Top Three Lessons Learned About Retirement Investing

Poor Economy Creates an Interesting Investment Classroom

CHICAGO--()--If consumers nearing retirement have learned anything over the past three years, it’s that they need a strong ship to ride the uncertain economic waters into a safe and successful retirement.

Retirement investment counselor Stewart Mather, CFP(R), CIMA, who leads The Mather Group, Inc. ( shares the top three lessons every investor approaching retirement should have learned during the perfect storm that was Wall Street:

Lesson learned: It’s your money. Be careful whom you trust with it.

The current regulatory environment holds Wall Street brokers to a lower standard of client responsibility than Registered Investment Advisors (RIAs). RIAs must by law put their clients’ interests before their own every time, and disclose any conflicts of interest. This is known as the “fiduciary standard.” Not so for broker-dealers, who under current standards can provide advice that lines their pockets but may not be in the best interests of their clients.

“This is a huge difference that separates the Wall Street broker-dealers from independent fee-only advisors,” Mather says.

While the Dodd-Frank Wall Street Reform and Consumer Protection Act is attempting to hold broker dealers more accountable, many Wall Street lobbyists oppose having all brokers held to the higher “fiduciary standard” required of RIA’s. In fact, lobbyists are working hard to water down the proposed legislation. Here’s one example: In a May 31, 2011 letter addressed to Mary Shapiro, Chairman of the Securities and Exchange Commission, Rep. Barney Frank recommended that the agency not place broker dealers under the same “fiduciary standard” that RIAs must maintain.

“It seems rather contradictory to sponsor legislation on one hand that’s designed to protect consumers but then fail to follow through and hold Wall Street brokers to the highest fiduciary standard that would help accomplish this goal,” says Mather.

“To me, it’s obvious why Wall Street is opposed to their brokers being held to a ‘fiduciary standard’ - it means they will be less profitable if they have to do only what’s right for the client every time. They would prefer business as usual – they now can push investments that make the most money for them whether or not they are in the best financial interest of their clients.”

Lesson learned: “Model portfolios” are only as good as the thinking behind them.

Some may think the recent financial crisis that took retirement accounts by storm was an aberration, like the 100 year flood or the “perfect storm”. Don’t be so sure, according to Mather.

“You can’t write off the economic downturn as a once in your lifetime event. It would be reckless for anyone to advise that this couldn’t happen again,” he says. “There were no ‘safe harbors’ during the collapse – nearly all asset classes declined.”

How can consumers protect themselves? Now more than ever it is important to understand how one’s retirement portfolio is invested and who made the investment decisions.

Mather says the latest fad is for investment firms to encourage their sales force to push retirees into “model” portfolios that are pitched as being highly diversified. During the recent financial crisis, a large number of these model portfolios imploded, and when the next storm hits, he says many retirees will be caught off guard once again.

The concept of a model portfolio isn’t the problem, Mather says. In fact, under the right circumstances, it provides the optimal investment solution for retirees. The problem is that most of the large financial firms allow their sales force to develop the models behind the portfolios. Since the success of these model portfolios depends exclusively on the assumptions made about how the underlying assets will correlate, fluctuate, and perform, any miscalculation can later lead to a broad portfolio implosion.

Retirees may not know that anyone can call themselves a “portfolio manager” or “retirement consultant” without even having a high school diploma, much less a graduate degree or professional certification.

“There are no qualifications required,” he says. “It would be like a law firm allowing paralegals to practice law just so they can increase their profits,” says Mather. To practice law you have to pass the Bar exam. The financial industry should have similar qualification standards and consumers should demand it.”

His advice: Seek out advisors with a Chartered Financial Analyst (CFA) designation or a Master’s Degree in Finance from a recognized institution.

Lesson learned: Stress test your retirement plan against all possible economic scenarios.

Leave nothing to chance nor on auto pilot. Mather believes it has become imperative to “stress test” one’s retirement plan on a regular basis, especially on the final approach – five years out from retirement. “There’s a myriad of economic possibilities we test against. You don’t want to find out in the eleventh hour that you can’t retire – you want to know you are on track all of the time.

“Our goal is to assure the investor has the necessary cushion, the right timing for retirement and the right portfolio to get them there. That requires a lot more than just hoping everything will work out.”

To achieve this goal, The Mather Group uses computational algorithms that rely on repeated random sampling to determine the probability of a successful retirement. While the roots of this approach lie in physics, it’s really more of an integration of modern portfolio theory and applied statistics, according to Mather. “The big picture has changed dramatically – we’re living in a very different economic world today and planning for a successful retirement has taken on a whole new meaning. Prepare for the known and the unknown if you want to retire successfully,” he said.

The Mather Group is an independent, fee-only retirement investment advisor utilizing Fidelity Institutional Wealth Services as its custodian. The firm serves the Chicagoland market from its state-of-the art office located at One Tower Lane, Suite 1820, Oakbrook Terrace, IL 60181.

As Managing Partner of The Mather Group, Mather sets investment policy, directs portfolio management and oversees retirement planning strategies. Other team members bring more than a century of wealth management experience to the firm, providing financial guidance through many economic cycles.


The Mather Group, Inc.
Terri Kaminski, 262-242-2754

Release Summary

Financial tips on investing for retirement.


The Mather Group, Inc.
Terri Kaminski, 262-242-2754