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The Time is Now
Plan for Your Financial Future
by Pam Losefsky
Some days Darrell Pennington (MBA 93) feels like a psychologist, others a marriage counselor, still others just a friend with broad shoulders. Such is the existence of a financial advisor. And these days, the general anxiety that people are feeling about the economy and the stock market means that Pennington and his business partner Scott Tiras (BBA 84, MBA 86) are wearing a lot of hats.
Tiras and Pennington operate the largest American Express Financial Advisors practice in Houston, providing investment, insurance, income tax, retirement, and estate planning advice for individuals and employee education for corporations. “Probably 90 percent of Americans do not plan adequately for their future—college, retirement, emergencies, and so forth,” estimates Tiras. “The biggest mistake people make is that they always think they will catch up later—next year or when you get that bonus or promotion, or whenever. In reality, that time never comes.”
But if there ever was a perfect time to think about your financial future, that time is now.
While the stock market has taken a major hit over the last year, the economy is really not doing so poorly, believes Tiras. “Usually the market follows the economy, but this time, that’s not happening. The economy is not in fantastic shape, but it’s not horrible.” Unemployment is still at a historically low level, productivity is high, and inflation nonexistent, but this good news has been overshadowed by other current events, Tiras says.
Pennington agrees, “It’s just been one thing right after another, and the market hasn’t had time to recover. These events have created uncertainties among investors that translate into negative implications for the market. In reality, everyone needs to step back, take a deep breath, and focus on the pure economic numbers, which are actually pretty good.”
In conjunction with that deep breath, Pennington believes that we all need to take this opportunity to reevaluate financial goals and get motivated to take action.
So, how are we to secure our financial futures while waiting for the market to rebound? “First, you need to look at all the different areas, not just your investments,” advises Pennington. “Have you started saving for your children’s college education? Do you have adequate cash reserves in case emergencies arise? Look at your tax planning—are you doing the best you can all year long to minimize your taxes? Look at your life insurance, your disability insurance, your auto coverage, and your estate planning. If you don’t have a will, get one. The state of Texas has a will for you, but you may not like what it says and who gets your money.”
Tiras notes that many employees are turning to the workplace for help in addressing their financial planning concerns. Their practice has forged strategic relationships with numerous corporations to help implement financial planning programs through educational workshops and one-on-one consultations. Their workshops cover such topics as day-to-day cash management and education planning for younger employees just beginning to set goals for the future, as well as retirement and estate planning for those employees preparing to embark on their post-career years. “We also work with employees in transition due to a corporate restructuring or other untimely cutbacks in personnel,” adds Tiras.
Of course investors will continue to read the paper, watch television, and closely follow the day-to-day volatility of the market. But Pennington notes that the market is still a good place to be for those with long-term time frames. “This investment climate reminds me of the stock market shudder of 1987. Had you invested the day before the drop and held onto those shares, you were way ahead ten years later,” he says. “I believe we’ll see the same thing ten years from now.” There are a lot of great values to be had in the market right now.
Those who had taken a short-term tack, however, may want to reconsider their allocations. “When the market was doing nothing but going up, many people over-estimated their tolerance for risk,” says Pennington. “Now that volatility has been reintroduced into the market, those investors may be feeling very uncomfortable.”
“The days of it being very easy to make a lot of money very quickly are over, and investors need to come to terms with the fact that there are no guarantees,” Tiras advises. That holds true for both the small individual investor and top-level executives who raked in hundreds of millions of dollars over the past few years, sometimes by ethically questionable means.
“When everyone is making money, no one asks questions,” says Tiras. “Greed is a pretty powerful force. But when the tide turns, people start pointing fingers.” Pennington believes that changes in how boards of directors operate and in accounting practices will lead the public to have faith in business again. “We don’t want to over-regulate, though—the market tends to take care of itself,” he says. “Companies know that people are watching with a critical eye and they will make sure that they are accountable.” Restored public confidence in American business will help to shore up the shaky market over time.
What Pennington likes most about his job as a financial advisor is helping people meet their goals. “To see my clients be able to send their children to college or retire earlier than they thought is really very rewarding,” he says. “I had a client who ended up being able to retire two years early, and now he is in very bad health. Without getting sound financial advice, he would not have been able to enjoy those last couple of years.”
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