A long-ago boss often reminded us that our business obligations extended to five constituencies: our clients, our employees, our community, our business partners (vendors and suppliers) and our industry.
Most professionals accept the first four duties instinctively but fail to acknowledge that we also have a responsibility to enhance the industry in which we make our living. Perhaps advisors mistakenly believe that serving our profession just helps our competitors.
In reality, the pioneers in our business have given us many gifts including technology innovations, enhanced means of investing, effective and efficient packaging of investment solutions and new approaches to financial planning that have been transformative for our clients. Other successful leaders have elevated the standards of practice and the focus on consumer rights.
What will we pass on to the next generation of financial professionals? A cynic might outline our legacy as a distrusting investor, a suspicious regulator and a large population of college graduates who would rather do anything other than enter this business.
Financial services has brought the wrath of consumers, regulators and legislators onto itself, not just because of the malfeasance of a few, but because we stood by while schools graduated millions of students who lack a foundation in personal economics. As a result, many uninformed people have been burned by the unscrupulous and spurned by potential employers, leaving a taint on our industry’s reputation and a stagnant talent pool for our future.
I first raised this issue formally in 2014 at Bob Veres’ Insider’s Forum and again that year at Pershing’s Annual Insite Conference. Allow me to share my premise.
I believe that providing students with a strong personal economic foundation will prepare them to make fiscally sound decisions throughout their adult life; that empowering the financial services community to help establish personal economics programs in high schools and grade schools will positively impact the reputation of our business; and that a focus on personal economics before college will induce many of the next generation of graduates to consider financial services as a career choice, thereby helping to relieve the chronic advisor shortage.
Consider these facts:
Sixty percent of states have few or no requirements for personal finance education in high school, according to the Champlain College Center for Financial Literacy.
Only 14 states require a course in personal economics. Anecdotally, where schools make it an elective, it is difficult to find qualified teachers and sufficient students to fill the classes.
Yet 85% of American parents believe that financial education courses should be a requirement for high school graduation, according to DailyFinance.com.
Meanwhile, the financial services industry has become the least trusted industry in the world—and has stayed in this position since 2008. According to the Edelman Trust Barometer in 2014, financial services companies are less trusted than oil, media, energy, alcohol, tobacco, government and automotive companies.
Further, we face a mass decline in college students choosing to enter the advice profession. Where will we find the next generation of talent when only 12% of new professionals are entering the industry directly from college? There are 50,000 fewer financial professionals today than in 2008, yet there is a growing supply of individuals and families who seek financial guidance. That’s good news for those who remain standing, but not sustainable for the long term of the business.