When I sit down with other financial industry professionals to talk shop, many of them ask me why I devote so much time to the financial education of my clients and online audience via blogs, podcasts, and webinars. Recently, someone quipped to me, “Bill, before I go to the dentist, I don’t read up on cavities and root canals. The dentist tells me what to do, and I do it. Fiduciary advisors and their clients are no different.”
I staunchly disagree. I believe that consumers, and especially friends and clients of Keen Wealth, need to have a baseline level of financial education to carry them between our annual meetings. My team can’t advise our clients when they’re on the phone with a Medicare rep, or sitting down with a car salesman, or refinancing a mortgage. We want to spend our annual meetings reviewing the progress our clients have made towards their retirement goals, and making minor adjustments if necessary. We don’t want those meetings to turn into annual clean-up sessions.
Reading, Writing, and … Retirement Planning?
Like any other kind of learning, financial education needs to start at a young age. You’ve probably spent hours helping your children with the old “Three Rs:” reading, writing, and arithmetic. But when was the last time your kids asked for help with their retirement planning homework? Or their compounding interest workbook? Have you ever helped your kid put together a presentation on how to manage credit card debt responsibly? Any big tests on market volatility coming up?
Schools are not in the business of financial education. A recent study by the Organization for Economic Cooperation and Development tested the financial literacy of 15-year-olds in eighteen countries. US teens ranked 9th. Another study by the Program for International Student Assessment found that one in five American teens lacked basic financial education. Worse, to quote that same study, “The latest PISA release finds only about one in 10 students in the U.S. achieved the highest proficiency level as a top performer, defined by the report as students who can look ahead to solve financial problems or make the kinds of financial decisions that will be relevant to them in the future.”
Financial education is one of those life skills parents need to teach in-home. Unfortunately …
… the financial education numbers for mom and dad aren’t much better.
The American College of Financial Services’ RICP® Retirement Income Literacy Survey found that only twenty percent of retirement-age Americans could pass a basic quiz on how to ensure their nest eggs lasted through retirement. When a financial industry regulatory authority tested 27,564 Americans on basic financial literacy, two-thirds failed.
I could keep throwing more and more sobering numbers at you, but when we look at these statistics, we sometimes tend to focus on phrases like “failed” and “can’t pass,” and place the fault on those tested. Yes, the gaps in financial education in this country need plugging. But another part of the problem is that your finances, and your retirement planning in particular, can be extremely complicated, especially if you wait until later in life to dive into these issues.
Most working people put their retirement planning on autopilot: automatic deposits into a savings account every month; automatic contributions into an employer-match 401(k); automatic contributions to an IRA. Then, suddenly, you turn 65, your automatic systems shut down, and you’re alone in the cockpit, holding the wheel, wondering how to fly this airplane into retirement!
You don’t have to be your own dentist.
As I’ve said repeatedly on my podcast, I’m not trying to turn readers, listeners, clients, or clients’ children into financial advisors themselves. I don’t think you have to BE a dentist just because you get your teeth cleaned every six months.
But we all make financial decisions every single day, some as big as your house, some as small as withdrawing extra cash for the weekend. I want to make sure that when people make these decisions, they’re drawing on a wide knowledge base. Eventually, even small choices about how and why you spend your money start to add up. Your big-picture financial goals should always be in the back of your mind whenever you open your wallet.
So take advantage of any and all financial education resources available to you. Listen to financial podcasts. Read articles. Subscribe to newsletters from people you trust. Go to the free dinners. Sure, you might get cornered by some pushy salespeople — although never at our awesome Keen Wealth events! — but learn as much as you can about what advisors think, and what they offer their clients. Learn as much as you can about the language of managing your money. While a lot of employers are still skittish about the liabilities surrounding their employees’ finances, if your company does offer financial education, take the classes.
Finally, bring any info you’ve learned and questions you have to your fiduciary advisor. Don’t be afraid to ask about things you don’t understand; we definitely have a strict “No such thing as a dumb question” rule at Keen Wealth, and your advisor should too. We see every day that clients who take responsibility for their financial education and play an active role in their financial lives become better consumers, better planners, and eventually, happier retirees.
Bill Keen is a CHARTERED RETIREMENT PLANNING COUNSELOR℠ and independent financial advisor with more than 24 years of industry experience. As the founder and CEO of Keen Wealth Advisors, a registered investment advisory firm, he specializes in providing personalized retirement planning designed to help people thrive before and during their retirement years. With a passion for educating others, Bill regularly blogs about retirement planning, hosts the podcast Keen on Retirement, and has contributed to U.S. News and World Report, Reuters, Wall Street Journal’s Market Watch, Yahoo Finance, and other publications. Based in Overland Park, Kansas, Bill and his team work with clients throughout the greater Kansas City area and across the nation. To learn more, connect with him on LinkedIn or visit www.keenwealthadvisors.com.
Keen Wealth Advisors is a Registered Investment Adviser. Nothing within this commentary constitutes investment advice, performance data or any recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. Any mention of a particular security and related performance data is not a recommendation to buy or sell that security. Keen Wealth Advisors manages its clients’ accounts using a variety of investment techniques and strategies, which are not necessarily discussed here. Investments in securities involve the risk of loss. Past performance is no guarantee of future results.