The experience of parenting three children helped inspire the award-winning Brandes Scholarship Program. "I have three daughters who now range from age 18 to 24," says Carol Lynde, president of Brandes Investment Partners & Co., "and what I saw, being in the investment business, was a lack of knowledge when it came to investments."
The scholarship program was the winner of the 2012 investor-education award sponsored by the Investment Funds Institute of Canada and presented last November at the Morningstar Canadian Investment Awards. The program addresses issues raised by a federal-government report that called for measures to improve the financial literacy of Canadians. The findings of the task force were released in February 2011 in a report entitled Canadians and Their Money.
"We believe that financial literacy is very important to the industry," says Lynde, "both on behalf of investors as well as financial advisors. So we see the Brandes Scholarship Program as a launching pad that we want to continue to develop."
The program offers Canadian students, aged 16 to 22, the chance to win a $1,000 scholarship. Through the website www.brandesscholarship.ca, students were invited to take an 18-question quiz developed in partnership with MarketPsych. This year's 10 winning entries will be announced on Aug. 15.
The multiple-choice quiz focused on helping students discover their investment personality. The questions were designed to determine whether the students were risk-takers versus risk-avoiders, and whether they were spenders versus savers. The quiz also assessed the respondents' level of interest and knowledge about investing. On completion of the simple multiple-choice quiz, the Brandes program provided an investor- profile summary.
To help students discover their tendency towards spending versus saving, the question was: Imagine that you won $5,000…you would most likely: a) put all of it in the bank, saving for the future, b) put some of it in the bank, but also use a good amount for having fun, or c) have some fun and spend it!
The quiz offers insights into some of the trade-offs between risks and returns, using simple illustrations. One part of the quiz, which dealt with the impact of inflation, cited the price of ice cream. 'Inflation traditionally rises at about 3% each year," Brandes said, "even though we don't really feel it while it's happening." What that means, according to the quiz, is that a $3 ice cream today will 30 years from now cost you roughly $6 or more.
After completing the quiz, the students submitted an essay of 400 to 600 words, explaining what they learned about their inner financial self. They were also asked to report on what was the most important thing they'll remember when they start investing.
Marketing executive, Leah Brock (right), accepting the award for the Brandes Scholarship Program at the 2012 Morningstar Canadian Investment Awards. | |
Among the 3,600 essays that Brandes received across Canada this year, the results of the quiz indicated that 89% of the participating young adults were savers, 75% showed a high interest in finances and 66% were risk-avoiders.
Brandes's Lynde says she was impressed by the quality and creativity of the essays submitted. "In fact, I got a hand-written thank-you letter from a young man, Zachary, 17, from Vancouver, saying that he's working really hard, has a couple of jobs, and that I had no idea how important receiving the $1,000 scholarship was to him. It brought tears to my eyes."
A snippet from Zachary's essay illustrates his creativity: 'Upon completion of the Money Factor Quiz, it seems that investing is very similar to being a Hawaiian pineapple farmer," he wrote. "Just as the Hawaiian pineapple farmers balance the risk of living in the shadow of an active volcano with the reward of growing crops in the best soil on earth, the smart investor must balance the risk of losing money with the reward of greater profits.'
According to the Brandes profile summary, Zachary is a saver who is neutral towards risk- taking, with an above-average understanding of finance. But according to Zachary's own self-assessment, he lacked some of the knowledge needed to make money. "I was highly surprised to learn that my strategy of saving money, by putting it in the bank, was not optimal for growth." That's a valuable lesson for anyone getting started in investing.
Another 2012 award winner, Sharon, 19, from Alberta, impressed Brandes's panel of judges with her financial wisdom. 'Saving for retirement,' says Sharon, 'is an endeavour that we should all start the moment we enter the workforce." She concluded that it's never too early to start saving for the future.
Above and beyond the scholarship awards to young adults, Brandes provides a template letter that financial advisors can offer to clients who have children. "I think it's important for financial advisors to get behind this," says Lynde, "because they will have future clients who are more aware of their investment personality and making better use of their services."
Energized by the success of the program, both in terms of industry recognition, youth participation and advisor interest, the scholarship initiative will continue next year. "Absolutely, we'll run it," says Lynde. "It's kind of my little baby, I love it."