If you've ever attended a business conference, you probably agree that the most worthwhile lessons often come not from the formal presentations but from casual encounters with other attendees.
That was the case last week when I attended the spring conference of the Retirement Income Industry Association in Chicago. The presentations were quite worthwhile, but what stayed with me was a conversation over dinner.
My table mates that evening included a mutual fund attorney and an executive at a company that offers a retirement income product. I'm not sure how we segued into the subject, but before long, we were debating the current state of financial literacy and retirement readiness.
The product executive was convinced — based on her experience with retirement plan participants and other ordinary savers and investors — that most people are so woefully ignorant of personal-finance and investing issues that they are too ill-prepared to make decisions affecting their own retirement. Worse, based on what she's seen, she believes that most Americans are not just unwilling to become financially savvy but also too stupid to handle their own money. In her experience, financial education is useless.
Our fund attorney was appalled. While agreeing that far too many people are financially illiterate, she is convinced that Americans are basically intelligent and will do the right things financially once they are educated. What's needed, she believes, are good programs to teach people about saving, investing and preparing for the future.
I agree that education can help, but first, there must be motivation to become educated. Certainly, since no one was ever born knowing the difference between a stock and a bond, it's clear that personal-finance subjects are eminently learnable. And the basics of good personal finance are really pretty easy — spend less than you make, save a lot, diversify what you own and watch costs.
In fact, if we're being totally honest, those of us in and around the business of financial advice and investments know that when you scrape away the marketing hype and high-cost, high-profit add-ons that make financial services so lucrative, the basics of saving and investing aren't all that complicated.
On the other hand, few people want to make the effort to become financially aware. Academic studies have shown that financial literacy education rarely works.
It's easy to see why: we've become a nation of soda-guzzling, no-attention-span good-time Charlies, so busy texting and instant-messaging one another about the latest pop culture inanity that there's no one left to remind us to eat our vegetables. Why bother with the no-fun chore of planning for retirement when you can download an iTune or play Frisbee golf on the Wii?
Since the days of paternalistic defined-benefit pension plans are over, and since most people really don't know how to handle retirement finances, the best policy bet to prevent the bulk of Americans from slipping into poverty in retirement probably involves expanding auto-IRA and auto-401(k) plans. These would make retirement savings the default option for millions of Americans, which few would change, given the inertia with which most people — even sophisticated, wealthy investors — approach financial decision making.
Is auto-enrollment coercive? Yes, but what's the worst that happens — ordinary people wind up having more money?
The clientele of most advisers, of course, are more financially astute than the typical retirement plan participant, and they face other retirement challenges, requiring ever-more-sophisticated knowledge on the part of advisers.
At the risk of being self-promotional, let me call your attention to a conference where advisers will find solutions for today's higher-level retirement income issues. The conference is the InvestmentNews Retirement Income Summit, which will be held May 2-3 at The Westin Chicago River North in Chicago. Speakers include J. Mark Iwry, President Barack Obama's top retirement policymaker; Dr. Andrew Lo, professor of finance at MIT and chief investment strategist at AlphaSimplex Group LLC; Matthew McLennan, head of the Global Value Team at First Eagle Funds; and David Winters, portfolio manager of Wintergreen Fund Inc.
Specifically, attendees will learn: how to position and market yourself as a retirement income specialist; the role of alternatives in retirement portfolios – and how to use them; how to plan for the unexpected in your client's lives; a new technology tool that may change the way your clients plan for their future; and what even your most affluent clients must know about health care and long-term care.
To sign up for the conference and take advantage of the early-bird $495 rate (which ends March 31), please go to
InvestmentNews.com/summit.
With retirement income such an important national issue, advisers can use all the practical help they can get.
