Pasadena and West LA. Check out the CFALA website for details of the events.

Women interested in participating in online chats with members of the community should join the “CFALA Women’s Member Group” LinkedIn group.

By Susan Drozdowski  Back To Top ^^

Risks and Resources for Advising Older Clients

The CFALA Advocacy/Ethics Committee hosted a program on October 9th that included a panel discussion regarding advising older clients. The intent was to share perspectives of three specialized gerontology professionals who focus their practices on elderly clients and field questions from the CFALA attendees on this topic.

Our moderator was Scott Laudemann, CFA. He began the program with introductions of the panelists John C. Lansing, Elder Law Attorney practicing in Pasadena, CA; Jane Schroeder, Senior Vice President of Lennox Advisors, a specialist in family and business insurance planning; and Gideon Schein, co-Founder of Eddy & Schein Group and a personal finance manager for seniors.

(A more extensive background for each of them can be found on the event page on cfala.org)

Schein noted that, today, many senior clients are from the “depression era” and thus, have more significant potential financial fears such as hiding money and spreading it in more accounts in various places. He also emphasized the need to have a good client service team engaged. This team would likely include financial advisors, attorneys, insurance specialists, family members, trustees, etc.

How do we avoid legal issues and challenges? John Lansing suggested the key answer is oversight. Notice and watch what is happening and be alert to unusual and sometimes small changes in attitude or circumstances.

Schein mentioned that one out of three Eddy & Schein Group clients were targeted by a scam. In most cases, it is by family members, which is why financial advisors need to be very observant – particularly with their older clients.

Jane Schroeder referenced a story of a mother and daughter who were living together but something wasn’t quite right. They weren’t open and clear with each other in identifying issues that could have been helpful in resolving their current living arrangement. Jane got involved to put the machinery in place to engage external care for the family and helped trigger discussions and address problems that ultimately improved their lives and relationship.

We then moved into an open dialogue with Q&A from attendees which Laudemann moderated.

The first question was, “If you have a high net worth client, why do you need long-term care insurance?” Schroeder said, “People typically don’t want to spend their money on insurance, but if they have coverage, ensuring it is put to good use is both convenient and is essentially leveraging dollars, assuming that they have acquired the coverage at reasonable premium costs while they were younger (say age 50 or 55).” She also suggested that if you have insurance, be aware of the inflation factor to ensure that it keeps up with your needs.

Gideon Schein added that, in his personal experience, 20 years of premiums were about the same as one year of home care cost. Additionally, due to the variety of products and specific services covered, insurance is now a much more complicated issue to include in the decision-making framework. This usually requires the expertise of someone who works with it full time. Also, the evolution of longevity makes a stronger argument for more actively considering insurance coverage. Technology has also added to the complexity of making projections about what coverage will cost.

John Lansing shared his personal situation with his mother, saying that his life would have been much easier if his mom had been covered with a long-term care policy – and that he now has coverage in place because of his experience.

Several people mentioned that family members could be put at risk in caring for their family member who needs more care, and thus sacrificing their own ability to earn and save money.

Another common issue, brought up by the audience, was working with older clients who feel that they can take care of themselves and push back against advisors trying to help.

Lansing suggested that advisors might attempt to “ease help” into the situation without offending the client, by identifying an appropriate family member who may help influence the client to accept help. Also, advisors should assuage the fears in the person they are trying to help. For instance, advisors might consider a more gradual pathway that would reassure the client’s sense of autonomy and independence.

Also with emerging dementia, there are episodes when it arises, and times when it is not present. For all new clients, Schein does an initial comprehensive and holistic assessment to determine whether or not there are any cognitive impairments that could put his clients at risk. There are ways to assess what degree of help is really needed. However, he notes that every individual is different and must be approached as a unique situation. One key idea is to do the assessments later in the day when cognitive issues are more likely to emerge. The fact that cognitive impairments are more likely to exhibit themselves after a full day of activity for seniors is referenced as “sunsetting”.

Schein advised to have two powers of attorney at a minimum to provide appropriate backup. There should also be a succession plan for the two powers of attorney, one who has primary power, with a backup in case the primary is not available. It has to be someone the client trusts implicitly.

Schein then suggested we carefully look at our services as catalyzing the assembly of a “team model” of family members and other advisors/professionals who are specifically relevant to their needs. Advisors must ask the question about who their clients trust – family and otherwise – to engage in the formulation of legal and other support frameworks for their future.

Gideon’s advice is to be cautious about automatically engaging large organizations and entities because they can sometimes get in the way of the highly personal and substantial relationship of trust with trustees that will be in the position of oversight for your client’s financial affairs. If in place, attempt to provide a pathway for successor trustees, or those granted legal authority to enhance flexibility as appropriate.

Gideon’s comment also suggests that you attempt to identify and match the cultures of trustees/service providers to the clients whom they serve.

We concluded the talk with each of the panelists indicating they are available to respond to questions we had regarding issues for our clients. Also, more specifically, if there is a suspected concern of elder abuse that needs to have some more in-depth professional review and potential investigations, they are happy to provide references.

By A. Mark Harbour, CFA Back To Top ^^ 

ESG Investing Member Community Analyzes Criticisms of ESG Investing

How does one address common criticisms of ESG investing? The ESG Investing member community wrestled with this question at its most recent meeting. The group reviewed a white paper that highlighted five criticisms of ESG investing: horizontal inconsistencies, vertical inconsistencies, temporal inconsistencies, hypocrisy, and unintended consequences. The discussion revealed a large breadth of complexity associated with ESG investing.

Horizontal inconsistencies represent inconsistencies across both industries and within firms. For example, should energy companies be held to different standards than technology companies when evaluating them from an ESG perspective? Or how should we evaluate a company like Coca Cola which on one hand supplies the world with sugary drinks that contribute to health problems, while on the other hand provides safe drinking water to millions of people in Africa?

Vertical inconsistencies highlight the challenge of evaluating a supply chain from an ESG perspective. For example, if a client says that they do not want any “gun stocks”, then it is relatively easy to exclude gun manufacturers from one’s portfolio. However, what about retailers that sell guns, or banks that provide financing to gun manufacturers? Where does one draw the line?

Temporal inconsistencies address changes in social norms. For example, smoking was socially accepted until the scientific research mounted to a point where people’s attitudes changed. The group highlighted social media, internet privacy and cannabis as areas where norms appear to be changing.

Hypocrisy focuses on the disconnect between one’s ESG mandates and one’s reality. For example, someone wants their investment portfolio to be “fossil fuel free,” but takes frequent carbon intensive airplane trips or enjoys cheap energy for their car or to heat their home.

Unintended consequences highlight products that may seem to support an ESG mandate but in turn cause another (maybe larger) problem. For example, while electric cars reduce the carbon output of a specific vehicle, they have batteries that are highly toxic and require cobalt, which has been sourced by child labor in undeveloped countries. The group highlighted Apple as an example of a company that does a good job of being mindful of the entire product cycle – starting with sourcing iPhone materials to recycling the phones at the end of their useful life.

The discussion underscored the validity of these criticisms. The group cautioned that regulation or legislation mandating ESG investing may amplify the challenges associated with these criticisms, especially when such legal and regulatory frameworks are not aligned on a global scale – a concern some members deemed particularly acute when it comes to the speed at which the European marketplace is moving regarding ESG policies.

The group talked about how improvements in ESG data and the ESG standard-setting process across jurisdictions will help resolve some of the complexity associated with these criticisms. Finally, the discussion emphasized the importance of talking through these issues with clients so that they can appreciate the complexities of ESG investing and be more comfortable integrating ESG into their portfolios.

By Jeff Kuhlman, CFA - ESG Investing Chair Back To Top ^^

Streaming Media Scholarships for Service Members and Disabled Veterans are Available

With Veterans Day just a few weeks away, CFA Society Los Angeles would like to remind our members of the full scholarship offered to active duty service members, as well as Disabled Veterans, for streaming media access to USC/CFALA CFA® Review Program courses. Specifically, recorded classroom lectures, including the presentation materials, are available free of charge to service members and veterans who qualify. The candidates who receive the streaming media access are also provided instructors’ email addresses, in case they have questions about the material and wish to contact the instructor directly.

This scholarship program was started after the beginning of the wars in Iraq and Afghanistan, when the need to assist interested veterans and service members as they transition into new careers in financial services was recognized. The scholarship, which is available for the Fall Level I and Spring Level I, II, and III review programs, has been utilized by roughly 20-30 candidates per year, with active duty service members stationed in Germany, Kuwait, and elsewhere, and disabled veterans living in Illinois, Texas, Florida and throughout the country, logging in.

Streaming media access scholarship applications for the Spring 2019 review programs are now open, and we ask our members to share this opportunity with any active duty service members or disabled veterans they know who are interested in the CFA Program or a career in financial services. Click here for more information and the application form.     Back To Top ^^     

how to get and stay ahead in the robo race

The rise of fintech will inevitably pose some threats but will also create new, exciting opportunities, explains Paul Smith, CFA, President and CEO of the CFA Insitute in this ThinkAdvisor piece. Smith assesses the impact of artificial intelligence (AI) and machine learning on both the industry and the profession, citing findings from the CFA Institute's most recent Next Generation of Trust survey. Read more... And more...  Back To Top ^^    

CFA Institute and FINRA Foundation Study Debunks Common Myths about Millennials and Investing

If you were among those who assumed millennials are aggressive, knowledgeable, and confident when it comes to investing, the findings of this new research study, sponsored by the CFA Institute and the FINRA Investor Education Foundation, may surprise you. Read more...  And more...  Back To Top ^^    

AI In Banking - An Analysis of America's 7 Top Banks

Check out this TechEmergence piece by Kumba Sennaar to get up to speed on the AI applications of America’s top 7 banks. Sennaar's survey helps answer important questions regarding the types of applications currently in use, those that are in the works, common trends, and the level of resources leading banks are committing to AI and emerging tech innovation. Read more... And more... Back To Top ^^   

Alexa, Should We Trust You?

In this article in The Atlantic, cultural critic and journalist Judith Shulevitz considers the forces driving the rapid adoption of electronic voice assistants, and some of the more sobering implications of their proliferation.  Read more... Back To Top ^^  

AFP Jargon Watch: Amara’s Law

The Association for Financial Professionals' Bryan Lapidus, FP&A, introduces us to Amara's Law of technological impact and Gartner, Inc.'s technology Hype Cycle. Science author and columnist Matt Ridley discusses Amara's Law in further detail.  Read more... And more... Back To Top ^^ 

Swedroe: 2018 Good For Gurus

The gurus are (finally) getting it right! In this ETF.com blog post, author and Buckingham Strategic Wealth Principal and Director of Research Larry Swedroe provides an assessment of how his 2018 list of financial market "sure things" has fared through the end of September.  Read more... And more... Back To Top ^^