An Economist Studied Popular Finance Tips Some Might Be Leading You Astray

Managing your money is obviously an important part of being a responsible adult. But how should you do that? It turns out that there’s a large gulf between the advice given by the authors of popular finance books and academic economists.

In a new study titled “Popular Personal Financial Advice versus the Professors,” the Yale financial economist James Choi rummages through 50 of the most popular books on personal finance to see how their tips square with traditional economic thinking. It’s like a cage match: Finance thinkfluencers vs economists dueling over what you should do with your money.

And, yes, Choi is an economist, but he may be a more impartial referee of this smackdown than you’d think. That’s because he’s a behavioral economist who doesn’t swallow the canon of old-school economics hook, line, and sinker. Traditional economic models portray humans as hyper-rational, disciplined creatures, who always make optimal financial choices for themselves. Behavioral economics, which has pretty much taken over the field, emphasizes that people are quirky, often irrational, and prone to errors.

In a way, Choi says, behavioral economists like him try to help people overcome their shortcomings and achieve their financial goals as if they were the savvy creatures of old-school theory. And so, he says, classic economic theory may still provide a good overall guide for how to maximize your financial well-being. But, Choi says, the advice of popular finance thinkfluencers, who tend to concentrate on helping us overcome our flaws and foibles, might actually be more effective in some cases.

So, who’s right in this financial royal rumble? The authors of self-help finance books or the stalwarts of traditional economic theory? While Choi doesn’t always provide definitive answers, this debate might spark some ideas on how you can more effectively handle your finances.

How Should You Save Money?

When it comes to saving money, many economists offer somewhat counterintuitive — and, dare I say, potentially irresponsible — advice: if you’re young and on a solid career track, you might consider spending more and saving less right now.

That’s because you’re likely going to earn a bigger paycheck when you’re older, and to really squeeze the enjoyment out of life, it might make sense to live a bit beyond your means at the moment and borrow from your future, richer self. Economists call this “consumption smoothing,” and it’s a feature of standard economic models of how rational people save and invest over their lifetime.

The idea, Choi says, is “you don’t want to be starving in one period and overindulged in the next. You want to smooth that over time.” The sort of ideal scenario: you start off adulthood saving little or nothing or even taking on debt, then you save a lot during your prime-age earning years, and then you spend those savings when you retire.

“I tell my MBA students, ‘You of all people should feel the least amount of guilt of having credit card debt, because your income is fairly low right now but it will be, predictably, fairly high in the very near future,'” Choi says. Once they start making money, he says, they should probably pay down that debt quickly since credit card companies charge high interest rates.

Reading through popular finance books, however, Choi finds that the vast majority of popular authors offer advice that contradicts this approach: throughout your life, the thinkfluencers say, your goal should be to live within your means and save a consistent percentage of your income. It doesn’t matter if you’re 20 or 30 or 50; they implore you to stash money away immediately and invest it for your future.

In arguing this, the thinkfluencers often cite the power of compound interest. The longer you save money, the more interest it accrues. As a result, wealth snowballs over time, so saving a large percentage earlier could make a lot of sense.

Of course, economists also recognize the power of compound interest. Where thinkfluencers and old-school economics really depart from each other, Choi says, is “the usefulness of establishing saving consistently as a discipline,” Choi says. This motivation, he says, “is almost always missing from economic models of optimal saving — [and is] a potentially important oversight.” In other words, some of us might need to adopt hard-and-fast saving rules at a young age to develop the discipline needed to lead more affluent lives, even if that’s less than optimal from a traditional economic perspective.

So who wins on this point? “I’m actually agnostic about it,” Choi says. “On the one hand, I do have a lot of sympathy for the view that you might be unnecessarily depriving yourself in your twenties and even thirties when, very predictably, your income will likely be much higher in later decades. That being said, I do think that there is something to this notion of being disciplined and learning to live within your means at a young age.”

How Should You Think About Your Budget?

In old-school economics, money is money. It’s fungible. There is no reason to put labels on it. Absent some financially advantageous reason to do so (like the ability to get subsidies or a lower tax rate), it doesn’t make sense to set aside savings for specific purposes, like a new car or a future vacation or a down payment on a house. A dollar is a dollar.

Of course, many people don’t think this way. They often do what behavioral economists call “mental accounting,” earmarking special money for this and that. “In more extreme versions of mental accounting, you cannot use the money that you’re saving for your Hawaii vacation for the down payment on your future house,” Choi says.

Choi finds that 17 of the 50 books he read through advocate for some sort of mental accounting exercise. And, he says, this advice might actually make sense. It makes financial calculations easier for people and may motivate them to accomplish their goals.

Should You Be “House Rich, Cash Poor”?

Many Americans live in enormous houses and are stretched thin paying for them. While their house is a valuable asset, and they’re technically pretty rich, they’re just squeaking by, living paycheck to paycheck. People generally refer to this as “house rich, cash poor.”

Choi says both popular financial advisers and most economists are pretty clear: don’t do this! Don’t buy a house you can’t really afford. That can be super stressful and potentially ruinous.

How Much Of Your Money Should Be In Stocks?

Choi says that popular advisors and economists also generally agree that when you’re young, you should invest most of your money in stocks and only a little bit in bonds. Moreover, Choi says, both camps agree that as you get older, you should get more conservative, rebalancing your portfolio away from stocks and more towards bonds because stocks are riskier than bonds. But, Choi says, while both of these groups advise people to do the same thing with their investments over time, their reasoning for doing so is very different.

Generally speaking, popular financial advisers say that, while stocks are risky in the short run, you should invest mostly in them when you’re young because they earn higher returns than bonds over the long run. “The popular belief is that the stock market is kind of guaranteed to go up if you just hold onto it for long enough,” Choi says. “Now, this is just not true. And you can see this in Italy and Japan. In Japan, the stock market still hasn’t recovered to the level it was back in 1989. So it’s not true that stocks will always win over the long run. Bad things can happen.”

But while popular authors may discount this risk over the long term, their advice recognizes that holding stocks is risky in the short term. That’s why they argue that, as you get closer to retirement, you should get out of stocks and go into bonds, which are generally less risky. A popular rule of thumb: 100 minus your age is the percentage of your portfolio that should be in stocks. The remainder should be in bonds. So if you’re 30, you should be 70 percent in stocks and 30 percent in bonds.

While economists agree that you should get more conservative over time with your financial portfolio, Choi says, their reasoning is more nuanced.

“For almost all working people, the major economic asset they have is their future wage income,” Choi says. In other words, think of your work skills (your “human capital”) as part of your financial portfolio. It’s like the biggest form of wealth you own, and it’s generally safer than stocks or even bonds. When you’re young, this safer form of wealth is a huge part of your portfolio, so you can balance it with risky stocks.

Sure the stock market might crash, but you still have the security of being able to earn money at your job for many more years. As you get closer to retirement, this safer asset, your labor, represents a much smaller part of your portfolio — and that makes it much more scary to be all-in on risky stocks. “That’s why you should become more conservative in your financial portfolio allocation over time,” Choi says.

Should You Care Whether Stocks Pay Dividends?

Choi says there are some popular financial books that advise people to buy stocks that pay dividends. For the uninitiated, dividends are checks that companies send to their shareholders typically every quarter. “There seems to be this fascination with generating ‘income’ from your investments,” Choi says.

Economists, generally speaking, think this is dumb. “If I need to spend some money from my wealth, I don’t need to wait for the company to send me a check,” Choi says. “I can just sell some shares and use the proceeds from that sale to finance my expenditure needs. And so there should be no reason why I prefer stocks that pay dividends versus stocks that don’t pay dividends. And in fact, dividends are tax-disadvantaged. So, a stock that pays dividends is going to put a bigger tax burden on you, all else equal, than a stock that doesn’t pay dividends.”

Choi is with Team Economist on this one.

Should You Invest In Foreign Stock Markets?

Economic theory stresses the importance of diversifying your investments. This, Choi says, is true of diversifying the countries you invest in, too. Theoretically, the more countries you invest in, the less risky your investment portfolio will be. Some countries will do well. Others will do poorly. “So economic theory would say you want a diversified portfolio that holds a bit of every country’s stock market in the world,” Choi says.

But people don’t do this. They exhibit what economists call “home bias.” The French are more likely to invest in French companies. The Japanese are more likely to invest in Japanese companies, and so on. This has long been a puzzle to economists. The answer may lie in the almost universal support for ‘investing at home’ among the thinkfluencers. “The striking thing about the popular authors is that they all recommend home-biased portfolios,” Choi says. Choi isn’t really sure whether this makes much sense. “It just seems to be a little bit of jingoism, where people just like the stocks that they are familiar with.”

Should You Invest In Actively Managed Funds or Passive Index Funds?

Actively managed funds are those where you pay an expert to pick and choose stocks for you. These fund managers charge big fees with the promise of higher returns. Index funds have nobody actively picking and choosing investments for you. These funds simply passively hold a small piece of each major company in the stock market, thereby earning the overall average market return.

Economists and thinkfluencers agree on this one, too. “Everybody basically says you should go with index funds,” Choi says. “The data are pretty compelling. On average, passive funds outperform actively managed funds.”

Choi’s Big Takeaway

So who wins? The thinkfluencers or the economists? Economists, Choi suggests, may know a lot about how people should act. But, as an empirically minded behavioral economist, Choi recognizes that people often don’t act this way. And that’s where he has a degree of sympathy for the popular authors. “Given that we have all these quirks and frailties, we might have to resort to strategies that are less than perfect.”

“I think of it in terms of diet,” Choi says. “The best diet is the one that you can stick to. Economic theory might be saying you need to be eating skinless chicken breasts and steamed vegetables for the rest of your life and nothing else. That’s going to be the best for your health. And, really, very few people will actually do that.” He certainly has that right.


Source: An economist studied popular finance tips. Some might be leading you astray : Planet Money : NPR

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How Finland is Eradicating Its Homelessness Problem

There are more than a million empty homes in Canada and on any given night at least 35,000 Canadians are homeless. They pack into overflowing, often dangerous, shelters or they hunker down outside, hoping the elements will be kinder to them than the conditions indoor.

In the 1980s, a Canadian psychologist working in New York had an idea: maybe the best way to solve the problem of homelessness was to give people homes. Sam Tsemberis was one of the earliest proponents of a model known as Housing First. The idea was viewed as outlandish and unworkable.

Skeptics argued that complex issues like addiction and mental health had to be addressed first before someone was a suitable candidate for long-term housing. How would the cost be justified to hardworking taxpayers?

But the idea has caught on. Housing First projects have appeared in municipalities across Asia, Europe and North America, including Medicine Hat, Alta. Now, Finland has become the first country to adopt a national housing first approach to homelessness.

Juha Kaakinen, CEO of Finland’s largest housing nonprofit, the Y-Foundation, has been working in the area of homelessness and social welfare since the 1980s. He was one of the architects of Housing First — Finland’s national plan. He spoke to The Sunday Edition‘s Michael Enright about how Finland eradicated homelessness. Here are some highlights from their conversation interview.

A home without preconditions

You can call it a principle, a service model or a philosophy; the main thing is treating homeless people like everybody else — people who have the same rights and see housing as a human right. So the housing first principle means that you give a homeless person a home, a flat, or a  rental flat with a contract, without preconditions. You are not required to solve your problems or get sober, for example, to get a permanent home. And then, when you have this home, you can get support to solve your issues. This is a simple basic principle of housing first.

Finland succeeds where the rest of Europe did not

A lot of progress has been made. We now have the lowest number of homeless. Our present government has decided that the rest of the homeless should be halved within the next four years and completely end by 2027.

We have had a constant policy of providing affordable, social housing. The state finances this. And in each new housing area, especially in the big cities, at least 25 per cent of housing must be affordable, social housing. This has kept the supply to a reasonable level. This has been probably the main reason why we don’t have the kind of housing crisis that most European countries have at the moment.

How Housing First works

For example, in Helsinki, there is a service centre for homeless people. You can always go in, no matter your condition. It’s probably the most similar to the shelters in other countries. But it’s the only one, with 52 beds. You discuss your situation with a social worker and they try to arrange housing for you. They make an assessment, find out what your needs are.

Affordable social housing stock is another option. For over 30 years, the Y-Foundation has been buying flats from the private market. We use these flats specifically as rental flats for homeless people.

Maybe the most important structural change in Finland is that we’ve renovated our temporary accommodations in shelters and hostels into supported housing. For example, the last big shelter in Helsinki, run by the Salvation Army, had 250 beds. It was completely renovated in 2012. Now they have 81 independent, modern, apartments in that same building. They also have on-site staff for support. So this structural change has probably been the crucial thing that has led to this trend of decreasing homelessness.

The common thing for all homeless people is that they don’t have a home. Everybody has their own story, their own history. They have their own resources. They may also have their own problems. For that reason, you have to make a very tailor-made plan for people, to provide adequate support.

For example, if you have drug abuse problems, simply providing housing doesn’t solve that kind of issue. You may need rehabilitation, detoxification, etc. These other elements are important. But to get these things done successfully, you must provide permanent housing. That way you can be sure that you are not kicked out the next morning and you can plan your life ahead.

Why the taxpayer argument doesn’t hold up

Keeping people homeless, instead of providing homes for them, is always more expensive for the society. In Finland we have some scientific evaluations of the cost of this program. When a homeless person gets a permanent home, even with support, the cost savings for the society are at least 15,000 Euros per one person per one year. And the cost savings come from different use of different services.

In this study, they looked at the services that homeless people used when they were without a home. They calculated every possible thing: emergency healthcare, police, justice system, etc. They then compared that cost to when people get proper housing. And this was the result. I’m quite sure this kind of cost analysis can also be found for Canada.

Political understanding is crucial

What has been crucial in Finland is that there has been a political understanding and political consensus: this is a national problem that we should solve together. Since 2008, we have had several governments with several different political coalitions. All these governments have decided to continue to work to end homelessness. This kind of political will — that’s the starting point. It doesn’t solve everything but it helps.

I think that it demands politicians who have an understanding of human dignity. It doesn’t require more. In Finland we have a very wide partnership. It has been a collaboration between the state, big cities and big NGOs working together towards the same goal.

Changing public attitude

There are several ways you can affect public attitudes. Facts and research are good starting points. But it’s always important to tell people stories of those whose lives have changed since they got housing. These things have an emotional impact on the general public. If there are willing former homeless people, who would like to tell their stories, this kind of human interest element is very powerful. But, of course there are very clear facts behind how it should be done and why we should speak about housing as human rights issue.

By: Tahiat Mahboob

Down More Than 30%: Insiders Call a Bottom in These 3 Stocks

Despite brief periods of respite, the markets have mostly trended south in 2022, with the NASDAQ’s 28% year-to-date loss the most acute of all the main indexes.

So, where to look for the next investing opportunity in such a difficult environment? One way is to follow in the footsteps of the corporate insiders. If those in the know are picking up shares of the companies they manage, it indicates they believe they might be undervalued and poised to push higher.

To keep the field level, the Federal regulators require that the insiders regularly publish their trades; the TipRanks Insiders’ Hot Stocks tool makes it possible to quickly find and track those trades.

Using the tool we’ve homed in on 3 stocks C-suite members have just been loading up on – ones that have retreated over 40% this year. Let’s see why they think these names are worth a punt right now.

Carvana (CVNA)

First out of the gates, we have Carvana, an online used car retailer known for its multi-story car vending machines. The company’s ecommerce platform provides users with a simple way to search for vehicles to purchase or get a price quote for a vehicle they might want to sell. Carvana also offers add-on services such as vehicle financing and insurance to customers.

The company operates by a vertically integrated model – that is, it includes everything from customer service, owned and operated inspection and reconditioning centers (IRCs), and vehicle transportation via its logistics platform.

Carvana has been growing at a fast pace over the past few years, but it’s no secret the auto industry has been severely impacted by supply chain snags and a rising interest rate environment.

These macro developments – along with a rise in high used-vehicle prices and some more company-specific logistics issues – resulted in the company dialing in a disappointing Q1 earnings report.

Although revenue increased year-over-year by 56% to $3.5 billion, the net loss deepened significantly. The figure came in at -$506 million compared to 1Q21’s $82 million loss, resulting in EPS of -$2.89, which badly missed the analysts’ expectation of -$1.42.

Such an alarming lack of profitability is a big no-no in the current risk-free climate, and investors haven’t been shy in showing their disapproval – further piling up the share losses post-earnings and adding to what has been a precipitous slide; Overall, CVNA shares have lost 88% of their value since the turn of the year.

With the stock at such a huge discount, the insiders have been making their moves. Over the past week, director Dan Quayle – yes, the former vice president of the United States – has picked up 18,750 shares worth $733,875, while General Counsel Paul Breaux has loaded up on 15,000 shares for a total of $488,550.

Turning now to Wall Street, Truist analyst Naved Khan thinks Carvana stock currently offers an attractive entry point with compelling risk-reward.

“We see a favorable risk/reward following reset expectations, a 50+% decline in stock post earnings/capital raise and analysis of the company’s updated operating plan. Our analysis suggests at current levels the stock likely reflects a bear-case outcome for 2023 profitability along with lingering concerns around liquidity (addressed in the operating plan). We see room for meaningful upside to 2023 EBITDA under conservative base-case assumptions, with Stock’s intrinsic value >2x current levels. At ~1x fwd sales, we find valuation attractive,” Khan opined.

To this end, Khan rates CVNA a Buy, backed by an $80 price target. The implication for investors? Upside of a hefty 200%. (To watch Khan’s track record, click here)

What does the rest of the Street make of CVNA right now? Based on 7 Buys, 13 Holds and 1 Sell, the analyst consensus rates the stock a Moderate Buy. On where the share price is heading, the outlook is far more conclusive; at $83.74, the average target makes room for one-year gains of 214%. (See CVNA stock forecast on TipRanks)

Wolfspeed (WOLF)

We’ll now switch gears and move over to the semiconductor industry, where Wolfspeed is at the forefront of a transformation taking place – the transition from silicon to silicon carbide (SiC) andgallium nitride (GaN). These wide bandgap semiconductor substrates are responsible for boosting performance in power semiconductors/devices and 5G base stations, while the company’s components are also used in consumer electronics and EVs (electric vehicles), amongst others.

Like many growth names, Wolfspeed is still unprofitable, but both the top-and bottom-line have been steadily moving in the right direction over the past 6 quarters. In the last report – for F3Q22 – WOLF’s revenue grew by 37% year-over-year to $188 million, albeit just coming in short of the $190.66 million the Street expected. EPS of -$0.12, however, beat the analysts’ -$0.14 forecast. For F4Q22, the company expects revenue in the range of $200 million to $215 million, compared to consensus estimates of $205.91 million.

Nevertheless, companies unable to turn a profit in the current risk-free environment are bound to struggle and so has WOLF stock. The shares have declined 41% on a year-to-date basis, and one insider has been taking note. Earlier this week, director John Replogle scooped up 7,463 shares for a total of $504,797.

For Wells Fargo analyst Gary Mobley, it is the combination of the company’s positioning in the semiconductor industry and the beaten-down share price which is appealing.

“We view WOLF as one of the purest ways in the chip sector to play the accelerating market transition to pure battery electric automotive power trains,” the analyst wrote. “Not only have WOLF shares pulled back in the midst of the tech-driven market sell-off, but we are also incrementally more constructive on WOLF shares given we are on the cusp of the company’s New York fab ramping production, a game changer for WOLF as well as the SiC industry, in our view.”

Standing squarely in the bull camp, Mobley rates WOLF an Overweight (i.e. Buy), and his $130 price target implies a robust upside of ~99% for the next 12 months. (To watch Mobley’s track record, click here)

The Wall Street analysts are taking a range of views on this stock, as shown by the 10 recent reviews – which include 4 Buys and 6 Holds. Added up, it comes out to a Moderate Buy analyst consensus rating. The average price target, at $109.59, implies ~68% one-year upside from the current trading price of $65.40. (See WOLF stock forecast on TipRanks)

The Home Depot (HD)

Lastly, let’s have a look at a household name. The Home Depot is the U.S.’ biggest home improvement specialty retailer, supplying everything from building materials, appliances and construction products to tools, lawn and garden accessories, and services.

Founded in 1978, the company set out to build home-improvement superstores which would dwarf the competitors’ offerings. It has accomplished that goal, with 2,300 stores spread across North America and a workforce of 500,000. Meanwhile, the retailer has also built a strong online presence with a leading e-Commerce site and mobile app.

Recently, even the largest retail heavyweights have been struggling to meet expectations, a development which has further rocked the markets. However, HD’s latest quarterly update was a positive one.

In FQ1, the company generated record sales of $38.9 billion, beating Wall Street‘s $36.6 billion forecast. The Street was also expecting a 2.7% decline in comps but these increased by 2.2%, sidestepping the macroeconomic headwinds. There was a beat on the bottom-line too, as EPS of $4.09 came in above the $3.68 consensus estimate.

Nevertheless, hardly any names have been spared in 2022’s inhospitable stock market and neither has HD stock; the shares show a year-to-date performance of -31%. One insider, however, is willing to buy the shares on the cheap.

Last Thursday, director Caryn Seidman Becker put down $431,595 to buy a bloc of 1,500 shares in the company.

She must be bullish, then, and so is Jefferies analyst Jonathan Matuszewski, who highlights the positive noises made by management following the Q1 results.

“We came away from the earnings call with the view that management’s tone was more bullish on the US consumer than it has been in recent history. With backlogs strong across project price points, consumers trading up, and big-ticket transactions sequentially accelerating on a multi-year basis, we believe investor reservations regarding slowing industry sales growth are premature,” Matuszewski opined.

Matuszewski’s Buy rating is backed by a $400 price target, suggesting shares will climb 39% higher over the one-year timeframe. (To watch Matuszewski’s track record, click here)

Most on the Street also remain in HD’s corner; the stock has a Strong Buy consensus rating built on a solid 18 Buys vs. 4 Holds. The forecast calls for 12-month gains of 24%, given the average target clocks in at $357.35. (See HD stock forecast on TipRanks)

To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights.

Source: Down More Than 30%: Insiders Call a Bottom in These 3 Stocks

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Redesigning Work For The Hybrid Era

A year and a half (and counting) after COVID-19 lockdowns spurred one of the most significant evolutions in office work since the introduction of the internet, a geographically distributed workforce is customary, whether temporarily or indefinitely through hybrid-work models.

But in the rush to remote work, many organizations fell victim to the inertia of tradition and missed the opportunity to design work to fit specific needs of the business and remote employees themselves. As hybrid-work models emerge, leadership and team members need to partner in designing how work is defined, evaluated and compensated, starting with remote work.

This begins with mapping the outcomes needed to support business operations and how that work contributes value to the organization. This exercise can bring some stability and logic to compensation models in a remote environment. Rather than basing compensation on location, organizations need to devise structures that reward team members on their impact to the business.

While this can be a difficult exercise, employees will benefit greatly from not only knowing how their work generates revenue, serves customers or cuts costs, but also how much they’re valued because of that work.

Another aspect of redesigning work is to rethink what purpose “the office” serves in the hybrid era. Traditionally, offices have operated as the place for executing all the types of work needed in many job roles.

This includes “heads-down” work (research, analysis, customer support, coding, documentation, training and development); “heads-up” work (ideation, knowledge sharing, networking, strategic planning); capability demonstrations; and research and development. In actuality, though, heads-down work can be performed anywhere, while heads-up work has been facilitated best by the physical presence of other people.

In a world in which workers have unprecedented access to information about and alternatives to work, leaders must reimagine the basics of the working relationship to deliver on the promise of working from anywhere. Top talent, especially, will gravitate toward organizations with the widest range of work flexibility — increasingly essential in today’s highly competitive labor market.

What follows is step-by-step guidance, based on client engagements, on redesigning work for the hybrid age.

Devising a role-specific location rating

With hybrid workplaces, it will be important to redefine what types of work and work-related events are best done where. To do this, businesses should first identify the core activities that each individual role in the organization is responsible for completing.

From there, cross-hierarchy task forces can be created to evaluate the remote fitness of each of these activities by taking a look at how effectively specific job activities — not tasks — can be completed outside or inside the traditional office setting. This exercise must be completed using direct input from individual employees and their managers.

To complete this exercise, the following numerical values should be defined for each job activity:

  • Time spent: The estimated share of time that should be dedicated to each activity
  • In-office and remote ratings: Based on a scale of 1 to 5, with 1 representing the function is best completed effectively in-office and 5 representing the function is well-facilitated remotely

Organizations can then combine these values to create a location rating (Time Spent X Rating / 5) that can be used to develop a location strategy for each role. By mapping these results, organizations can start to paint a clear picture of where roles can be located based on the work they do.

By incorporating these details into job descriptions, businesses can also help potential job candidates clearly understand what will be asked of them, what resources will be available to them, with whom they will work closely, etc. (in addition to the available compensation range). Within any job description, estimates should be included as to how much of the role can be performed successfully outside of the traditional office setting.

An interesting outcome of the heads-down/heads-up model is that senior leaders — many of whom have struggled to communicate the purpose, value, urgency and details of a return to the office order — are the very people whose jobs are most focused on the collaborative, heads-up work best supported by an in-office presence. It may be that senior leaders will be most apt to be found in the office vs. the majority of other workers who will find a balance between remote work and an in-office presence.

Mapping out a healthy workday

In addition to categorizing and evaluating the activities and outcomes for each role, businesses need to assess and map how team members should work together. This assessment should include specifics on meetings: their purpose, how they can be conducted effectively, how participants can contribute productively, and when they should be scheduled. Meeting hygiene should also be detailed, including calendar blocks to protect team members from rampant over-booking.

An ideal schedule would incorporate the following key tenets:

  • Mental health protections: Taking breaks for water, nourishment, exercise/stretching and mind clearing; schedule blocks for deep work (up to four hours per day), motion-activated thinking and logging off for the day after a reasonable contribution to the business.
  • Intentionality: When bringing team members together for meetings, be clear about the purpose, the objective and any necessary pre-work. Implement a multitasking-free zone to make space for undivided attention and engagement. No more meetings about meetings. Identify specific reasons to use video calls — not every call requires people to be on-camera.
  • Flexibility: Asynchronous work is a given with distributed teams. Identify and flag activities that require simultaneous effort to make sure team members are properly supported to complete tasks and activities according to plan. Schedule appropriate heads-up working sessions to complete synchronous work. Grant team members the autonomy to schedule all other work as they see fit.

For a more extensive look at updating corporate strategy to attract top talent by supporting employees who — for whatever reason — wish to work outside of the traditional office setting, see “A Guide to Modernizing Talent Management in the Hybrid-Work Era.”

Keahn Gary is a Senior Manager with Cognizant’s Center for the Future of Work. Her research with the CFoW focuses on modernizing value systems

Source: Redesigning Work For The Hybrid Era



As companies continue adjusting their structure between remote and in-person work, leaning into the hybrid model can provide the best of both worlds—but not without its own set of challenges.

Wherever your organization is during this transitional period, here are 8 key tips to help design a hybrid model that’s inclusive of your entire population and to help your employees thrive in the middle ground.

Get your copy to learn:
  • 8 keys to make your hybrid workplace successful and keep your employees engaged.
  • How to prioritize the health and wellbeing of your employees in times of transition and uncertainty.
  • How a Homebase for Health® allows your organization to communicate a clear vision and adapt to the unexpected.

More contents:

The future of work: A bright future for the world of work

The shock: Labour markets are working, but also changing

Essential workers: The biggest losers from covid-19

Home working: The rise of working from home

Automation: Robots threaten jobs less than fearmongers claim

Government policy: Changing central banks—and governments

Flexicurity: The case for Danish welfare

How to think about work: Pessimism about the labour market is overdone

The future of work

A bright future for the world of work

The shock

Labour markets are working, but also changing

Essential workers

The biggest losers from covid-19

Home working

The rise of working from home

Automation Robots threaten jobs less than fearmongers claim

Government policy

Changing central banks—and governments


The case for Danish welfare

How to think about work

Pessimism about the labour market is overdone

Sources and acknowledgments

The future of shopping: The return of one-to-one commerce

The marketplace: E-commerce profits may become harder to make

The merchants: The rise of the rebel brands

The travelling salesmen: Independent retailers may choose multiple sales channels

The food stall: The importance of “omnichannel” strategies

Mass craftsmanship: How to know what customers want

People: Shop assistants and the retail renaissance

The future: Welcome to democratised retail

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 Seven Predictions To Help Insurers Thrive In 2022

As 2021 thankfully recedes from view, 2022 will present insurers with a host of profound changes that we believe will significantly alter the carrier landscape this year and beyond. These changes will be driven by serious pandemic-related challenges, climate change threats, continuing margin pressures and unrelenting incursions from industry outsiders.

Gleaned from conversations with clients, prospects and partners, here’s what insurers need to look out for and respond to in the coming year:

1. Corporate board-level activism will drive strategic planning and operating model change. 

Insurer C-suites have generally had broad latitude in setting their corporate strategies. Now, though, factors that were once an afterthought — climate change, the circular economy, social equity, the connected world — are now front and center.

Under pressure from their boards, most insurers now include environmental, social and governance (ESG) components in their strategic plans and portfolio strategies. Pressure will intensify in 2022, which will impact investment returns, employee hiring and retention, ecosystems and partnerships, and the ability to expand into new geographies.

Recently, the technology head at a large P&C insurer with whom we work began assessing a comprehensive data platform to gain a better understanding of the company’s carbon footprint, climate-related risks, third-party supplier risks and sustainability goals. Companies that respond thoughtfully to ESG concerns will gain significant competitive advantage, including increased customer loyalty, better brand reputation and greater compliance, over those that do not.

2. Heightened M&A activity and private equity infusion will alter the insurance pecking order. 

Armed with trillions of dollars, private equity (PE) firms are snapping up insurance books of business; meanwhile, PE and venture capital (VC) firms are lavishing insurtechs with investment dollars. Concurrently, insurance companies are actively incorporating digital capabilities from insurtechs and startups.

With more acquisitions announced every quarter since the pandemic began (PE insurance sector investments hit $19.28 billion through August 2021, according to S&P Global), we continue to see a shift in the makeup of the insurer landscape. Recent examples include Blackstone acquiring Allstate’s Life insurance business, Apollo’s merger with Athene holdings and Carlyle’s investments in Vantage Risk.

It’s easy to imagine capital, underwriting expertise and customer experience capabilities from non-traditional sources applied to underwrite new risks across industries. This year may be the industry inflection point for unleashing a significant challenge to the mega-insurer establishment.

3. New business domains will further blur the lines between insurance and other industries. 

The pandemic spurred insurers to rethink their core capabilities and increase their relevance by divesting non-core businesses or splitting conglomerates into new entities to create more shareholder value. Recently, AIG split off its life and retirement segment into a standalone entity via an IPO to simplify its business structure, while Principal Financial exited the retail market, placing $25 billion in reserves.

With the ever-increasing need to align business models with how customers engage with products and services, we expect to see new business domains emerge that overlap with and integrate services from several traditional industries. MIT’s analysis of the home domain shows this happening among participants from insurance, financial services, consumer goods and other industries.

For example, Tesla already offers embedded insurance based on driving data, and Amazon recently launched product liability insurance for its sellers through its Insurance Accelerator.

We’re also continuing to see the employer/employee as a new domain around which insurers can build customer-centric business models that include ecosystem partners and attract the attention of PE money to forge unlikely partnerships. 2022 may be the year when this phenomenon gives rise to more embedded insurance products.

4. Employee wellness will continue spurring innovation and development of new group products. 

Wellness products are all the rage, and for good reason. Amid the seemingly endless pandemic, anything that promotes physical, emotional and financial health is a win for all involved.

By proactively engaging with employees to improve their overall wellness and emotional health, insurers can decrease risk for many insurance products, while employers benefit from having more productive and engaged staff. Look for more consumers to seek voluntary wellness options in their insurance products in 2022 — particularly those sold in a direct-to-consumer (D2C) mode via a digital-first model.

Employers will increasingly offer remote benefit programs like fitness classes, telehealth, financial literacy, mindfulness coaching and caregiver help. Such products are a low-cost way to boost employee retention and create a better employee experience.

5. More insurers will experiment with low-/no-code solutions. 

2021 was the year low-/no-code platforms gained notoriety, offering more power to non-technical people to automate processes, develop new applications and build new customer experiences. Although the jury is still out on the promise of these platforms, core insurance systems and enterprise software providers don’t want to be left behind.

Microsoft and ServiceNow are good examples of enterprise platforms that offer low-/no-code capabilities to orchestrate processes. Insurance systems like Vitech, Guidewire, EIS and Duck Creek now offer design tools to create scripts that deliver new functionality faster. Insurance carriers are working to modernize their IT operating models, talent and partner ecosystems to make the best use of low-/no-code technologies offered by software vendors to expedite solution delivery.

6. Digital purchasing experience comes of age. 

The decades-long crawl toward increasingly complex online sales capabilities has now shifted into high gear in the insurance space, with the explosion of third-party data, embedded insurance products (see #3) and more precise systems of engagement. No matter what domain they’re purchasing from, consumers expect online purchases to be convenient, speedy and wrapped into a full-service experience.

Insurers are adapting their processes and unique data assets to meet the challenge. Most insurers are placing “digital-first” bets to create seamless purchase experiences, increase loyalty and engagement, and drive behaviors that improve risk profiles.

Working with a digitally-born business, a large supplemental carrier with whom we work is seeking to offer a one-stop-shopping consumer experience by integrating its new product, distribution and servicing capabilities and expanding its base products with complimentary coverage for richer cross-selling opportunities. It’s also introducing white- and co-labeling of products with partner companies’ distribution channels.

Another specialty insurer that we serve is partnering with marketing and tech organizations to create a roadmap for content management, customer relationship management and marketing automation ecosystems through the lens of experience enablement for new D2C audiences and internal (broker and carrier) stakeholders.

While indirect sales channels won’t go away, insurers and intermediaries must improvise and adapt to the digital environment and create unique products and solutions that predict and address customers’ needs. The emergence of better tools (think AI and analytics, for example) will help. But a commercial FOMO (“fear of missing out”) brings real urgency to this shift.

7. Greater use of AI will result in changes to permissible data and a heightened role for regulating authorities. 

Reliance on traditional credit and demographic data is increasingly under scrutiny by regulators, resulting in wholesale changes and limitations on how policies are priced, purchased and serviced. New data sources, as well as AI- and machine learning-driven analytics will increasingly be used to address the vacuum created across product development, distribution, underwriting, pricing, servicing and claims. Such variables will draw more scrutiny from regulators.

Insurers will encounter protracted regulatory reviews based on their use of new data sources (GPS data, health and safety data, consumer demographics, etc.) and AI-driven predictive models and analytics. The need to test models for the irresponsible use of advanced AI technologies could complicate future regulatory filings and rate changes.

Furthermore, regulators may require insurers to publish publicly available model bias impact statements to establish transparency. To differentiate themselves, leading insurers will invest in establishing a foundation for dealing with third-party data, new rating systems and analytical capabilities while also creating streamlined filing processes. Carriers that drop bias-creating variables in favor of those that truly impact risk will minimally benefit from better underwriting results. As ESG and disclosure requirements evolve, compliant carriers will gain a distinct competitive edge.

Creating tomorrow’s advantage, today

Insurers’ success in 2022 will pivot around how well they predict customer needs, navigate uncertainty and deliver value — concurrently. Winning carriers will be those that are agile, build skills and capabilities that increase their relevance, accelerate collaboration with ecosystem partners and emphasize data-driven products.

By doing so, insurers can step boldly into the future, well-equipped to anticipate change and deliver seamless customer experiences.

Mahesh Natarajan is Head of Strategy, Insurance Solutions Group and Ventures, at Cognizant. A 20-year veteran at Cognizant, he is an experienced business leader with a demonstrated history of enabling client success, scaling businesses and simplifying complex problems. Mahesh has proven experience advising clients on strategic business initiatives such as digital transformation, operational excellence, managed technology services, organizational change management, Lean ADM and technology transformation. He is passionate about continuous learning, empowering teams and STEM education. Mahesh has a Bachelor of Computer Science and engineering from University of Madras. He can be reached at

Source: Cognizant BrandVoice: Seven Predictions To Help Insurers Thrive In 2022


More contents:

The Documentary History of Insurance, 1000 B.C.–1875 A.D. Newark, NJ: Prudential Press. 1915. pp. 6–7. Retrieved 15 June 2021.

Insurance” . In Chisholm, Hugh (ed.). Encyclopædia Britannica. Vol. 14 (11th ed.). Cambridge University Press. pp. 657–658.

Lloyd, Edward (c.1648–1713)”. Oxford Dictionary of National Biography. Vol. 1 (online ed.). Oxford University Press. doi:10.1093/ref:odnb/16829. Archived from the original on 15 July 2011. Retrieved 16 February 2011. (Subscription or UK public library membership required.)

Today and History:The History of Equitable Life”. 26 June 2009. Retrieved 16 August 2009.

“Encarta: Health Insurance”. Archived from the original on 17 July 2009.

The Cabinet Papers 1915-1982: National Health Insurance Act 1911. The National Archives, 2013. Retrieved 30 June 2013.

To Insure or Not to Insure?: An Insurance Puzzle. The Geneva Papers on Risk and Insurance Theory.

Irish Brokers Association. Insurance Principles Archived 11 April 2009 at the Wayback Machine.

Losses From Malware May Not Be Covered Due To Your Policy’s Hostile Acts Exclusion”. The National Law Review. Retrieved 25 April 2019.

Insurers waive terrorism exclusions for Christchurch shooting victims”. Stuff. Retrieved 25 April 2019.

Insurance Economics. Springer Science & Business Media. pp. 268–. ISBN 978-3-642-20547-7.

Insurance Regulation in the United States: Regulatory Federalism and the National Association of Insurance Commissioners”. Archived 11 May 2011 at the Wayback Machine. Florida State University Law Review.

A Study on State Authority: Making a Case for Proper Insurance Oversight”. Archived 10 May 2011 at the Wayback Machine.

The Impact of the European Union Insurance Directives on Insurance Company Stocks”. The Journal of Risk and Insurance.

FSA takes on insurance regulation”. The Guardian.

The impact of changing regulation on the insurance industry”. Financial Services Authority.

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Insurers’ websites receive first marks | Банк России”. Retrieved 21 May 2018.

Senior broker on the importance of reducing clients’ risk exposure”. Retrieved 5 November 2020.

Insurance as maladaptation: Resilience and the ‘business as usual’ paradox” (PDF). Environment and Planning C: Government and Policy. 34 (6): 1175–1193. doi:10.1177/0263774X15602022. ISSN 0263-774X. S2CID 155016786.

Consumer Motivation for Purchasing Low-Deductible Insurance. In Marketing and Public Policy Conference Proceedings, Vol. 4, D. J. Ringold (ed.), Chicago, IL: American Marketing Association, 147–155.

Credit-Based Insurance Scores: Impacts on Consumers of Automobile Insurance

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