Dean’s Seminar

1. Dean’s Seminar Ned C. Hill Dean, Marriott School of Management Minneapolis, MN April 15, 2004

2. Marriott School What’s happening with: • Rankings • Student Achievements • Alumni Portals • Management Society

3. Who Beat Stanford & USC?(not to mention UCLA, Notre Dame & Virginia)

4. Who Beat Stanford & USC?(not to mention UCLA, Notre Dame & Virginia) Answer: The Marriott School of Management! 22. MIT 23. Emory 24. IPADE (Spain) 25. Ohio State 26. Brigham Young 27. Wake Forest 28. Washington (St. Louis) 29. University of Virginia 30. Stanford WSJ Rankings 31. Notre Dame 34. Thunderbird 37. NYU 38. UCLA 39. London Business School 40. USC

5. What the Wall Street Journal Said • “Schools making the biggest advances in the ranking: Brigham Young University…” (12) • “Brigham Young’s Marriott School of Management stood out for its students’ integrity in this era of corporate scandals. ‘Our recruiters return to Brigham Young year in and year out because of the school’s high ethical standards,’ says Roger McCarty, corporate strategy development leader for Dow Chemical Co.”

6. …continued • “Recruiters find that Brigham Young produces a particularly valuable type of graduate these days…the ethical accountant.” • “Brigham Young, which is sponsored by the Church of Jesus Christ of Latter-day Saints, is considered one of the best schools for hiring students with high ethical standards.” • “In addition to ethics and integrity, recruiters gave students very high marks for analytical and problem solving abilities, communication and interpersonal skills, fit with the corporate culture and team orientation.”

7. MBA Rankings • We advanced or maintained standing in every major MBA ranking for the third year in a row • 22nd worldwide in Forbes (17th in U.S.) • 26th worldwide in The Wall Street Journal • 29th in U.S.News & World Report • 1st bang for the buck in Business Week • 2nd for Ethics in The Wall Street Journal

8. Other Rankings • 3rd graduate accounting (Public Accounting Report) • 3rd undergraduate accounting (Public Accounting Report) • 38th undergraduate management (U.S.News & World Report) • No. 1 “Stone cold sober school” (Princeton Review)

9. Student Achievements Undergraduates beat out MBA students nationwide to win Fortune Small Business Magazine’s first business plan competition. MBA team wins 2003 Thunderbird Innovation Challenge, beating 154 other teams.

10. Student Achievements MBA students win the D.A. Davidson & Co. investment competition— earning a 32 percent return on their investment. Three students placed second at the Net Impact 2003 International Case Competition.

11. Student Achievements An information systems student placed first and another student placed third in the school’s first appearance at the National Collegiate Conference. An MPA student was the first in Utah to win an American College of Healthcare Executives Scholarship.

12. Student Achievements Marriott School MBA team wins first place in U of Denver National Ethics Case competition—with invited schools known for their ethics programs. Marriott School MAcc team wins first place in Deloitte national auditing case competition in March against all top Accounting programs.

13. Student Achievements Undergraduate accounting students took first place and the graduates took second place at the Deloitte Tax Case Study Competition. This is the seventh time in the twelve-year history of the competition that both BYU teams placed among the top three—an unparalleled accomplishment.

14. Alumni Portals • New portal service unveiled in September 2003 • Portals are customized by program and year (i.e. MBA 1996, MAcc 2001) • Alumni portals are a powerful tool to renew connections and establish new relationships

15. Alumni Portals • Visit your alumni portal to: • Update your profile • Access a class directory • Participate in online forums • Connect to the Management Society • Search 40,000 Marriott School and nearly half a million BYU alumni records • Web: marriottschool.byu.edu • Click “Alumni Portals” “I believe this new tool will help our graduates really leverage their Marriott School degree. One of the benefits of going to this school is the strength of the alumni network you’re tied into.” — Dean Ned C. Hill

16. Management Society • Now a global organization • 40 Chapters in the U.S. • 17 International chapters • Developed central membership database • Membership records • Online dues/events payment • Online calendar • Communication tools • Formalized 5-year strategic • plan

17. Management Society   “We need the members of the BYU Management Society to help build the moral base of our communities. You have standards, ideals, and values that will not only lead you to success, but will bless and strengthen this nation and all the world.” — Elder David B. Haight

18. Questions?

19. Putting Our Financial Houses in Order Ned C. Hill Dean, Marriott School of Management President, BYU 5th Stake

20. President Gordon B. Hinckley Priesthood Meeting, October 3rd, 1998 • Story of Pharaoh’s dream of the seven fat cattle and the seven lean cattle • “…I want to make it very clear that I am not prophesying, that I am not predicting years of faminein the future. But I am suggesting that thetime has come to get our houses in order. There is a portent of stormy weather ahead to which we had better give heed.” • “So many of our people are living on the very edge of their incomes. In fact, some are living on borrowings.”

21. President Gordon B. Hinckley (cont.) • “I urge you, brethren, to look to the condition of your finances.” • “I urge you to be modest in your expenditures; discipline yourselves in your purchases to avoid debt to the extent possible.” • “Pay off debt as quickly as you can, and free yourselves from bondage.” • “That’s all I have to say about it, but I wish to say it with all the emphasis of which I am capable.”

22. President Gordon B. Hinckley General Conference, October 7th, 2001 • “The economy is particularly vulnerable. We have been counseled again and again concerning self-reliance, concerning debt, concerning thrift. So many of our people are heavily in debt for things that are not entirely necessary.” • “I urge you as members of this Church to get free of debt where possible and to have a little laid aside against a rainy day.” • “But there is no need to fear. We can have peace in our hearts and peace in our homes.”

23. Elder Joseph B. WirthlinApril Conference, 2004 • “Remember this: debt is a form of bondage. It is a financial termite. When we make purchases on credit, they give us only an illusion of prosperity. We think we own things, but the reality is, our things own us.” • “Some debt—such as for a modest home, expenses for education, perhaps for a needed first car—may be necessary. But never should we enter into financial bondage through consumer debt without carefully weighing the costs.”

24. Other Counsel on Debt • Revelation to Martin Harris: “Pay the debt thou hast contracted with the printer. Release thyself from bondage.” (D&C 19:35) • Heber J. Grant: “If there is any one thing that will bring peace and contentment into the human heart, and into the family, it is to live within our means. And if there is any one thing that is grinding and discouraging and disheartening, it is to have debts and obligations that one cannot meet.”

25. Some Facts about Credit Cards • Average household has 8 credit cards • 65% of card holders do not pay off total balance each month • Why so much credit card debt? • Good times = confidence = overspending • Lots of money and it needs a place to go

26. Self-Test: Do I Have Too Much Debt? • Can I pay off my credit card balance completely each month? • Do I skip some bills to pay others? • If I lost my job today, do I have enough in liquid assets to pay living expenses for at least two months? • Do my spouse and I often argue about money? • Do I receive calls from creditors about overdue bills? • Have I postponed medical or dental appointments because I can’t afford them right now? • Am I using an increasing percentage of my monthly income to pay off debts?

27. Origin of Most Debt Problems? Spending Problems Debt Expenditures Income

28. Gaining Control of Your Expenditures • Step 1: Track cash flows • 1-3 months back • Find all expenditures • Determine assets and liabilities • Step 2: Agree on goals • What do we want to accomplish? • Agree on a budget for future cash flows • Step 3: Track cash flows--compare budget to actual • Use computer or any other method • Step 4: Review monthly • Step 5: Make adjustments

29. Compute Your Net Worth • Net worth = Assets - Liabilities • Assets • Market value (not purchase price) • Real and financial • Liabilities • Credit card and other consumer debt • Mortgages • Why do this? • Net worth helps you do stuff in the future • Track over time--should be growing • Identifies assets that could be used to reduce debt

30. What Adds to Net Worth? Credit Card Debt Stereo System Assets Liabilities Net Worth How do you balance this?

31. What Adds to Net Worth? Stereo System Credit Card Debt Assets Liabilities Net Worth Net Worth Must Shrink!

32. Productive debt Unproductive debt Avoid Unproductive DebtIt Makes Net Worth Shrink Consumer goods Vacations Car Most credit card debt Home Education Minimum transportation Business

33. Corollary: Be careful where you borrow! • Finance companies • Credit cards • Banks • Credit unions • Savings

34. Reducing Unproductive Debt • Plastic surgery • Reduce spending • Use assets to pay off debt • Reduce interest rate • Consider a home equity loan • Use another lower cost source of borrowing • Make a plan -- stick to it • Talk to a credit counselor if needed

35. Insurance--Makes Up for Low Net Worth Problems • If you have low or negative net worth? • Heirs may have difficulties • Severe cash flow problems • Insurance creates an instant estate--it becomes an asset if you die Liabilities Assets Net Worth Added Net Worth Cash from Insurance

36. Goals of Estate Planning 1. Live life fully • Provide for self & spouse • Provide for others without spoiling them • Provide for own possible incompetence 2. Pass property according to desires • Provide for administration (who does the work) • Provide dispositive scheme (who gets what)

37. Goals of Estate Planning, Cont. 3. Provide for guardianship & conservatorship of minor children 4. Avoid probate if desired or use probate strategically 5. Decrease or eliminate taxes • Income tax (capital gains basis problems) • Gift & estate tax

38. Provide for Others--Life Insurance • Term life -- pure death benefit • No savings component • About 1/10th the cost of whole • Expires at age 65 (usually) • Whole life -- death benefit plus savings • Builds cash value • Does not expire • Low but fixed rate • Use for estate tax purposes

39. Provide for Others--Life Insurance • Term insurance (6-10 times annual income) • Convertible term may be best for young families • Group is least costly but what if you leave? • Have some for non-employed spouse

40. Prepare for Retirement Some Retirement Myths • “I’ll live on Social Security benefits” • SS will replace only 24% of your income • “Someone else will take care of me” • “Better be safe and invest conservatively” • “I can use my retirement funds for other things”

41. Start Saving Early! • Sources of retirement money • Social Security 24% • Pensions 21% • Real Assets 13% • Financial Savings 11% • TOTAL 69%

42. Start Early!Bill starts saving for retirement at age 20Joe starts saving for retirement at age 40 ($2,000 per year at 8%) $903,800 $172,702 Bill has accumulated over 5 times what Joe did by 65!

43. How Does This Work? • Compound interest • Bill started earlier--compound interest has more time to work its miracle • If someone had put $1 in an account back in 1776 at 8% interest how much would the account have in it today? $30,685,000 !!

44. How Much Will I Need in Retirement?Money Magazine Survey • Estimates: 53% Actual: 71% • One third of retirees support children and grandchildren • Health care costs generally higher • Biggest regrets for retirees: • Didn’t take full advantage of tax deferred investments • Didn’t start earlier to save for retirement

45. Life Cycle Savings (000’s) Save 20% Retirement Save 10% Borrowing To heirs Age

46. What Should I Invest In? • Principle: risk-return trade-off • High risk--high return • Low risk--low return • What? • Stocks -- ownership in a company (risky) • Bonds -- loan to a company/government (less risky) • Deposit accounts -- (insured, no risk) • How? • Mutual funds • Tax-advantaged investing

47. Best and Worst Total Returns(1926-2002) 54% S&P 500 U.S. T-bills 20% 17% 15% 9% 8% 0% 0% 0.4% 3% -1% One year holding period 10-year holding period 20-year holding period -43%

48. Chances of Beating Inflation % HoldingPeriod

49. Chances of Loss

50. Corollary 1: • When investing for a short period (5 years or less), put your money in less risky investments like savings accounts and bonds. • When investing for a longer period (10-20 or more years), put your money in stocks.