Probably nothing comes as close to motherhood and apple pie in the realm of economics as financial literacy, a wholesome concept that seemingly everyone can embrace.
Yet surprisingly, the cause of financial literacy has taken a bit of a beating in recent years. Last week, the hoary British newsweekly The Economist published an article (“Teacher, Leave Them Kids Alone”) pointing out the disappointing results of such programs.
The article cited research by Lauren Willis of Loyola Law School in Los Angeles suggesting that the checkbook-balancing-type curriculum these programs offer may be no match for the complex products and decisions consumers must make.
Harvard Business School professor Shawn Cole and Wellesley economics professor Gauri Kartini Shastry have also dogpiled on financial literacy. In a December 2010 paper, the two scholars showed that state-mandated high school financial literacy programs failed to encourage savings behavior, a basic goal of such programs.
To be sure, there are many scholars who have positive things to say about the efficacy of financial literacy programs, like Wharton’s Olivia Mitchell and George Washington University’s Annamaria Lusardi.
While the academic war rages on, AdvisorOne readers likely feel they are on the front lines of the financial literacy battles they confront daily in their efforts to help clients plan for various lifecycle goals. In that spirit, we asked Merrill Lynch advisor Aubrey Lee Jr. (left) how financial literacy rates in the daily conduct of his Detroit-area practice.
A financial advisor for nearly 26 years, Lee has addressed financial literacy issues on a volunteer basis, usually in the context of high school “Career Day” type events, though he has specifically addressed long-term financial planning issues as well.
Nevertheless, it is in daily interactions with clients where the advisor, who heads the Aubrey Lee Jr. Group in Merrill’s Novi, Mich., office, most regularly confronts literacy issues.
“When I work with clients, I think it’s important to be on the same side of the table in terms of my clients having a basic knowledge around how stocks work, how bonds and fixed income work…I’m least comfortable when a client says, ‘Aubrey, I trust you, just go ahead and do it.’”
The academics have various ways of measuring financial literacy, but Lee’s got his own definition based on his many years dealing with the needs of his Midwestern clientele. It boils down to having a common vocabulary to discuss financial issues.