PR E S ENT ED   B Y    G R EG   F I SH ER  &   G L EN   F E RRAND  

           

The  Financial  Advisor  Challenge  (FAC)    

Sponsored  by  the  California  Council  on    Economic  Educa>on  

Table  of  Contents  

�  Introduc>ons  �  Goals  of  the  Webinar  �  Basics  of  the  FAC  Contest  -­‐  Greg  

¡  What  is  the  FAC?  ¡  Objec>ves  &  State  Content  Standards  ¡  Who  Can  Par>cipate?  ¡  How  to  Get  to  the  Finals?  ¡  The  Essay  ¡  The  Finals  ¡  Resources  ¡  The  CFALA  Mentors  ¡  Deadlines  ¡  Things  to  Consider  

�  Q  &  A  �  Fundamentals  of  Financial  Advising  -­‐  Glen  

¡  Role  of  a  Financial  Advisor  ¡  Fundamentals  of  Investment  ¡  Strategies  and  Approaches  to  Investor  Profile  Cases,  Asset  Alloca>on,  and  the  Essay.  

�  Q  &  A  

Introduc>ons  

�  Greg  Fisher  ¡  Narbonne  High  School  Economics  Teacher    ¡  CCEE  Board  member  

�  Glen  Ferrand  ¡   CFP,  FRM,  CFA  with  Merrill  Lynch  ¡   CFALA  regular  member  ¡  FAC  Advisor  &  Mentor  

Teacher  Goals  of  this  Webinar?  

� What  do  you  want  to  accomplish  and  take  away  from  this  webinar?  Be  specific.  

Goals  of  the  FAC  contest  is  for  …  

�  students  to  go  within  themselves  to  explore  and  invest  in  their  human  capital.  

�  students  to  become  more  prepared  in  their  future  and  be  beWer  decision-­‐makers  when  it  comes  to  personal  finance.  

�  teachers  to  add  an  invaluable  learning  tool  to  their  curriculum.  

�  this  program  to  be  seen  as  a  vehicle  that  assists  our  students  become  beWer  investors  and  ci>zens  and  to  help  secure  their  own  future  in  tomorrows  changing  economic  landscape.  

What  is  the    Financial  Advisor  Challenge?  

�  An  economics  and  personal  finance  contest  that  helps  students  learn  to  invest  in  their  own  human  capital  and  create  an  investment  porYolio  for  a  hypothe>cal  prospec>ve  investor.  

�  A  self-­‐contained  program  with  a  curriculum  that  helps  teachers  by  providing  them  with  engaging  materials,  resources,  and  lessons.  

�  All  student  teams  that  par>cipate  will  be  provided  with  a  CFALA  mentor  who  will  provide  support  with  their  professional  exper>se.    

�  Cash  prizes  (includes  4  students  and  1  teacher)  will  go  to  the  winning  teams  in  each  division.  ¡  1st  place  -­‐  $2,500          2nd  place  -­‐  $1,500            3rd  place  -­‐  $750  

Why do it? �  Students will:

¡  learn how to create a professional investment portfolio for hypothetical investors. ¡  go beyond understanding how investments work and explore how to invest in themselves

and their own human capital. ¡  compete with student teams across Southern California for prizes. ¡  develop 21st century skills and knowledge while learning economics and personal finance

�  Teachers will:

¡  be adding a vital and dynamic learning tool to their teaching repertoire. ¡  offer their students an unforgettable learning experience. ¡  help their students apply their newfound skills and knowledge to themselves; students will

become aware of important strategies for their own personal financial future. ¡  add rigor and relevance to their curriculum with the lessons and resources contained in the

program

�  Why every teacher of Economics, Math, Business, and Finance should participate in the FAC? ¡  The contest will energize your classroom, making it more experiential and dynamic. ¡  Many state content standards are realized in the curriculum. ¡  Students learn by doing. This contest puts students in charge of their own learning along

with the teacher and provided mentor. ¡  There is no better program that exists than the FAC when it comes to helping students

understand how to invest in their own human capital and become successful decision-makers in today's ever-changing economy.

Specific  Objec>ves  of  the  FAC  

�  Students  will:  ¡  dis>nguish  between  saving  and  inves>ng  ¡  learn  specific  investment  terms  ¡  iden>fy  different  types  of  inves>ng  –  stocks,  bonds,  mutual  funds,  money  market  CD’s  ¡  dis>nguish  between  the  three  major  financial  markets  –  Dow  Jones,  NASDAQ,  Standard  and  

Poor’s  ¡  consider  a  series  of  ques>ons  when  inves>ga>ng  investment  alterna>ves  –  investment  goals,  

>me  horizon,  risk  aversion.  ¡  consider  the  power  of  compound  interest  when  evalua>ng  different  investment  strategies  ¡  consider  income,  growth,  growth  and  income,  aggressive  growth,  sector,  pro  cyclical  and  an>-­‐

cyclical  financial  instruments  in  construc>ng  a  porYolio  ¡  evaluate  how  the  business  cycle  affects  different  investment  instruments  ¡  be  able  to  iden>fy  the  right  type  of  investment  strategies  for  a  variety  of  investor  profiles.  ¡  create  a  stock  porYolio  and  track  the  equity  markets  over  a  10  week  period.  ¡  be  able  to  make  the  dis>nc>on  between  stocks  and  bonds  as  investment  instruments.  ¡  determine  the  factors  that  impact  the  equity  markets  and  understand  the  incen>ves  for  

investors  to  trade  stocks.  ¡  gain  insight  into  the  role  of  a  financial  advisor.  ¡  apply  the  concepts  of  Market  Value  Timing,  Compound  Interest,  Asset  Alloca>on,  Market  

Timing,  and  Leverage  to  their  own  human  capital  and  personal  financial  decision  making.  

California State Content Standards in Economics Covered

�  12.2  Students  analyze  the  elements  of  America’s  market  economy  in  a  global  seRng.  ¡  12.2.2  Discuss  the  effects  of  changes  in  supply  and/or  demand  on  the  rela>ve  scarcity,  price,  and  quan>ty  

of  par>cular  products.    

¡  12.2.4.  Explain  how  prices  reflect  the  rela>ve  scarcity  of  goods  and  services  and  perform  the  alloca>ve  func>on  in  a  market  economy.  

¡  12.2.5.  Understand  the  process  by  which  compe>>on  among  buyers  and  sellers  determines  a  market  price.    

¡  12.2.9.  Describe  the  func>ons  of  the  financial  markets.  

�  12.5  Students  analyze  the  aggregate  economic  behavior  of  the  U.S.  economy.  

�  1.  Dis>nguish  between  nominal  and  real  data.  

�  2.  Define,  calculate,  and  explain  the  significance  of  an  unemployment  rate,  the  number  of  new  jobs  created  monthly,  an  infla>on  or  defla>on  rate,  and  a  rate  of  economic  growth.  

�  3.  Dis>nguish  between  short-­‐term  and  long-­‐term  interest  rates  and  explain  their  rela>ve  significance.  

�  12.6  Students  analyze  issues  of  internaVonal  trade  and  explain  how  the  U.S.  economy  affects,  and  is  affected  by,  economic  forces  beyond  the  United  States  borders.  ¡  12.6.4.  Explain  foreign  exchange,  the  manner  in  which  exchange  rates  are  determined,  and  the  

effects  of  the dollar’s gaining (or losing) value relative to other currencies.

Who  can  par>cipate?  

�  Open  to  all  Southern  California  high  school  students.  �  Designed  for  economics,  business  &  finance,  and  math  classes.  

�  There  will  be  2  divisions:  

Warren  Buffet  Division  -­‐  D1  All  classes.  

Bears  &  Bulls  Division  –  D2    Open  only  to  regular  classes.  

How  to  Reach  the  Finals    for  the  Warren  Buffet  Division?  

�  Register  to  par>cipate  at  least  one  class  in  the  contest.  ¡  To  sign  up,  go  to  hWp://econworks.org/signup.html  ¡  All  students  in  at  least  one  class  must  be  involved  in  all  of  the  following  criteria:  ÷ Online  FAC  pre  and  post-­‐tes>ng.  ÷ Register  one  or  more  classes  in  the  Wall  Street  Journal’s  ‘Market  Watch’  Stock  Market  Simula>on.  Its  URL  is    hWp://www.marketwatch.com/game/  (5-­‐weeks  minimum  par>cipa>on).  

÷ Submit  one  team  (four  students)    Investment  PorYolio  (PowerPoint  and  Investment  Policy  Statement)  for  the  investor  profile  provided;  ¢  students  develop  a  strategy  for  an  investment  porYolio,  taking  into  account  their  goals/objec>ves,  risk  tolerance,  >me  horizon,  and  asset  alloca>on.    

÷ An  essay  not  to  exceed  1,000  words:  

The  prompt  for  the  ESSAY  

÷  If  you  were  your  own  financial  advisor,  define  and  elaborate  the  posi>ve  strategies  of  Time  Value  of  Money,  Compounding  Interest,  and  Asset  Alloca:on  and  explain  how  to  avoid  the  common  piYalls  such  as  market  :ming  and  excess  leverage.  Provide  examples  for  each.  

÷ What  are  the  pre-­‐requisites  for  you  becoming  a  financial  investor?  Include  personal  quali>es,  educa>onal  background,  and  all  relevant  human  capital.  

The  Final’s  for  Division  1  �  A  panel  comprised  of  members  from  CCEE  and  CFALA  judges  will  evaluate  all  qualified  student  submissions  and  determine  the  6  teams  that  will  be  invited  to  ‘The  Finals’.  

�  Six  teams  will  be  invited  to  the  Finals  which  will  take  place  on  May  22,  2013  at  the  Los  Angeles  Branch  of  the  San  Francisco  Federal  Reserve.  Transporta>on  expenses  are  not  covered.    

�  The  judges  will  use  a  rubric  to  score  each  team’s  porYolio  (and  all  other  submission  requirements).  The  rubric  will  be  provided  to  all  par>cipa>ng  teachers.  

Division  1  Finals  cont.  

�  2  Rounds:  ¡  Round  1  (All  6  of  the  invited  teams):  

÷ Students  make  a  PowerPoint  presenta>on  of  their  investment  porYolio  and  accompanying  strategy  (9  minutes  maximum).  

÷ Students  respond  to  a  panel  of  judges  ques>ons  ¡  Round  2  (The  top  3  scoring  teams  from  Round  1  will  par>cipate):  ÷ Students  develop  an  investment  porYolio  for  a  given  poten>al  investor;  In  addi>on,  students  must  place  an  added  emphasis  on  how  their  human  capital  >es  into  the  role  of  a  financial  advisor  (45  minutes).  

÷ Students  make  a  PPT.  presenta>on  on  their  investment  porYolio  and  accompanying  strategy  (9  minutes  maximum).  

÷ Students  respond  to  judges  ques>ons.  

Getting to the Finals for Bears & Bulls Division

�  All teams participating register in the National Finance Challenge online at http://www.financechallenge.org/index.html?s=26&l=12

�  Go to the California FinanceChallenge site at http://www.financechallenge.org/index.html?s=5&l=1

�  Teachers and students use VISA Football or Soccer and selected lessons from Learning, Earning, and Investing to prepare for the National Finance Challenge.

�  The team that goes on to the regional contest is the one with the highest score.

�  The next 8 teams with the highest scores who are not in AP, IB, honors classes will be selected as finalists for the FAC Division 2 and are invited to the California Finals at the Los Angeles Branch of the San Francisco  Federal Reserve Bank on May 22nd, 2013.

�  Those 8 teams will compete in three rounds. In Round 1, 8 teams compete, then four, then two. In each round, the questions become slightly more difficult.

Timeline for the National Finance Challenge

�  March 18 - 27, 2013- Spring Online Competition - Top 5 teams  will be invited to the regional competitions. (online)

�  April 20, 2013- Regional Competitions . Prizes  �  May 2, 2013 - National Competition in St. Louis,

Missouri.

Curriculum  and  Resources  for    Teachers  &  Students  

�  All  of  the  following  will  be  easily  accessed  on  the  CCEE  website  (Econworks.org):  ¡  Learning,  Earning,  and  Inves>ng    ¡  PowerPoint's  ¡  Apps.  for  mobile  devices  ¡  YouTube  Videos  ¡  websites  ¡  Lessons  ¡  Market  Watch  Stock  Market  Simula>on  (hWp://www.marketwatch.com/game/)  

The  Mentors  

�  CFALA  provides  mentors  to  teach  up  to  three  lessons  (but  may  exceed)  on  financial  markets  and  financial  planning  basics.  

�  All  invited  teams  to  ‘The  Finals’  will  work  with  a  mentor  on  a  more  frequent  basis  to  assist  in  the  prepara>on  of  their  Finals  performance.  

�  No  financial  products  will  be  marketed  to  teachers  or  students.  

�  The  mentors  will  provide  professional  skills  and  exper>se.  � Mentors  will  explain  what  are  the  pre-­‐requisites  for  becoming  a  financial  advisor  (i.e.,  skills  and  knowledge,  specific  training,  educa>on,  background,  etc.).

WHEN  are  the  deadlines  for  the  FAC?  

�  Deadlines:  ¡  Teacher  registers  their  class(es)  online  or  by  emailing  Megan  Terasaki  at  ccee.org  no  later  than  March  1,  2013.    

¡  Pre/Post  Tes>ng  is  administered  online  at  Econworks.org  ÷ Pre-­‐Test  completed  by  March  8,  2013  at  5  pm.  ÷ Post-­‐Test  completed  by  May  9,  2013  at  5  pm.  

¡  Stock  Market  Simula>on  to  be  played  for  a  minimum  dura>on  of  5  weeks  between  March  1,  2013  and  May  9,  2013.    

¡  Submission  of  Investment  PorYolio  and  Essay  no  later  than  May  10,  2013  at  5  pm.    

¡  All  teams  invited  to  the  finals  will  be  no>fied  by  May  15,  2013  ¡  The  Finals  will  take  place  on  May  22,  2012  at  the  Bank  of  India  in  downtown  Los  Angeles.  

Things  to  Consider  

�  Teachers  don't  have  to  have  a  strong  knowledge  base  of  financial  investments  to  par>cipate.  The  curriculum  provided  and  the  mentors  are  the  resources  to  help  you  and  your  students.  

�  If  a  team  does  not  get  invited  to  the  finals,  op>ons  for  con>nued  use  include:  ¡  in-­‐class  and/or  inter-­‐class,  inter-­‐school  compe>>ons.  ¡  presenta>ons  to  other  classes,  school  faculty  members,  and  parent  groups.  

�  Feel  free  to  solicit  other  teachers  at  your  school  to  par>cipate.  ¡  Individual  teachers  at  every  school  may  register  their  classes.  ¡  Bring  in  teachers  from  other  departments  to  help  with  any  aspect  of  the  

contest  (i.e.,  math  analysis,  essay  wri>ng,  ppt.  presenta>on,  etc.)  

Ques>ons?  

�  Write your questions in the chat area.

The  Financial  Advisor

Presented by Glen Ferrand, CFP, FRM, CFA

 Financial  Investment  Fundamentals  

�  Advise  and  be  advised  �  Risk  fundamentals  �  Understanding  alloca>on  � Market  >ming,  myth  or  reality?  �  Compounding,  the  8th  wonder  of  the  world  �  Leverage  and  the  price  for  it  

Risk vs. Reward

Financial Advisor Process

L L L

Asset Allocation & Diversification

VALUE BLEND GROWTH

LAR

GE

SM

ALL

M

ED

IUM

Utilities

Financials

Low P/E

Etc….

Technology

Health Care

Hi P?E

Etc…

60%

30%

10%

Core Holdings

RISK

Less Volatile

More Volatile

Size & Style Matrix for Equities

SHORT INTERM. LONG

HIG

H

LOW

M

ED

IUM

Interest Rate Risk

Cre

dit R

isk

1 year T-Bill

20 years BB- corporate

Interest & Credit Risk Matrix for Bonds

Timing the Market

Compounding and Time Value

Magic  Penny  assumes  a  100%  return  every  day  which  is  highly  unlikely,  but  the  principle  of  compounding  holds  true  for  even  smaller  returns,  this  is  why  compounding  is  a  core  aspect  of  good  personal  finance.  When  you  are  young,  you  have  an  asset  money  cannot  buy:  TIME.  Start  saving  now  and  turn  pocket  change  into  riches.  Compound  interest  has  been  called  the  eight  wonder  of  the  world.  And  with  good  reason.  It  magically  turns  a  liWle  bit  of  money,  invested  wisely,  into  a  whole  lot  more.  Even  Albert  Einstein  is  said  to  have  called  it  one  of  the  greatest  mathema>cal  concepts  of  our  >me.  

 

Compound Interest Formula

P = principal amount (the initial amount you borrow or deposit) r = annual rate of interest (as a decimal) t = number of years the amount is deposited or borrowed for. A = amount of money accumulated after n years, including interest. n = number of times the interest is compounded per year

TVM and Compounding

Leveraging

The Risks of Excess Leverage

Questions?

�  Write you questions in the chat area.

Contact  Informa>on  

�  Greg  Fisher  –  Economics  Teacher  ¡  gfisher@lausd.net  

�  Glen  Ferrand  –  FAC  Advisor  &  Mentor  ¡  glen_ferrand@ml.com  

� Megan  Terasaki  –  Teacher  Rela>ons  Support  ¡  meganterasaki@gmail.com