National strategy aims to promote financial education

President's new Advisory Council on Financial Capability charged with turning plan into reality

Dec 1, 2010 @ 2:58 pm

By Mark Schoeff Jr.

On the heels of the nation's economic meltdown two years ago, the White House is determined to promote financial literacy among Americans.

The Obama administration yesterday unveiled a national strategy aimed at guiding federal and private efforts to make sure Americans are equipped with the financial skills needed to attain economic security and stability.

The strategy addresses four main areas: increasing awareness of and access to financial education, identifying core financial competencies, improving the delivery of financial education, and sharing best practices.

The plan was developed by the Financial Literacy and Education Commission, a group of 22 federal agencies. It is now up to the newly created President's Advisory Council on Financial Capability to carry out it out.

The strategy “seeks to foster a culture in which households take periodic stock of their financial situations, individuals seek information and ask questions before entering into financial transactions, and everyone has the information and tools needed to help manage debt, save to meet their financial goals and plan for secure financial futures,” the strategy outline states.

“I'm excited by this,” said Paul Auslander, chairman and chief executive of American Financial Advisors Inc. “It's been a patchwork of solutions, none of which were coordinated at the national level.”

Mr. Auslander also serves as the 2011 president-elect of the Financial Planning Association.

The challenge for the President's Advisory Council on Financial Capability is to turn broad strategic outlines into specifics.

“Any strategy is only as effective as its implementation,” said Richard Ketchum, chairman and chief executive of the Financial Industry Regulatory Authority Inc. and a member of the council.

The panel, which is composed of 12 financial, education and community development experts, will form five subcommittees — strategy, financial access, research and evaluation, partnerships and youth — to flesh out the strategy.

“The question is, ‘How do we make sure we corral all the best ideas in some focused way?',” said John Rogers Jr., chairman, chief executive and chief financial officer of Ariel Investments LLC and chairman of the advisory council.

Achieving broad financial literacy will require the efforts of investment advisers and broker-dealers. Mr. Ketchum said that good financial guidance includes inculcating the rudiments of money management in clients.

“An excellent investment adviser or financial adviser is somebody who can teach and effectively put information together in an understandable way,” he said.

In some ways, investment advisers are stationed on the front lines of the financial literacy effort.

Mr. Auslander said that there's no downside to insurers, advisory firms and broker-dealers getting involved in financial education. The banking industry has taken the lead for years, and there is no political opposition to such efforts, he said.

“From a corporate citizenship standpoint, they'd be foolish not to weigh in and try to help,” Mr. Auslander added.

Mr. Ketchum endorsed investment advice practitioners playing a role.

“They are an important linchpin,” Mr. Ketchum said. “But they can't do it alone. Broker-dealers and investment advisers can build [awareness], but they need to build on a strong base.”

Council members asserted that that foundation should include financial education at all school levels and should extend to poor communities. Michael Barr, who is serving as assistant Treasury secretary for financial institutions Friday, cited a study by the Federal Deposit Insurance Corp. which showed that eight million Americans don't have a banking account.

Carrie Schwab-Pomerantz, president of the Charles Schwab Foundation and a member of the council, highlighted the organization's work to take financial knowledge to low-income areas of the country. The Schwab Foundation collaborates with the Boys & Girls Clubs of America on a personal finance education initiative for youngsters known as “Money Matters: Make it Count,” which was established in 2004.

More than 245,000 teens have completed the course at about 1,600 Boys & Girls Clubs across the country. The Schwab Foundation also has awarded $345,000 in college scholarships to young people who have graduated from “Money Matters” and demonstrated personal finance skills.

“It's very interactive and engages these kids,” said Michael Townsend, vice president of legislative and regulatory affairs at Charles Schwab & Co. Inc. He said classes are taught by club employees and Schwab volunteers.

In Florida, the state's Financial Literacy Council has been working to get school systems to adopt a financial literacy curriculum. Establishing outposts, however, is a challenge because local school control means that the group has to make its pitch district-by-district. In addition, teachers must be trained to deliver the courses, requiring money from a tight state budget.

“It's been a marginal success, but it's not out of a lack of interest; it's out of a lack of funding,” said Mr. Auslander, who is a member of the Florida Financial Literacy Council.

It's not just kids who need guidance, Mr. Auslander said, noting that even doctors and lawyers enter into ill-advised mortgage arrangements and fail to read the fine print of financial products.

“These are people you would think are financially literate, but are not paying attention or are simply not knowledgeable in these areas,” he said.

Mr. Auslander is confident that the current financial literacy push will have a bigger impact than the effort launched by the Bush administration.

“To the extent you solve this problem, you solve a lot of issues in our communities,” he said.


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