Dean’s Seminar
Ned C. Hill
Dean, Marriott School of Management
Minneapolis, MN
April 15, 2004
Marriott School
What’s happening with:
Rankings
 Student Achievements
 Alumni Portals
 Management Society

Who Beat Stanford & USC?
(not to mention UCLA, Notre Dame & Virginia)
Who Beat Stanford & USC?
(not to mention UCLA, Notre Dame & Virginia)
Answer: The Marriott School of Management!
22. MIT
23. Emory
WSJ Rankings
24. IPADE (Spain)
25. Ohio State
31. Notre Dame
26. Brigham Young
34. Thunderbird
27. Wake Forest
37. NYU
38. UCLA
28. Washington (St. Louis)
29. University of Virginia
30. Stanford
39. London Business School
40. USC
What the Wall Street Journal Said


“Schools making the biggest advances in the
ranking: Brigham Young University…” (12)
“Brigham Young’s Marriott School of
Management stood out for its students’ integrity in
this era of corporate scandals. ‘Our recruiters
return to Brigham Young year in and year out
because of the school’s high ethical standards,’
says Roger McCarty, corporate strategy
development leader for Dow Chemical Co.”
…continued



“Recruiters find that Brigham Young produces a
particularly valuable type of graduate these
days…the ethical accountant.”
“Brigham Young, which is sponsored by the
Church of Jesus Christ of Latter-day Saints, is
considered one of the best schools for hiring
students with high ethical standards.”
“In addition to ethics and integrity, recruiters gave
students very high marks for analytical and
problem solving abilities, communication and
interpersonal skills, fit with the corporate culture
and team orientation.”
MBA Rankings

We advanced or maintained
standing in every major
MBA ranking for the third
year in a row
22nd worldwide in Forbes (17th in U.S.)
 26th worldwide in The Wall Street Journal
 29th in U.S.News & World Report
 1st bang for the buck in Business Week
 2nd for Ethics in The Wall Street Journal

Other Rankings

3rd graduate accounting
(Public Accounting Report)
 3rd undergraduate

accounting (Public Accounting Report)
38th undergraduate
management (U.S.News & World
Report)

No. 1 “Stone cold sober school”
(Princeton Review)
Student Achievements
Undergraduates beat out
MBA students nationwide
to win Fortune Small
Business Magazine’s first
business plan competition.
MBA team wins 2003
Thunderbird Innovation
Challenge, beating 154
other teams.
Student Achievements
MBA students win the
D.A. Davidson & Co.
investment competition—
earning a 32 percent
return on their
investment.
Three students placed
second at the Net Impact
2003 International Case
Competition.
Student Achievements
An information systems
student placed first and
another student placed third in
the school’s first appearance at
the National Collegiate
Conference.
An MPA student was the first
in Utah to win an American
College of Healthcare
Executives Scholarship.
Student Achievements
Marriott School MAcc team
wins first place in Deloitte
national auditing case
competition in March
against all top Accounting
programs.
Marriott School MBA
team wins first place in U
of Denver National Ethics
Case competition—with
invited schools known for
their ethics programs.
Student Achievements
Undergraduate accounting
students took first place and the
graduates took second place at the
Deloitte Tax Case Study
Competition. This is the seventh
time in the twelve-year history of
the competition that both BYU
teams placed among the top
three—an unparalleled
accomplishment.
Alumni Portals
• New portal service unveiled in
September 2003
• Portals are customized by
program and year (i.e. MBA 1996,
MAcc 2001)
• Alumni portals are a
powerful tool to renew
connections and establish
new relationships
Alumni Portals
Visit your alumni portal to:
•
•
•
•
•
Update your profile
Access a class directory
Participate in online forums
Connect to the Management Society
Search 40,000 Marriott School and
nearly half a million BYU alumni
records
Web: marriottschool.byu.edu
• Click “Alumni Portals”
“I believe this new tool
will help our graduates
really leverage their
Marriott School degree.
One of the benefits of
going to this school is
the strength of the
alumni network you’re
tied into.”
— Dean Ned C. Hill
Management Society
• Now a global organization
• 40 Chapters in the U.S.
• 17 International chapters
• Developed central membership
database
•
•
•
•
Membership records
Online dues/events payment
Online calendar
Communication tools
• Formalized 5-year strategic
plan
Management Society
“We need the members of the
BYU Management Society to
help build the moral base of our
communities. You have
standards, ideals, and values that
will not only lead you to success,
but will bless and strengthen this
nation and all the world.”
— Elder David B. Haight
Questions?
Putting Our Financial
Houses in Order
Ned C. Hill
Dean, Marriott School of Management
President, BYU 5th Stake
President Gordon B. Hinckley
Priesthood Meeting, October 3rd, 1998



Story of Pharaoh’s dream of the seven fat cattle and the
seven lean cattle
“…I want to make it very clear
that I am not prophesying, that
I am not predicting years of famine
in the future. But I am suggesting
that the time has come to get our
houses in order. There is a portent
of stormy weather ahead to which
we had better give heed.”
“So many of our people are living
on the very edge of their incomes.
In fact, some are living on borrowings.”
President Gordon B. Hinckley (cont.)




“I urge you, brethren, to look to the condition of
your finances.”
“I urge you to be modest in your expenditures;
discipline yourselves in your purchases to avoid
debt to the extent possible.”
“Pay off debt as quickly as you can, and free
yourselves from bondage.”
“That’s all I have to say about it, but I wish to say
it with all the emphasis of which I am capable.”
President Gordon B. Hinckley



General Conference, October 7th, 2001
“The economy is particularly vulnerable. We have
been counseled again and again concerning selfreliance, concerning debt, concerning thrift. So
many of our people are heavily in debt for things
that are not entirely necessary.”
“I urge you as members of this Church to get free
of debt where possible and to have a little laid
aside against a rainy day.”
“But there is no need to fear. We can have peace in
our hearts and peace in our homes.”
Elder Joseph B. Wirthlin
April Conference, 2004


“Remember this: debt is a form of bondage. It is a
financial termite. When we make purchases on
credit, they give us only an illusion of prosperity.
We think we own things, but the reality is, our
things own us.”
“Some debt—such as for a modest home,
expenses for education, perhaps for a needed first
car—may be necessary. But never should we enter
into financial bondage through consumer debt
without carefully weighing the costs.”
Other Counsel on Debt


Revelation to Martin Harris: “Pay
the debt thou hast contracted with
the printer. Release thyself from
bondage.” (D&C 19:35)
Heber J. Grant: “If there is any one
thing that will bring peace and
contentment into the human heart,
and into the family, it is to live
within our means. And if there is
any one thing that is grinding and
discouraging and disheartening, it
is to have debts and obligations that
one cannot meet.”
Some Facts about Credit Cards
Average household has 8 credit cards
 65% of card holders do not pay off total
balance each month
 Why so much credit card debt?

 Good
times = confidence = overspending
 Lots of money and it needs a place to go
Self-Test:
Do I Have Too Much Debt?







Can I pay off my credit card balance completely each
month?
Do I skip some bills to pay others?
If I lost my job today, do I have enough in liquid assets to
pay living expenses for at least two months?
Do my spouse and I often argue about money?
Do I receive calls from creditors about overdue bills?
Have I postponed medical or dental appointments because
I can’t afford them right now?
Am I using an increasing percentage of my monthly
income to pay off debts?
Origin of Most Debt Problems?
Spending Problems
Debt
Income
Expenditures
Gaining Control of Your Expenditures

Step 1: Track cash flows
 1-3
months back
 Find all expenditures
 Determine assets and liabilities

Step 2: Agree on goals
 What
do we want to accomplish?
 Agree on a budget for future cash flows

Step 3: Track cash flows--compare budget to actual
 Use


computer or any other method
Step 4: Review monthly
Step 5: Make adjustments
Compute Your Net Worth


Net worth = Assets - Liabilities
Assets



Liabilities



Market value (not purchase price)
Real and financial
Credit card and other consumer debt
Mortgages
Why do this?



Net worth helps you do stuff in the future
Track over time--should be growing
Identifies assets that could be used to reduce debt
What Adds to Net Worth?
Stereo System
Credit Card Debt
Liabilities
Assets
Net Worth
How do you balance this?
What Adds to Net Worth?
Stereo System
Assets
Credit Card Debt
Liabilities
Net Worth
Net Worth Must Shrink!
Avoid Unproductive Debt
It Makes Net Worth Shrink
Productive debt
Unproductive debt
Home
Consumer goods
Education
Vacations
Minimum
transportation
Business
Car
Most credit card debt
Corollary: Be careful where you
borrow!





Finance companies
Credit cards
Banks
Credit unions
Savings
30
25
20
15
10
5
0
FC CC
B
CU
S
Reducing Unproductive Debt
Plastic surgery
 Reduce spending
 Use assets to pay off debt
 Reduce interest rate

 Consider
a home equity loan
 Use another lower cost source of borrowing
Make a plan -- stick to it
 Talk to a credit counselor if needed

Insurance--Makes Up for Low Net Worth
Problems

If you have low or negative net worth?
 Heirs
may have difficulties
 Severe cash flow problems

Insurance creates an instant estate--it becomes an
asset if you die
Assets
Liabilities
Net Worth
Cash from
Insurance
Added Net
Worth
Goals of Estate Planning
1. Live life fully
 Provide
for self & spouse
 Provide for others without spoiling them
 Provide for own possible incompetence
2. Pass property according to desires
 Provide
for administration (who does the work)
 Provide dispositive scheme (who gets what)
Goals of Estate Planning, Cont.
3. Provide for guardianship & conservatorship
of minor children
4. Avoid probate if desired or use probate
strategically
5. Decrease or eliminate taxes
 Income
tax (capital gains basis problems)
 Gift & estate tax
Provide for Others--Life Insurance

Term life -- pure death benefit
 No
savings component
 About 1/10th the cost of whole
 Expires at age 65 (usually)

Whole life -- death benefit plus savings
 Builds
cash value
 Does not expire
 Low but fixed rate
 Use for estate tax purposes
Provide for Others--Life Insurance
Term insurance (6-10 times annual income)
 Convertible term may be best for young
families
 Group is least costly but what if you leave?
 Have some for non-employed spouse

Prepare for Retirement
Some Retirement Myths
 “I’ll live on Social Security benefits”
 SS
will replace only 24% of your income
“Someone else will take care of me”
 “Better be safe and invest conservatively”
 “I can use my retirement funds for other
things”

Start Saving Early!

Sources of retirement money
 Social
Security
 Pensions
 Real Assets
 Financial Savings
 TOTAL
24%
21%
13%
11%
69%
Start Early!
Bill starts saving for retirement at age 20
Joe starts saving for retirement at age 40
($2,000 per year at 8%)
1000000
900000
800000
700000
600000
500000
400000
300000
200000
100000
0
$903,800
20 Start
40 Start
$172,702
20
25
30
35
40
45
50
55
60
65
Bill has accumulated over 5 times what Joe did by 65!
How Does This Work?
Compound interest
 Bill started earlier--compound interest has
more time to work its miracle
 If someone had put $1 in an account back in
1776 at 8% interest how much would the
account have in it today?

$30,685,000 !!
How Much Will I Need in Retirement?
Money Magazine Survey
Estimates: 53%
Actual: 71%
 One third of retirees support children and
grandchildren
 Health care costs generally higher
 Biggest regrets for retirees:

 Didn’t
take full advantage of tax deferred
investments
 Didn’t start earlier to save for retirement
Life Cycle Savings
(000’s)
600
500
Save 20%
400
Retirement
300
200
100
Save 10%
Borrowing
To heirs
0
-100
20
25
30
40
50
60
65
70
80 Age
What Should I Invest In?

Principle: risk-return trade-off
 High
risk--high return
 Low risk--low return

What?
 Stocks
-- ownership in a company (risky)
 Bonds -- loan to a company/government (less
risky)
 Deposit accounts -- (insured, no risk)

How?
 Mutual
funds
 Tax-advantaged investing
Best and Worst Total Returns
54%
(1926-2002)
S&P 500
U.S. T-bills
20%
17%
15%
9%
0%
One year
holding
period
-43%
0%
-1%
10-year
holding
period
8%
3% 0.4%
20-year
holding
period
Chances of Beating Inflation
%
100
90
80
70
60
50
40
30
20
10
0
S&P500
Bonds
T-bills
One-year
5 Years
10 Years
Holding Period
20 Years
Chances of Loss
30
25
20
15
S&P 500
Bonds
T-bills
10
5
0
One
year
5
years
10
years
20
years
Corollary 1:


When investing for a short period (5 years or less),
put your money in less risky investments like
savings accounts and bonds.
When investing for a longer period (10-20 or more
years), put your money in stocks.
Corollary 2: Where Possible Use
Tax Deferred Investments






IRAs
Roth IRAs (not tax deductible)
Keogh Plan (various types, up to 30% of self-emp inc)
SEP Plan (up to 25% of self-empl income)
401(k)--retirement plans
 Employer may participate
 Loan provisions
 Tax exempt until retirement
403(b)--retirement (employees of govts, ed, relig.)
What’s a Tax-advantaged Investment?
Say you make $10,000
 You put $1,000 in a 401k

 Money
goes into stock, bonds—wherever you want
 You leave it there until you retire



You are taxed on $9,000—not $10,000
The $1,000 grows for many years
You DO pay taxes when you take out the ($1,000
+ the increase)
Corollary 3: Diversify!
Never put all or even most of your eggs in
one basket
 Use mutual funds

Where to Put Your Money
Start-ups
Growth Stocks
Corporate Bonds
Corporate Bond
Funds
Government
Bonds
Specialty Funds
Growth Mutual Funds
Blue Chip Stocks
GARBAGE:
Speculative
Investments,
LPs,
Derivatives,
Gambling
Conservative Stock
Mutual Funds
Tax-Advantaged Retirement Funds: Growth Stock Mutual Funds
Insurance
Food Storage
Health
Life
MMMF,
Ins. Savings
Home
Checking
Account
Stay away from “get rich quick”
schemes




Some investment
seminars!
$1.00 per box cereal
scam
Telephone scams
Pyramid schemes
 “Make
$3 each stuffing
envelopes in your own
home!”
How to Recognize Them

Is promised return unusually high?
 Remember
the risk-return trade-off
Is product significantly above or below
reasonable market price?
 Does sale require pressure tactics?
 Does seller emphasize BYU or Church
connections?
 Is most of the product purchased by end
users or by other distributors?

Read a Good Personal Finance Book





Tyson, Personal Finance for Dummies, 3rd Edition
Engel and Hecht, How to Buy Stocks, 8th Edition
Lynch and Rothchild, Learn to Earn
Jane Bryant Quinn, Making the Most of Your
Money
Stanley and Danko, The Millionaire Next Door
Learn about Your Own Finances





Organize and know how to read your financial
documents (insurance, retirement, bank and
investment statements)
Create financial reports for your family (assets and
liabilities)
Know your monthly cash inflows and outflows
Use the Web for financial information
Develop a plan
Computerize your Finances
Excel
Internet
Personal Branch
Use Web Sites on Personal Finance








Yahoo!Finance (general)
MSN Money Central (general)
Quicken.com (general)
Charles Schwab (discount brokerage)
E-Loan (mortgages)
INSWEB (insurance quotes)
Utah Community Credit Union
(credit union services and general)
College saving information
finance.yahoo.com
www.moneycentral.com
www.quicken.com
www.schwab.com
www.eloan.com
www.insweb.com
www.uccu.com
savingforcollege.com
Conclusions
Be very careful about debt: avoid it where
possible
 Wise financial management empowers you
to serve more capably: family, community,
church
 Spend the time to acquire a basic
understanding of personal finance
 Surely we will be held accountable for how
we manage our resources

Day Trading--A Scam?




“Beat the market” ads
Low transaction costs inviting many to test their
own trading abilities
Day traders under-perform the market
Study by prominent investment firm:
 Market
gained 22% in 1998
 Average day-trader gained 2%
 Why? Trades based on emotional, band-wagon
excitement
Family Spending Guidelines
After-tax Expenditures









Contributions
Short and Long Term Savings
Housing
Transportation
Food
Health Care
Utilities
Clothing
Other
5-12%
10-20%
25-30%
10-15%
10-14%
4-6%
4-6%
3-6%
2-8%
Nigerian Money Scam
Faxes sent to many hundreds of CEOs and
other managers
 Need to arrange for $40M transfer
 However, need a U.S. bank account
 Lend us your account and we pay you
$10M for your services!
 Only need to cover a few incidental
expenses for us

Diamonds Are Forever?
Investors promised 30% return per month
 Invest now or you’ll miss the opportunity
 First few investors did receive promised
return
 Later investors lost everything

Sophisticated Selling

Fax sent to motels
 Large
tour groups seeking quality motels
 Fax us your rates and availability at 900-xxxyyyy
 Footnote: Each fax received will be billed at $39
.

Cost?
Credit Counseling Services
National Foundation for Consumer Credit
 American Consumer Credit Counseling
 American Debt Management Services
 Debt Counselors of America

Some Facts about Personal Debt
Total consumer debt = $1.2 trillion (3/98)
 Over $420 billion is credit card debt
 Consumer debt = 19.3% of disposable
income (up from 16.3% in 1993)
 Personal bankruptcies = 1.35 million (1997)

 50%
increase since 1992
 362,000 filings in 2Q, 1998--largest ever
You May Need a Trust
Estate taxes: about 50% of assets above
$650,000 per person (indexed)
 Spouse may pass on unlimited amount to
surviving spouse
 BUT…then only one gets the $650,000
exemption
 Need A/B trust
 Consider life insurance trust

Risk and Scams
There is risk in everything we do
 What is a scam?
 How does a scam differ from a legitimate
investment?
 How can we avoid unnecessary risk?
