Your Complete Guide to a Successful and Secure Retirement. 2019. Larry E. Swedroe and Kevin Grogan, CFA.
This guide includes information beyond the topics relevant to a financial analyst’s review of the book. As such, I focus here on such content, which is largely found in the book’s first half. In the early chapters, authors Larry Swedroe and Kevin Grogan, CFA, lay the foundation for the investment elements of retirement planning. They then cover a broad range of retirement topics to build on that foundation, creating a truly “complete” guide.
The authors’ groundwork on investment aspects is thorough and comprehensive. They begin with an overview of the entire retirement planning process and guide the reader through goal setting, investment policy, implementation, and risk management. Academic sources are used liberally to reinforce the arguments while anecdotes and examples bring the text to life.
Swedroe and Grogan use a CAPM reference framework for both the return and risk management goals of the investor. Some practical decisions are presented as involving a range of choices in either risk management or asset allocation. But the authors come down strongly in favor of passive investing when selecting mutual funds and exchange-traded funds (ETFs), claiming that active management does not add value in stock selection. When discussing strategy, however, they advocate an active approach to allocation and rebalancing. This advice appears consistent with the authors’ experience as wealth managers, not fund managers. Their wealth management background is also apparent when they recommend specific mutual funds and ETFs based on their own recommended lists for clients.
The chapter on risk management has the subtitle “Reducing the Risk of Black Swans,” which is also the title of one of the authors’ prior books. The chapter provides a conventional CAPM analysis of risk, although “black swan” events are neither explained nor discussed.
Although this book is “complete” in the sense of having both breadth and depth, its intended audience is unclear. It professes to be aimed at the retiree, but the level of detail on technical topics suggests that the average retiree could quickly get lost in the complexity. Is it then for the more sophisticated retiree — someone more able and willing to come to grips with the intricacies of financial planning? Perhaps, although this rationale exposes a contradiction in the book’s approach. Advocating the exclusive use of passive vehicles seems more suitable for an unsophisticated audience, while the authors’ recommendation to use Monte Carlo simulations and active allocation techniques suggests a more sophisticated reader. To help retiree investors at all levels of investment knowledge, this book may best be used as an occasional reference guide to its various specialist topics.
The audience who likely will find the book most helpful consists of financial advisers and wealth managers. It is not that they need to learn the subject matter. Rather, the real benefit will be in using the book as a reference textbook when working with clients. In this context, the content’s breadth and depth are real advantages. The adviser can make the relevant points and comparisons to a client’s real-world circumstances and then share the book with the client for credibility, reference, and “homework.”
A caveat for finance professionals is that the book implicitly argues that advisers focusing on active allocation and risk management can add value, while active managers of mutual funds cannot. Some readers may agree with that view, but many may disagree. The latter should be aware of the book’s perspective before handing it to their clients.
If you liked this post, don’t forget to subscribe to the Enterprising Investor.
All posts are the opinion of the author. As such, they should not be construed as investment advice, nor do the opinions expressed necessarily reflect the views of CFA Institute or the author’s employer.