Tuesday, May 5, 2020

Picture this: your new house has a garden. Would you think it was a fabulous garden if the previous owners planted nothing but daffodil bulbs? There would  be a couple glorious weeks in the early spring, but the rest of the time it would be a whole lot of… nothing.

Professor of Practice Cathy Zaharis uses this garden analogy as a way to teach asset allocation.

"We diversify a portfolio because we don’t want to have a garden that’s only good in April and early May. We want it to work for us all year round,” she explained.

Zaharis (BBA82) has been teaching asset allocation as part of the London Winter Program, but starting this January, she launched a new on-campus class in Applied Wealth Management. The class accompanies a new endowed fund: the Charles E. Marberry Asset Allocation Fund, named after late finance professor Charles Marberry.

Marberry made a deep impact on the initial donor for this fund, Scott Taylor (BBA82), while he was an undergraduate student. Taylor remembers several “Marberry-isms,” including: “If you ever have to choose between being good and being lucky, always choose lucky.”

But the quip that had the largest impact was: “How many times do you have to double four thousand dollars to have a million?”

The answer is less than you may think.

Taylor put Marberry’s concept into action in his own life, investing and making small gains that added up—big. Taylor chose to honor that legacy by giving back to the college and naming the fund after this influential professor, along with fellow donors Daniel (BA78/MBA84) and Tina Lonergan (BA80/MFA84).

"The purpose of this donation is to have students participate in a real investment process. My hope is that this will raise awareness of the need to start investing at the beginning of their first job,” Taylor said. “It’s my feeling that Professor Marberry would like this program very much.”

Zaharis, who also had Marberry as a professor and can still picture him in the classroom, said “It’s a real tribute to our faculty to have a fund named after him. I have said for years now that I think our faculty teach quite well. They’re great researchers and great educators.”

Each semester, students enrolled in Applied Wealth Management allocate assets for the Marberry Fund, creating tailor-made retirement accounts for fictional people with different ages, circumstances, and goals. The undergraduates work in teams to hand pick mutual funds or ETFs (exchange traded funds), using real money to invest. Their recommendations are presented as a formal financial plan to an outside advisory board made up of industry professionals at the end of the semester. Students gain the tools they need to make the recommendations throughout the course.

“There are more funds that you can invest in than there are stocks. So how do you pick? Where do you start?” Zaharis asked. “And how much do you choose to invest in any fund? Students have to know the why.”

Tippie has a strong history of student-managed funds. The Marberry Fund is the fourth at Tippie, joining the Henry Fund, the Hart Fund, and the Krause Fund. It is only the second fund that undergraduates can participate
in (the Krause Fund is the other). Earnings from the funds support various financial needs of the college. Periodically, profits from the Marberry Fund will be redistributed to the Department of Finance to support its strategic needs, and the fund will reset to the initial donation value.

The fact that it’s real money at play, not an abstract intellectual exercise, really grabs students’ attention. The inaugural class filled up the first day of registration.

"As a student, you can read about it and work with a formula for an efficient frontier of asset allocation,” states Zaharis. “But the learning comes to life when you make recommendations for actual investments to real-world professionals and get feedback on your work.”

The experiential nature of this class makes it applicable to the RISE requirement at Tippie. (Students must either Research, complete an Internship, Study abroad, or take an Experiential class to graduate).

“Providing students with as many RISE experiences as possible is a priority because it sets them up for professional success,” Associate Dean Kenneth Brown said. “Having real-world experience will let them hit the ground running, whether it’s in an internship or a full-time position post-graduation.”

Outside of asset allocation, there’s more to the class—like choosing insurance, saving for college, tax efficiency, estate planning, and the soft skills needed to be an excellent financial advisor such as intellectual curiosity and the need  
to listen to clients.

"If I ask financial advisors to name one course they think students should take, they actually say psychology," Zaharis said. "There's nothing that screws people up more than their money."

Even if students don’t become financial planners, the class will still be useful in their personal lives.

With more and more companies moving away from defined-benefit plans (traditional retirement accounts) and moving toward defined-contribution plans (401k-type accounts), the onus of financial literacy is shifting to account holders.

“Investors need to have diverse assets growing and working well at different parts of their life and under different economic and market conditions,” Department Executive Officer Tom Rietz said. “The ability to asset allocate is the number one determinant of financial stability over time.”

According to Rietz, this growing need for know-how also provides an opportunity for Tippie graduates.

“Training a generation of financial planners, or even just financially literate people is important, impactful work,” he said.

As the department sees it, investing in financial literacy will render compound returns for individuals and society as a whole. Just as educators get satisfaction from seeing growth in their students, gardeners are rewarded quite literally with sweet returns on investment, and investors get to watch their money (and ultimately their independence, stability, and peace of mind) grow and compound over time.

So how many times do you have  to double four thousand dollars to reach a million?

Only eight. So, get investing— early—and put your money to work.


Read more about Professor Emeritus Charles Marberry