A Moment with our Faculty - Wade Pfau, Ph.D., CFA
By: Sheila Runkel, CLF®
Wade grew up in Iowa and Michigan, and his original plan in high school was to become a U.S. government economist. After earning both a BA and BS from the University of Iowa, he pursued a Ph.D. in economics at Princeton University.
While writing his dissertation at Princeton, which focused on President Bush’s proposal to create a Personal Retirement Account with a portion of Social Security contributions, Wade developed a passion for finance. Near the end of his doctoral program, he decided to postpone getting a job in the government; he wanted to try living abroad and moved to Japan. He got a job teaching economics at the National Graduate Institute for Policy Studies, a graduate school for government officials from developing and emerging market countries.
A long way from his native Midwest, Wade gained a global financial perspective in Japan while researching public pension systems in different countries. Retirement income accumulation is just as important to longevity outside of the United States; Japan’s current retirees generally save quite a bit. They are less likely to own stocks, and many households keep the bulk of their savings in postal savings accounts. With slight deflation in Japan, deposits have earned a small real return, so discussions about issues like safe retirement withdrawal rates are less common.
There are other differences that Wade noticed, as well. Brokerage fees are still exceedingly high in Japan, and there wasn’t much effort at the brokerages to check about the suitability of investments. Life insurance is also quite expensive. When Japan’s interest rates were so much lower than the rest of the world, retail banks were aggressively promoting that household investors hold foreign currency deposits with exchange rate risk. Comprehensive financial planning in Japan, however, is still a rarity.
After ten years in Japan – during which he met his wife and had two children – The American College welcomed Dr. Pfau to the faculty in April of 2013, as the first professor to teach exclusively in its new PhD program. He is responsible for three courses in the curriculum; courses centered on the accumulation and distribution of financial assets, on public policy related to financial and retirement planning, and on research methods.
When dealing with sophisticated products and a population whose cognitive abilities continually decline as the aging process continues, Wade believe that ethics in retirement planning is paramount. This is a population that could easily be taken advantage of; as such, it is important for an advisor to always act in the best interest of their client. Dr. Pfau’s rule of thumb is for the advisor to take care of the client first, then their employer, and themselves last. “My background in ethics as a formal discipline has been from studying the very comprehensive ethics materials that are part of the CFA Institute curriculum.” Wade says. “ I became a CFA charterholder in 2011. […] I try to maintain objectivity with my research, though I’ve found that many financial planners become suspicious when I speak positively about income annuities, since they view The American College as being very closely tied to the insurance industry. Of course, they are correct about those financial ties, but I’m thankful that no one at the college has tried to influence my research in any sort of unethical way. I’m glad that ethics plays an important role in everything The American College does.”