Ethics and the Personal Finance Industry
The personal finance industry can’t save us – Salon.com
How does the industry prey on our fears about our inability to save and plan for the future?
We can’t articulate that for all too many of us our problem is not an inability to manage and invest money effectively; it’s that we’re expected to do more and more with less and less. So we think we are individually messing up, that we lack the financial skills and smarts to get ahead. The financial services industry presents itself as our savior. But by doing that, it has to confirm our cultural bias that we are alone responsible for our financial fates.
You see this dynamic especially in personal finance and investment initiatives aimed at women, which contain an almost odd mix of the language of empowerment and infantalization. They tell us we are women, we are so strong because we do so much more around the home and work than men, but yet we are financial illiterates who have no clue. In fact, both sexes have low financial knowledge. Men have more money than women for the most obvious of reasons: they earn more.
You mention the work of economist Teresa Ghilarducci, “the most dangerous woman in America.” Who is afraid of her and why?
It became very clear to me while reporting this book that Teresa Ghilarducci had hit a nerve in the financial services sector that no one else had. The reason, to me, was obvious. Most other people discussing retirement reform schemes (Auto IRAs, Save More Tomorrow and the like) were talking about expanding the role – or at least the bottom line of — the current dominant players on the retirement scene. I mean the retail brokerages, the 401(k) plan providers, the dominant mutual fund companies and the like. Ghilarducci’s Guaranteed Retirement Accounts calls BS on this model. First, she points out how much money the current retirement is making on what we think is our money. Second, her model would bring new players in, and I mean new, powerful players – state pension funds, institutional investors, and hedge funds – into the game.
Ethics and the Personal Finance Industry
Personal responsibility. I believe in it. I recognize the power of it, the usefulness of it. But circumstances have to be taken into consideration. We do get injured, become ill and suffer accidents. We can be killed by natural disaster or more mercifully, have homes or businesses destroyed. Choice and environment interact to produce our reality.
Here we have a situation which the personal finance industry proclaims loudly and persistently that if you only change your decision making and be tough on yourself, that you can attain financial stability and even possible eventual wealth. I would prefer that industry to look at this situation from a business ethics stand point and promise less because personal choice is only part of the equation. If a great majority of the American people had shared in the profits of the increased production and financialization of the last thirty years, I think most financial suffering might be attributable to poor planning. But here again, we have circumstances, downward wage pressure, very high unemployment, a replacement of stable pension with the disastrous 401K’s, the changes in the bankruptcy act, the plague of student loans, etc.
Americans of the middle class suffer from real wage pressure and for many, no amount of planning will fix those problems. Americans of the lower class are simply in the midst on an ongoing week to week, day to day, financial disaster.
Financial planning can be useful but only in proportion to the amount of disposable income in the individual cases. If the disposable income is inadequate, no amount of planning can fix it. Promising magical fixes from non-existent resources is not ethical. Financial planning is not for everybody.
From around the web –
From the web site, Personal Finance for Beginners:
Your questions in personal finance would revolve around the following:
How much money will be needed by you at various points in the future?
Where will this money come from (e.g. savings or borrowing)?
How can you protect yourself against unforeseen events in your lives, and risk in financial markets?
How can family assets be best transferred across generations (bequests and inheritance)?
How do taxes (tax subsidies or penalties) affect personal financial decisions?
Your Personal financial decisions will involve paying for education, financing durable goods such as real estate and cars, buying insurance, e.g. health and property insurance, investing and saving for retirement. Personal financial decisions may also involve paying for a loan.
From the web site, Finance for Youth: The Blog:
A couple of days ago, a young student approached me and asked me for some career advice. The student wanted to understand a little more about what banking and finance is about, and how it measures up in terms of their “dream job“. I was very impressed with this young student, because unlike many of their peers, they were actually trying to look at their future and start planning. This student, to be fair, is part of an advanced group of students. They get tutoring as part of their regular school day, they have additional instruction in note-taking and other study skills, and they are in advanced Math and English classes. They have a leg up over many students already. This young person seemed to have a leg up on even this group.
And from the web site, Nancyeewing:
You need to make a plan of what you really want in life that money can buy. Then you must find out how to get the money it takes to finance it and finally start to implement this plan. This is the long term part of your financial life – the process of personal financial development from the state you are in right now – to the state you want to be in. This journey toward financial freedom is in my opinion the most interesting and exciting part of personal financing you can have.