Seated below a portrait of himself in the Berkeley College Master’s House — also known as the Swensen House — David Swensen, Yale’s chief investment officer, spoke with National Public Radio correspondent Chris Arnold about the problems of the U.S. financial system.
Arnold has reported on Wall Street for over a decade and currently serves as the lead reporter and editor of the NPR series “Your Money and Your Life,” which investigates personal financial issues. Swensen, Yale’s CIO since 1985, has gained considerable renown for his implementation of modern portfolio theory in managing Yale’s endowment, currently valued at $25.6 billion. Arnold and Swensen, who first met in 2006, used Wednesday’s talk to discuss the importance of financial literacy before a crowd of 40 community members.
“What I began to understand was that, if people understood what David Swensen had to say to them … the average person could have twice as much money down the road, at least,” Arnold said, describing his first conversations with Swensen. “I felt like I was very lucky to be getting this education.”
Arnold and Swensen agreed that most of the problems of the U.S. financial system can be fixed by the dissemination of credible financial information among the American public.
For instance, many Americans, because they are largely uninformed about financial issues, are forced to rely on a broker or financial advisor to manage their accounts. But Swensen argued that most investors would be better off managing their money on their own.
“I think there’s almost a Catch-22 involved with financial advisors,” Swensen said. “Because if you’re going to choose a financial advisor, you have to be educated enough to understand what it is you’re choosing. But if you’ve educated yourself well enough to make a good choice, you don’t need a financial advisor.”
Swensen and Arnold both emphasized the difference between the interests of a financial advisor or broker and the interests of an investor. Swensen noted that the broker often benefits “at the investor’s expense.”
Throughout the 75-minute conversation, Swensen referred to his 2005 book “Unconventional Success: A Fundamental Approach to Personal Investment.” In the book, Swensen outlined a template that individual investors could follow to achieve success in a financial market rigged against them. Arnold praised Swensen as a source of reliable information he often uses in the “Your Money and Your Life” series.
Arnold noted that in the world of finance journalism, a dependable source is “hard to come across.”
“But then you find some people who you can just innately trust,” Arnold said of Swensen. “And you feel like what they’re saying is true and they become sort of guides to you.”
Two student attendees interviewed said that though they enjoyed the talk, they did not learn anything new.
“[Swensen’s advice] goes against traditional financial advice that you get from institutions,” Jessica Yang ‘16 said. “But I think maybe at our age we are more skeptical of institutions and have done more research.”
The “Your Money and Your Life” Facebook group has over 7,000 members.