The Financial Advisor Challenge (FAC) Sponsored by the California Council on Economic Educa>on P R E S E N T E D B Y G R E G F I S H E R & G L E N F E R R A N D
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 todays 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 n rices reﬂect the rela>ve scarcity of goods and services and perform the p alloca>ve func>on i 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. number of new jobs and explain the signiﬁcance of an unemployment rate, the f 2. Deﬁne, calculate, created monthly, an inﬂa>on or deﬂa>on rate, and a rate o 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. oxplain foreign exchange, the manner in which exchange rates are determined, and the E eﬀects f 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 Bears & Bulls Division – D2 All classes. 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 ¡ PowerPoints ¡ 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 dont 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 AdvisorPresented 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
Size & Style Matrix for Equities60% VALUE BLEND GROWTH Utilities LARGE Core Holdings Technology Financials Low P/E Health Care Less Hi P?E Etc…. Volatile MEDIUM 30% Etc… RISK SMALL 10% More Volatile
Interest & Credit Risk Matrix for Bonds SHORT INTERM. LONGHIGH 1 year T-BillMEDIUM Interest Rate RiskLOW Credit Risk 20 years BB- corporate
TVM and CompoundingMagic 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 FormulaP = 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