Review: Pound Foolish: Exposing the Dark Side of the Personal Finance Industry byHelaine Olen
BY SAM KNIGHT Bloomberg News
Sunday, December 30, 2012
12/30/12 at 3:54 AM
Helaine Olen thinks Americans have lost their financial minds.
Name your idiocy and over the last 30 years otherwise sensible people have done it. Gorged on credit cards. Jumped into "no-money down" mortgages. Frittered away 401(k) plans on day trading.
An entire industry exists to stop this from happening. In 2011, there were 319,456 financial advisers working in the U.S. - a field forecast to grow by 30 percent over the next decade as baby-boomers enter retirement, worrying whether they have saved enough along the way.
If only this "personal finance industrial complex" was truly on the side of its clients. As Olen makes clear in "Pound Foolish," that is often not the case.
"So much of the advice we receive is suspect, but in our desperation we take it anyway," she writes, patiently skewering the industry she has been writing about for almost 20 years in the Los Angeles Times and elsewhere.
She describes how the business of selling financial advice has grown with, and fed off, other powerful currents in American life.
Olen exposes the fallacies spun by some of America's current personal-finance celebrities.
Take "The Latte Factor," the money-spinning idea of David Bach, a former senior vice president at Morgan Stanley. The theory goes that if we forgo our daily $5 trip to Starbucks and invest the money, we could end up with a stash of $2 million by the time we retire.
Flat wrong, Olen says. A more likely (though still optimistic) outcome is a nest egg of around $170,000. "Not chump change, for sure, but way short of a million dollars," she says.
Olen takes us into the depressing world of free lunches and dinners offered to panicked, retirement-age Americans to pitch them "investment opportunities." She finds a plethora of fees, commissions, dizzying annuities and conflicts of interest.
The central promise of much personal financial advice is alluring. It taps into the strong American spirit of practical can do-ism. "The backbone of the self-help movement is that you can do it. You. Singular," she says.
Its real power, however, lies in our absolute need for it. The unstoppable rise of the personal finance industry has coincided with an American era of stagnant salaries, withering pensions and staggering rises in the cost of education and health care.
"We were participants in a vast experiment, a hope that personal finance and investments would do it all for us," Olen writes. With 43 percent of the population now living paycheck to paycheck, according to Olen, is it any wonder that people have ended up making poor, desperate decisions?
Olen concludes by arguing for a broader kind of financial literacy, a conversation about income inequality and decent pensions.Original Print Headline: It's a matter of dollars and sense
‘POUND FOOLISH: EXPOSING THE DARK SIDE OF THE PERSONAL FINANCE INDUSTRY’
By Helaine Olen