Event Summary: Pound Foolish: Exposing the Dark Side of the Personal Finance Industry

The Asset Building Program hosted journalist and author Helaine Olen yesterday for a conversation about her new book, Pound Foolish: Exposing the Dark Side of the Personal Finance Industry.

The Asset Building Program’s Justin King began the conversation by noting the extraordinary losses in wealth for American families during the Great Recession, which correlate with the growing public attention to the wealth gap. A common refrain is that our collectively insufficient level of savings is just part of “American culture” – but King argued this framing fails to recognize the role of policy in shaping culture. The personal finance industry communicates the message that Americans’ financial troubles are the result of personal failings, when in fact, they are working within a system of policies that often sets them up to fail.

Olen then provided some background for the book by describing her own process of entering the personal finance realm. While working as a freelance writer in LA, she received a call inviting her to write a personal finance column. Despite her admittedly limited experience in this field, she accepted, anticipating harsh criticism for her first draft; instead, she received praise and offers to contribute regularly. Olen’s own experience of quickly becoming an “expert” despite little formal training led her to more closely examine the cults of personality and conflicts of interest that pervade the personal finance industry, often to the detriment of consumers.

A recurring theme during the conversation was the emphasis on thrift in both advice books and popular consciousness as a strategy for saving—and perhaps even becoming a millionaire. The notion that putting aside the money you’d otherwise spend on a latte each day will lead to vast wealth has charmed many Americans both with its simplicity and manageability. Yet this simple “you can do it” strategy fails to account for structural barriers like stagnant wages and rising costs of “big-ticket” items like college tuition, housing, and healthcare.

Similarly, despite broad appeal, financial education efforts have done little to bolster families’ long-term economic security. In particular, because the financial services landscape changes so fast, financial literacy courses for high school students will be ineffective at preparing them to be savvy financial actors two decades (or more) down the line. Nevertheless, Olen was careful to identify the distinction between financial education and financial coaching, which she noted could be a more effective tool for helping individuals navigate particular moments in their financial lives. Ultimately, placing the emphasis on thrift and traditional financial education shifts the burden of navigating the financial services landscape onto the individual, rather than addressing the core structural problems that have given rise to such a complex (and at times intentionally misleading) system.

Lastly, Olen discussed the looming U.S. retirement crisis and described a variety of factors that have contributed to low savings levels. As she noted, if the 401(k) were going to work as a path to retirement security, “it would have by now.” A limited social safety net, vast income and wealth inequality, and rising costs of medical care and higher education have made it difficult for Americans to put aside enough money for retirement. Many Americans struggle to save enough to meet immediate needs or maintain an emergency savings fund, let alone guarantee their long-term stability. The shift from traditional pensions to 401(k)s has put all the responsibility onto individual workers to make sophisticated investment decisions – and offers little protection in the event these investments don’t pan out.

In concluding the event, Olen noted that the only way to effectively advocate for reform of the financial services sector is for Americans to recognize their largely shared circumstances. While the financial services industry has gone out of its way to emphasize the role of the individual in securing their own financial security, American families are collectively facing unprecedented debt, insufficient retirement savings, and a widening wealth gap. The extensive and structural nature of these problems calls for an adequate federal policy response rather than increased thrift at the household level.

As Justin King put it, Helaine Olen’s book is “a little angry, a lot of fun, and provides a challenge to the status quo,” as well as to the asset-building field, as we envision how to make successful initiatives both sustainable and scalable. Watch the full event recording below, and check out King's follow-up conversation with Olen here.