Mention the word innovations in the economy and the ears of most people talk – investors and consumers alike – will perk up. Think of drugs and antidepressants, and its iPhone, cars and hybrid vehicles. However, you will probably, if you pop financial innovation theme, you can get a dismissive sneer. No wonder, considering mortgage bonds from debt, the consequences of toxic credit default swaps, options and other so-called weapons of innovation.
Recent record is so frustrating is that Paul Volcker, the former head of the US Federal Reserve’s legendary, were driven ask financiers in 2009, they have much innovation can come up with it was “important for the individual ATM horse Chine, this is actually more of a financial than a mechanistic?” good question.
The answer is, a lot of financial innovation is the result of what little money wise re-labeling, so that businesses, governments and financial institutions to circumvent regulatory restrictions. Wall Street’s financial engineers came up with a complex trading strategies on mathematics, often making spectacular leveraged bets fancy way.
What benefit do we?
Nevertheless, from the point of view of the past few decades, dismissive comments Volcker is too harsh. Financial innovation to improve the daily household finances. Among the more important innovation is the credit and debit cards, money market mutual funds and stocks I ndex mutual funds, Treasury Inflation Protected Securities (TIPS) and exchange-traded fund (ETF), and Mint.com and other online financial services. Taking a total, these products can more easily manage money and save ingenious.
However, when it comes to personal finance, well, you is not seen nothing yet. Due to competitive pressures brought about by the powerful combination of an aging population, globalization and IT advances, people have been forced to take greater responsibility for all the recent decades – from saving for retirement, for college students pay
Future will be all about simplification. The financial services industry to create a dazzling range of products and services for handling domestic risk and responsibility. From now on, the mantra novation of the overall management of these risks, in income under hedgeDown to make sure you never run out of money and water monitoring household finances finger. Cutting-edge basic knowledge of financial wizardry, no hidden costs lie these products, but the product will be easy to use for ordinary people. Robert Shiller, the “democratization of risk management.” Economists, creative Yale University and a new risk management infrastructure architect, vividly called financial innovations of the next phase
Close retired gap
Get retired. We all know that Americans are getting older and longer life. There are more and more attention, a lot of people do not save enough in recent decades, as an employer and earnings uncertainty voluntary 401 (k) plans, traditional pensions turnover. Consultant McKinsey & Company estimates the average couple will live what they need to fall $ 250,000 short after retirement. To make matters worse, the retiring find it more difficult to find out how much they should be extracted from the retirement savings account into their old age. The first live high on the hog, you may end later struggle. Hoarding cash, you will not outlive your assets, but what kind of life?
A very difficult contour calculus are formed. There are activities on Wall Street guru, financial scholars, benefits consultants and others to create a portfolio for retirement, providing a fermentation among depositors LO real income and retirement age, for example – long-term returns NG few questions based on their answers. When it comes time to leave behind the works, it will provide lifetime income annuity hedging, not only preserved, but also medical expenses. You’ll get your investment portfolio after inflation adjustment is automatically updated and the standard of living on your phone. “We need immediate financial markets, so that we can avoid risks,” Lawrence Kotlikoff, an economist at Boston University and founder of ESPlanner, financial planning software company.
As well as enticing glimpse of the first generation will become daily in what way. Three decades of investment company dimension, based on cutting-edge academic theory, financial markets and investment, the introduction of dessert ensional hosted DC this year. This combination will be designed for employees, provide a source of inflation-protected income for life for them, they answer a series of questions about their income and post-retirement goals. ESPlanner has developed a programCombined TIPS and stock index funds to the end, the living standards of retirees.
It has proposed that the federal government retiree pensions after the release of inflation adjustment, as well as pension and hedge risks to health and long-term care expenditures. “If a simple product, fully meet the longevity risk, credit, inflation, etc., you can spend less time worrying about retirement and useful things such as exercise, start companies, and help charities more time,” Henry He said: ^ hU, a law professor at the University of Texas at Austin.
Information technology will make it easier for families to monitor their savings, investments, loans, real estate, insurance, living in the real-time basis. Now, most of us are dispersed such information in different places, although the software literacy and economic organizations may be very close to put it together. However, these people are the exception rather than the rule. The financial aspects of the family in one place will improve the daily money management. “It’s not more choice,” Silicon Valley companies Textual analysis foresight managing director Ming Paul Saffo said. “This is a better understanding.”
Another revolution is at hand
Personal finance is still in its first ate reminiscent of the late 1980s and 1990s PC early age. At that time spent in-depth understanding of programming and software into the PC’s potential. Now, with the iPad, even if the technical challenges can be completed very complex tasks with a touch of a finger. Similar transformations – called iPad financial – occurred in personal finance. It’s about time.