Financial advice for all is a costly endeavor

Dec 8, 2013 @ 12:01 am

Nobel laureate Robert J. Shiller takes financial advisers seriously. In fact, he believes they are so important to consumers that he has advocated that the government subsidize personal advice for those who can't afford it on their own.

Speaking during a virtual conference last week, Mr. Shiller reiterated his plea to make financial advice more available, not only to the rich but also — and especially — to the middle- and lower-income classes. To the noted economist, it's simple: “People make better decisions with financial advisers,” he said.

As he has in the past, Mr. Shiller said that a lack of good financial advice was partly responsible for the financial crisis, pointing to the large numbers of Americans who took on outrageous amounts of debt to buy homes in the years leading up to the crisis.

In earlier writings, Mr. Shiller maintained that most Americans end up relying on salesmen of one sort or another to help them make key financial decisions. Real estate agents, mortgage brokers and car salesmen all can provide valuable information to consumers. But their advice is almost always compromised by their vested interest in seeing that a deal gets done — one way or another.

Mr. Shiller believes that the need for financial advice is so great that he is asking the government to subsidize it. In proposals going back to at least 2009, he has talked about providing four hours a year of advice at $75 an hour. If 50 million Americans were to take advantage of the subsidized service, it would cost the government $15 billion a year.

We are not supporting Mr. Shiller's specific proposal — at least not yet. We have serious reservations about the cost, and much more study needs to be done. Perhaps the many online services springing up in the financial advice field could offer a less expensive alternative.

But the fact that someone with Mr. Shiller's credentials is recommending financial advice for the masses is heartening. Now if we could just figure out a way to do it economically.


What do you think?

View comments

Recommended for you

Featured video


Federated's Orlando: The economic and financial midyear outlook

As a country, are we stuck in neutral? Federated's Phil Orlando explains what he believes needs to happen to create an economic surge. (Hint: It rhymes with "crump.")

Video Spotlight

Will It Last As Long As Your Clients Do?

Sponsored by Prudential

Video Spotlight

The Catalyst

Sponsored by Pershing

Latest news & opinion

Brian Block's $4 million bonus was tied to a key metric at ARCP

Prosecution rests case in fraud trial against CFO of American Realty Capital Properties.

Edward Jones is winning the Google search war

Brokerage firm's digital marketing investment helps land it at the top of local and overall search engine results, report finds.

Voya's win in 401(k) fee suit involving Financial Engines bodes well for other record keepers

Fidelity, Aon Hewitt and Xerox HR Solutions are currently defending against similar fiduciary-breach claims.

Collective investment trusts getting more attention from 401(k) advisers

The funds are catching on due largely to lower costs and more product availability, but come with some inherent drawbacks.

Vanguard rides robo-advice wave to $65B in assets

Personal Advisor Services, four times the size of its closest competitor, combines digital and human touch.


Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print