Erik Sussman of Institute of Financial Wellness On The 5 Essentials for Smart Investing

Pay attention! Be financially aware. Know what you are spending and earning and don’t try to get rich quick. Consistent savings is the best way to accumulate a nice nest egg.

As a part of my series about The 5 Essentials of Smart Investing, I had the pleasure of interviewing Erik Sussman, CLU®, ChFC®, CFP® CEO and Co-Founder of The Institute of Financial Wellness.

Erik Sussman is the CEO and Founder of the Institute of Financial Wellness and brings over 26 years of financial services experience, success and insight to his role. Erik is a Certified Financial Planner®, Chartered Financial Consultant® and Chartered Life Underwriter, and is a Registered Investment Advisor.

Thank you for doing this with us! Our readers would like to learn a bit more about you. Can you tell us the “backstory” about what brought you to the finance industry?

I graduated from the University of Maryland, College Park with a Bachelor of Science in Kinesiology (the study of human movement) with the hopes of being a physical therapist. However, after completing an internship at a physical therapy office, I realized I was not passionate about medicine. Serendipitously, I was introduced to someone recruiting for entry-level financial advisors. Based on my upbringing, I found the topic very interesting and was accepted into the program. The rest is history.

Can you share with our readers the most interesting or amusing story that occurred to you in your career so far? Can you share the lesson or take away what you took out of that story?

When I first entered the financial services business, my first client was my grandfather. He was incredibly supportive and turned over his entire portfolio and allowed my team and me to review it. I was surprised how much we were able to really improve his financial position, since I had assumed he was all set and had a great plan. Thanks to the way we restructured his finances, my grandmother was able to live out her later years with dignity, and my mother is now blessed with no financial worries in retirement. I saw firsthand the power of what could be done for a family with proper planning.

Are you working on any exciting new projects now? How do you think that will help people?

At the Institute of Financial Wellness, we are working on a project that enables people to get financial advice and guidance on their 401(k) plans. For most people, their 401(k) will be their largest and most important asset for retirement, and for the most part, people are not confident in their investment selections. Through a special program called a self-directed 401(k), we will align people with financial professionals to manage these assets for them so they don’t have to randomly pick their own investments.

Ok. Thanks for all that. Let’s now jump to the main core of our interview. According to this report in Fortune, nearly two-thirds of Americans can’t pass a basic test of financial literacy. In your opinion or experience what is the cause of these unfortunate numbers?

We are not surprised that Fortune is reporting that almost two-thirds of Americans cannot pass a basic test of financial literacy, considering that our school systems do not provide any formal financial education programs. This is exactly why we created the Institute of Financial Wellness. We provide the financial education, resources and services that people need to live their best lives.

If you had the power to make a change, what 3 things would you recommend to improve these numbers?

1. We believe that we DO have the power to make a change — and The Institute of Financial Wellness evidences that. The reason we created The Institute of Financial Wellness is because we recognize that people need better financial education, and we want to be part of the solution.

2. I believe that our country should incorporate financial education curriculums into our schools, to start instilling within the DNA of our country the basic tenets of personal financial planning, which unfortunately currently do not exist in most Americans.

3. Just as important, in addition to educating Americans on the importance of financial planning, we also need to elevate awareness of the definition of a true fiduciary, and the dangers of all the fear-based tactics and agenda-driven propaganda that are out there today.

Ok, thank you! Now to the main question of our interview: You are a “finance insider.” If you had to advise your adult child about 5 non intuitive essentials for smart investing, what would you say? Can you please give a story or an example for each?

1. Pay yourself first! Make sure you set up some automatic savings programs that are deducted from either your paycheck or your checking account.

2. Set up three buckets. A short term bucket (0–3 years goals ) where you keep 6–12 months of monthly expenses in a cash equivalent, a mid-term bucket where you earmark dollars for goals 3–10 years away, and a long term bucket for goals 10 years+ away.

3. DO NOT CHASE RETURNS AND TRY TO TIME THE MARKET! Dollar cost averaging is a very effective way to buy into your investments. This way you automatically buy more shares when the investment values are down and less shares when the values are up. This will likely bring down the cost you pay for your investments.

4. Diversify, Diversify, Diversify! It is so important not to have all your eggs in one basket. This will likely provide less volatility in your returns which not only makes it easier to stomach the down markets, it also will provide you more money long term because volatility hurts your actual returns.

5. Pay attention! Be financially aware. Know what you are spending and earning and don’t try to get rich quick. Consistent savings is the best way to accumulate a nice nest egg.

What are your thoughts about investing in cryptocurrency? Can you explain what you mean?

Investing in cryptocurrency is highly speculative. These currencies rise as quickly as they fall. This phenomenon reminds me of the dot.com era of the late 1990s, when companies with no earnings were trading for lots of money. There was a euphoria until things settled out and most of these companies went out of business and the market crashed. I believe this will happen with many of the crypto-currencies that don’t catch on.

What are your thoughts about daytrading, using apps like Robinhood? Can you explain what you mean?

I think if you enjoy buying and selling securities on a daily basis, to try to make money it’s fine as long as you don’t do it with more than 3–5% of your portfolio. Just as if you could enjoy going to a casino as long as you are responsible and disciplined and don’t lose more than you can afford. Most people don’t have the time to do the necessary research so it just doesn’t make sense to day trade, in my opinion.

None of us are able to achieve success without some help along the way. Is there a particular person who you are grateful towards who helped get you to where you are? Can you share a story about that?

I have had a lot of amazing mentors over the past 27 years. Sometimes I have learned what to do and I have also learned what not to do. The best lesson I could share from my years of experience is to go into all dealings with a win/win mentality. Don’t just think of how you will benefit from a business deal, think about helping the other person as well. It is a lot more fun that way and you will build lifelong relationships!

Can you please give us your favorite “Life Lesson Quote”? Can you share how that was relevant to you in your life?

Do what you say you will do! In order to be successful and respected, you have to be trusted. In my opinion, one of the best ways you can establish trust with someone is to always do what you say you will do. The moment that you develop a pattern and reputation for not following through on your commitments, you lose trust and credibility which will usually result in losing opportunities.

You are a person of great influence. If you could inspire a movement that would bring the most amount of good to the greatest amount of people, what would that be? You never know what your idea can trigger. :-)

I am doing it! That’s why we created the Institute of Financial Wellness!!!

Thank you for the interview. We wish you continued success!