Can you trust the financial services industry? In Pound Foolish
by Helaine Olen, you find out that you should take all advice with a grain of salt.
From financial gurus to advisers that recommend complex annuities,?Pound Foolish: Exposing the Dark Side of the Personal Finance Industry?by Helaine Olen takes a look at the financial services industry — and finds it distinctly lacking. Instead of being truly helpful, she asserts, it's all about making money off the little guy, all the while blaming the little guy for not working hard enough.
Should You Listen to Financial Gurus?
One of the tenets of the book?Millionaire Fastlane by MJ DeMarco is that following the advice of financial gurus will put on in line to toil away at a job for decades, only to have “wheelchair wealth” that you will be too old to enjoy. All the while, you'll buy products and books from financial gurus, helping?them get rich.
In Pound Foolish by Helaine Olen, you discover that financial gurus don't have your best interests in mind — and that some of the advice can be sometimes dangerous. Especially to those who don't really understand money.
Olen takes down just about every financial guru out there. She cites the simplistic and ever-changing advice of Suze Orman, and she looks at the cult of personality surrounding Rich Dad Robert Kiyosaki?(and the fact that the Rich Dad branded “seminars” are little more than attempts to sell high-priced wealth systems).
She blasts the Latte Factor from David Bach, pointing out that, for most people, it's not lattes killing their finances. It's the high health care costs, and other big expenses that no amount of penny pinching will ever overcome. And she complains that Dave Ramsey hypocritically tells people to power through without bankruptcy, paying what they owe, even though he was able to rebuild the shambles of his financial life on a foundation of…bankruptcy.
The point, of course, is that you need to take what others tell you about finances (including me!) with a grain of salt. Financial gurus are in the business to make money. Lots of money. And many of them don't follow their own advice. Olen points out that Suze Orman spends a lot of time talking about the importance of stocks, even though her own portfolio has never been heavy in that area.
Olen uncovers some uncomfortable truths about financial gurus, the way they make money, and the fact that some of the advice is…suspect. Financial gurus have some helpful things to say, but it's important to remember that their #1 goal is to make money.
Pushing Financial Products You Don't Need
Another issue, Olen points out in the book, is that financial services industry is all about pushing financial products that you don't need. Many of the terms, even with recent attempts at transparency, are still buried in hard to see places, and still difficult to understand. She especially looks at the annuity industry, and the attempts to sell annuities that are complex, and can even be harmful.
Once again, the book points out that advisers in positions to sell many financial products don't have your best interest in mind — and they don't have to have it. Unless you are dealing with someone who, by law, has a fiduciary duty to you, there's a good chance that a conflict of interest exists.
She also includes a look at the financial literacy movement. Olen takes issue with the fact that most financial literacy efforts are presided over the very companies (like credit card issuers) that benefit most when you are financially ignorant. So she doubts the true efficacy of these programs.
So, Who's Responsible for Your Finances?
One of the things that did start to bother me in the book is that Olen puts a lot of emphasis on it being “someone else's fault” that people are struggling with finances. To some degree, I agree. I know that there are plenty of people who don't have financial opportunities, or the knowledge to take advantage of them. And I agree that the fraying social safety net isn't helping matters.
However, I think that Olen goes a little too far. I am with her that a lot of the tactics supplied by the financial services industry won't do much to overcome income inequality, and stagnating wages at the bottom are a real problem. Even though I think that there is a lot more we need to do as a society to ensure that there is more access to opportunities, I do think that Olen did go a little too far in her attempts to blame everyone but consumers for the current state of affairs. I think there is plenty of blame to go around — including for individuals.
Unlike Olen, I do think that there is more that we can do for our situations, and I think that it is possible to be empowered to improve our finances. We do need more financial education, and we do need more transparency in the financial services industry. And we do need a social safety net (but we can't come to depend heavily on it).
I think that Pound Foolish?by Helaine Olen is worth a read, even though I don't agree with all of her points (but I am sympathetic to many of them).?I think we do need to take responsibility for our own finances. Look at where you are right now, and make a plan to move forward from this position. You might not be able to control all your money circumstances, but you can control how you react, and where you go from here.
Listen to a Consumerism Commentary podcast with Helaine Olen, and read the book. It's definitely interesting and provoking — whether you agree with her or not.
What do you think of the financial services industry? And do you follow financial gurus? Did you read Pound Foolish by Helaine Olen? What did you think?