Most Americans lack basic financial literacy.  One recent study found that about two thirds of Americans cannot correctly answer basic questions about interest rates and ordinary economic calculations.  It isn’t a surprising finding.  Put simply, most people need help when it comes to handling financial planning and investing decisions.

There are different ways to solve the problem.  One way is to focus on increasing financial literacy by doing more education and outreach.  That approach hasn’t shown great results so far.  Another mechanism for improving financial decision-making is to pair people with competent financial advisers and planners.   In theory, financial advisers can improve financial outcomes for their clients by helping them make the best decisions for their situation.  Unfortunately, the law in most states doesn’t require persons providing financial advice to act in the best interests of their clients.  Nevada is a notable, recent exception.

Many people working with financial advisers walk in with a mistaken default expectation that financial advisers must give advice in the best interests of their clients.  This perception may exist because of the constant drumbeat of trust-focused advertisements from financial services firms. With mismatched expectations and commission-compensated financial advisers, ordinary customers routinely find themselves steered into not-so-great decisions.  In many instances, if they pick a high-fee fund over a low-fee fund, this can result in missing out on thousands and thousands of dollars in future gains. The problem is entirely predictable and can be prevented.  It just requires persons to end up working with financial advisers committed to giving advice in the best interests of customers.

In the aftermath of the 1 October shooting in Las Vegas, I was asked about preparing financial literacy materials to help survivors receiving funds raised in the shootings aftermath to avoid some of the worst scams and frauds out there.  Although materials may do some good, it seemed like it would be better to get them access to financial planning assistance.   We decided to make it happen and reached out to The Institute for the Fiduciary Standard.  With their help, we put together a project bringing together the CFA Institute, the National Association of Personal Financial Advisers, and the Garret Planning Network.   They put out the call to their affiliated financial planners and dozens responded, all agreeing to the following:

I affirm the following statement regarding offering pro bono (free) financial advice to the individuals and families of the survivors of the October 1 Las Vegas tragedy.

I am a fee-only adviser registered with the state or the SEC. I have no pending or current infractions with any regulator.

I will provide at least four hours of advice free of charge. Upon completion of these four hours, I will not solicit any survivor or survivor family for my (or my firm’s) services; however, I will, if requested, offer my services to a survivor on a fee-only basis.

We put together a website to help get the word out and make it easy for survivors to get help from advisers affiliated with these organizations where all members have committed to providing advice in the best interests of their clients.  

Getting good advice to survivors is critically important.  Greg Phelps is one of the financial advisers that volunteered to help.  He has an idea of what these survivors may be going through because he was at the Route 91 festival when the shots started falling on the crowd.  He is also a fee-only financial planner that has volunteered to help other survivors.  He explained the need for assistance as critical because  “[l]ife has been hard enough on all the survivors and all the victims. I can’t tell you how many times in my 23 years that they’ve been taken advantage of or they’ve been steered the wrong way and that’s why this project is so important.” Explaining the critical need for help, he said that “[w]e can’t let that happen to these people because they’ve already been through too much.”

The good news is that we’ve got a project together to help some people get good advice in the aftermath of the shooting.  The bad news is that there are 10,000 Americans turning 65 every day.  Most are financially illiterate.  We don’t have resources in place to help them make good investment decisions before retirement or to manage their savings through retirement.  It’s an enormous, slow-moving problem that continues to play out.

Quick Update.  Financial Planning Magazine is also covering the project.