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What Does Financial Literacy Month Mean to You?

What Does Financial Literacy Month Mean to You?

The American College of Financial Services
April 8, 2020

At The American College of Financial Services, our mission is to be life-long learning partners while we strive to reach new communities and improve people’s lives through training, knowledge, and education in the financial services sector. With April being Financial Literacy Month, we asked our expert faculty and thought leaders why financial literacy is important to them, on a personal or a professional level. These are their stories.

 

Michael Finke, PhD, CFP®

In the defined contribution era, today’s retirees are now more responsible for managing a nest egg to fund their lifestyle instead of relying on a pension from their employer. My research shows that as we reach advanced age, there is a risk of dementia that can result in a decline in financial literacy and poor financial decisions. This is particularly worrisome for older investors who have built substantial IRA balances that make them targets for the sale of unregistered securities. In 2019, I provided evidence to the Securities and Exchange Commission that investors over age 80 who meet the accredited investor definition had lower financial literacy scores than younger retirees who did not meet the definition. High net worth older retirees are a particularly vulnerable group because many aren’t aware of their own cognitive decline and are easy prey for unscrupulous brokers of lightly regulated investments. Last December, my research was cited by SEC commissioner Allison Herren Lee who noted that asset-based thresholds for the sale of unregistered securities pose a “serious risk to retail investors, particularly elderly investors who have spent a lifetime saving for retirement.”

For research on financial literacy and aging, see:

https://pubsonline.informs.org/doi/10.1287/mnsc.2015.2293

https://www.sec.gov/comments/s7-08-19/s70819-6168201-192389.pdf

Commissioner Lee’s testimony: https://www.sec.gov/news/public-statement/statement-lee-2019-12-18-accredited-investor

 

Kevin M. Lynch, ABD, MBA, CFP®, CLU®, ChFC®, CASL®, CAP®, RICP®, RHU®, REBC®, LUTCF, FSS, CLTC®, FIC, FICF, LTCF, LTCIS

"Kevin, why do you have so many professional designations?"

I have lost count of how many times I have been asked this question during my professional and academic career. The answer is simple: because Stephen L. Lander, Sr., my financial services mentor and friend of 50 years, taught me to believe that “You can never know it all, but you can never know too much.”

What is the purpose of professional education? For some people, it is to impress prospects with the number of letters after their name. For others, it is because they take their responsibilities to serve their clients seriously. 

Over the years, I have earned 20+ professional designations. Why? Because I do not believe in “empty CE.” If I have to take a CE class to fulfill my obligations to a designation-granting institution or to meet my state CE requirements, I am going to make the CE serve me…and my clients. Invariably, over the years, as I took more and more classes, I found myself needing “only one or two more” to finish another designation program. Add to that my love of learning and my being a “professional student, “ and there you have it. (I do not use them all, for obvious reasons.)

When I was recruited to The American College of Financial Services in 2009 by then-President Dr. Larry Barton, he made me realize an important truth. As a practitioner, even a superstar one, I had the potential to serve only 300 to 400 families a year. As a professor at The College, I could impact the lives of tens of thousands of students over a long career, and each of them could serve 300 to 400 families per year. Where, then, could I do the most good?

When I accepted the responsibility of being a mentor to my students as their professor, I decided Steve Lander and Dr. Barton were both right. In the words of the old U.S. Army recruiting slogan, I decided to “Be all I could be.”

 

Brianne C. Smith, CPA, PFS, ABV, PhD Candidate at The American College of Financial Services

Financial literacy has been a part of my life from a young age. I had a father in the Air Force who encouraged me to not only know about money, but also to have the ability to earn it. I have been in the financial profession for 20 years now, but my passion for women's empowerment and money matters really began after my divorce from my first husband. It was an abusive relationship that was difficult to get out of despite my financial knowledge, my amazing job, and my professional network of support. It occurred to me then that women without those things would have an even harder time.

I first started working with women through my church and found that women of all ages not only need this support and guidance in the area of finance, but long for it once they understand its importance. Financial knowledge is a source of power and freedom that is often put off until it is relevant, so helping women understand this relevance sooner is what I do. My dissertation focus is on the factors that impact a woman's decision to forgo an investment in financial knowledge, which is interesting because despite cognitive ability and education, many women still choose to delegate financial decisions to someone else. Women typically earn less, work less, and risk less than men, while at the same time living longer and having more health issues in old age. The lack of financial literacy among women extenuates these circumstances, and my research is an effort to understand why this is so and how can it be addressed.

 

Jim Petersen, PhD, MSM, MSFS, CFP®, CLF®, ChFC®, CLU®, CASL®, RICP®, WMCP®, ChSNC®, CRPC®, CAP®, AEP®

Although I had an interest in financial literacy from a young age, I did not get serious about it until the early 1980s, while still on active duty with the United States Navy. At that time, my wife and I sat down with a financial advisor to develop a personal financial plan. This meeting was prompted by a book called The Richest Man in Babylon. Although I learned much about putting money away for the future, one of the ideas that stood out from this book is the phrase, “A part of all you earn is yours to keep.” After learning this and other lessons about finances, we implemented our first financial plan. Recently during sequestration, I found one of our original financial plans and looked at the projections for what we needed to achieve by retirement. I was amazed at how close they were to what we actually needed, and that we exceeded the goals set way back in our early financial life. So, if you learn nothing else, remember that “a part of all you earn is yours to keep” and start putting 10 to 20% of your income away for your financial future right now.

 

Steve Parrish, JD, RICP®, CLU®, ChFC®, RHU®, AEP®

Financial literacy can mean many things, but one clear meaning of the term is getting help in assessing your options. You don’t need to make financial decisions alone. Talk to others, particularly if they have knowledge that can help you make a more informed choice.

I was reminded of this when, while talking with my brother in the middle of the COVID-19 pandemic, he blurted out, “I’m sure glad I bought that annuity all those years back!” I had forgotten about a conversation he and I had 15 years ago, when he had just received a large cash payment following termination from his company. He knew he was employable, so he wanted to put the severance pay away for retirement. His first step was to get recommendations from his financial advisor. Next, he called his little brother, yours truly, for a second opinion. Then, he did his own research.

The result was his purchase of two deferred annuities that had generous guaranteed income riders from highly rated insurance companies. When the Great Recession arrived, he didn’t worry. He knew he had a guaranteed income stream when he needed it. When he finally retired, he started taking his income from the annuities and knew he’d be fine financially. And when the current financial crisis caused by the pandemic hit, again, he felt secure.

Call it smart investing, or call it financial literacy. He got help, made his decision, and is enjoying the fruit of his labors. 

 

Ted Digges, MS, CPL®, ChFC®; Captain, SC, USN (Ret.)

As a volunteer, I teach financial management to local high school students, as they are beginning to think about their future, their transition to adulthood, and good habits to be formed.

I believe it is critically important the next generation elevates their knowledge on how to manage their finances. This includes the basics of budgeting, cash flow, savings, and debt management.  One of the most important lessons is the concept of living within your means, regardless of income level. Understanding just these basics can be life-changing by reducing or even eliminating financial stress, which so many live with daily. For the next generation, understanding these concepts could be transformational.

 

Kirk Okumura, MSFS, ChFC® 

My introduction to financial literacy came at the hand of my father. He taught me two key habits.

First, track your expenses. He faithfully recorded all of his expenses in a ledger, a habit that I mimicked as a young man. He also got me hooked on saving my money—this was back when passbook savings earned six percent. A good percentage of the money I earned delivering newspapers went into my savings account. Ultimately, these habits formed my basic understanding of finances: spend less than you make and save the difference.

These habits predisposed me to instantly resonate with the basic concepts laid out in David Chilton’s The Wealthy Barber. In it, Chilton promotes the basic habits of paying yourself first, starting early, and implementing a periodic investment approach that have served me well for almost 30 years. I have found them indispensable.

 

David Pierce, ChFC®, CLU®, CLF®

In my late 20s, I was fortunate to be recruited by the insurance company considered to be the best for training financial services professionals. Applying that training led to great success for my clients and I, and I quickly learned there was a clear link between financial literacy and confidence.

Continuing education served me well through several geographic and company changes. My intense desire for clients to “know…and know that they know” paved the way for exciting career opportunities.

In 2003, I accepted an international assignment. I started in Singapore, was promoted to a larger role in Hong Kong, spent about a year in India on special assignment, and then went to New Zealand as the CEO of an insurance company’s country operations.

In Singapore I was introduced to MoneySense, a financial literacy program sponsored by the Monetary Authority of Singapore. Their goal was tremendous: “to help Singaporeans manage their money well and make sound financial decisions on their own.” MoneySense is practical and easy-to-understand information designed to make financial planning information “practical, unbiased, and relevant.”

My Hong Kong role carried responsibilities in many Southeast Asian countries. Representatives from several companies met and built the first-ever needs-based financial services system in Asia. It was called The Financial Health Check. It is still in use today, 15 years later.

The Financial Health Check asked clients why they see a doctor, with the answer usually being to either stay well or get better due to sickness or poor health. In either case, clients sought three things: the status of their current health, potential health improvements, and professional advice. The most powerful advice for clients was that they should do the same thing with their financial health: get the status of their current financial health, consider financial health improvements, and seek professional advice.

Today we see many versions of a financial planning pyramid. Every version I’ve seen offers guidance regarding a first-things-first approach: budgeting and protection first, saving and investing second, conserving or preserving third, and then retirement and legacy planning.

Thomas J. Wolffe, CLU®, ChFC®, revolutionized our industry with his Capital Needs Analysis, creating an early and profound understanding of meeting client needs. His legendary work served as a springboard for financial literacy for decades.

Wolffe often said, “When you know, and you know that you know, confidence replaces fear.” He was right. Let us not be fearful of pursuing and refining financial literacy in our industry. May we boldly go forward with confidence.