Comments on: Should Bailouts Include Pre-paid Financial Advice? http://www.assetpolicy.org/blog/archives/134 Asset Building Blog Fri, 30 Jul 2010 12:43:33 +0000 http://wordpress.org/?v=2.7.1 hourly 1 By: David Marzahl http://www.assetpolicy.org/blog/archives/134/comment-page-1#comment-100680 David Marzahl Wed, 04 Feb 2009 17:16:06 +0000 http://www.assetpolicy.org/blog/archives/134#comment-100680 Saundra: You've raised an important issue regarding Robert Shiller's suggestion that the federal government get involved in sanctioning and directly supporting financial advice. What you miss is that Shiller correctly identifies the critical need that American consumers, of all incomes, have for unbiased financial advice. The tax code currently subsidizes taxpayers who itemize by allowing them to deduct the cost of financial planning while offering nothing to those of limited means who don’t itemize. Having someone of his stature raise this issue is important and relevant to moving the debate forward around the future of financial literacy efforts. In his column and recent book, The Subprime Solution Shiller articulately puts forth the need for a new kind of everyday financial advisor who can offer objective advice and guidance for those with low incomes. Where Shiller gets it wrong is in suggesting that the government should subsidize the private sector to provide this service. Rather than subsidizing for-profit financial advisors to provide this service, we can learn from recent experiences of non-profit organizations that have been piloting financial coaching and other new approaches to build the financial decision-making capacity of consumers -- experiences that demonstrate great promise. The new Administration and Congress should take note of community-based financial coaching and the tangible benefits it offers to consumers, helping them to make sound, sensible and responsible choices as they negotiate a marketplace filled with high-risk, low-value products and services. Using bailout funding or economic stimulus dollars to directly support financial coaching and financial advice may not be the right strategy at this time, but it will be important for our government to consider an investment approach that allows those of limited means to access unbiased financial advice and coaching. If middle and upper income Americans get government support to help them make sound financial decisions, why shouldn’t the rest of us benefit as well? David Marzahl Executive Director, Center for Economic Progress www.economicprogress.org dmarzahl@economicprogress.org Saundra:

You’ve raised an important issue regarding Robert Shiller’s suggestion that the federal government get involved in sanctioning and directly supporting financial advice. What you miss is that Shiller correctly identifies the critical need that American consumers, of all incomes, have for unbiased financial advice. The tax code currently subsidizes taxpayers who itemize by allowing them to deduct the cost of financial planning while offering nothing to those of limited means who don’t itemize. Having someone of his stature raise this issue is important and relevant to moving the debate forward around the future of financial literacy efforts.

In his column and recent book, The Subprime Solution Shiller articulately puts forth the need for a new kind of everyday financial advisor who can offer objective advice and guidance for those with low incomes. Where Shiller gets it wrong is in suggesting that the government should subsidize the private sector to provide this service. Rather than subsidizing for-profit financial advisors to provide this service, we can learn from recent experiences of non-profit organizations that have been piloting financial coaching and other new approaches to build the financial decision-making capacity of consumers — experiences that demonstrate great promise.

The new Administration and Congress should take note of community-based financial coaching and the tangible benefits it offers to consumers, helping them to make sound, sensible and responsible choices as they negotiate a marketplace filled with high-risk, low-value products and services. Using bailout funding or economic stimulus dollars to directly support financial coaching and financial advice may not be the right strategy at this time, but it will be important for our government to consider an investment approach that allows those of limited means to access unbiased financial advice and coaching. If middle and upper income Americans get government support to help them make sound financial decisions, why shouldn’t the rest of us benefit as well?

David Marzahl
Executive Director, Center for Economic Progress

http://www.economicprogress.org

dmarzahl@economicprogress.org

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