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October 01, 2008 at 04:00 AM
With gas prices and foreclosures at an all-time high, debt levels soaring, and paltry savings rates that Americans are infamous for, consumers are in dire need of financial help–so much so that financial education is becoming an industry. Yes, an industry. This dawning of a new industry is best evidenced by the fact that numerous financial education firms have popped up over the last several years and because venture capital firms are eager to buy stakes in such companies. Liz Davidson knows this first hand. The financial education company she founded, Financial Finesse, was recently approached by a VC firm looking to grab a share of her business (she declined the offer).
More and more employees, too, are demanding financial education services at the workplace, and companies are answering their call. “There are some highly intelligent, wise business leaders who recognize that basic financial education is good for the employees, and [the company's] bottom line,” says Thomas Garman, president of the Personal Finance Employee Education Foundation (PFEEF).
Legislation is also supporting financial education. Case in point: the Pension Protection Act (PPA) of 2006. “If you get really deep into the [PPA], the interpretation could be that it’s pro advice as opposed to education,” says Davidson with Financial Finesse, “but what [the legislation is] doing is creating a greater awareness of the importance of communicating with employees about their investment options and providing them with guidance and information.”
More and more financial professionals also prefer these days to provide financial education instead of pushing products. “The whole financial services field is evolving and changing,” says Alice Whinnery, president of the LFE Institute in Springfield, Missouri, which provides workplace financial literacy workshops via various types of financial professionals. “A lot of our instructors and money coaches are looking to use their financial expertise but do it from an educational viewpoint, not product sales.” Indeed money coaching, Whinnery says, is actually an “expansion” of financial education and has become an industry unto itself.
Whinnery says recent stats from the Federal Reserve found that employees spend 28 hours per month on the job thinking about their finances, asking employer’s questions that many times they can’t answer, and researching ways to address their financial concerns throughout the year. “This is prompting companies to say, ‘How can we get the employees some help?’” Whinnery says. “Employers are sponsoring money coaching for employees not only because it provides ‘Safe Harbor’ protection under ERISA, but because it’s so effective at keeping employees’ focused on their jobs.”
Indeed, financial education is “so much more than planning for retirement or investing,” she adds. “The biggest challenge is not where to invest their assets, but how do they make it past the next payday and where can they find money to save and invest.” That’s why money coaching “has emerged as the solution,” she says.
The Mainstreaming of Money Coaching?
Whinnery says LFE’s corporate clients started asking for money coaching services about 10 years ago, but “there just wasn’t an economical way to offer it back then.” Today, however, there is: via e-mail–because it’s not only inexpensive, but confidential and time efficient. Because there’s such demand for money coaching in the corporate world, she anticipates it will become mainstream within the next five to seven years. IBM, she notes, recently committed $50 million (over a two-year period) toward money coaching and secured advisors from Fidelity and Ayco, an insurance company.
LFE was set to roll out in early September an extensive 30-module program that once completed results in participants being awarded the Certified Workplace Money Coaching (CWMC) designation for money coaches. The company created the CWMC designation “because there just wasn’t anywhere financial professionals could go to learn the specialized field of workplace money coaching,” Whinnery says.
