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CFSI: Turning Greater Financial Knowledge Into Better Habits

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It’s a given that improving the financial knowledge of a larger segment of the population is critical to getting more Americans to participate in their own financial planning. But increased financial literacy and education is only a part of the solution for greater financial empowerment, says Joshua Sledge, director at the Center for Financial Services Innovation (CFSI).

What’s even more important, he says, is changing peoples’ financial behavior, particularly those in the lower income segments of society, because even with greater access to financial knowledge, old habits – putting off paying down debt, not saving properly, living from paycheck to paycheck, to name a few – can sometimes die hard.

“Just because you have the knowledge doesn’t mean you always do what’s right,” Sledge says. “What we need to do is improve financial capability, to provide information, products and tools that can not only help people learn about the importance of financial planning, but help them change their behavior by putting their knowledge to work.”

Since 2010, CFSI has been working closely with partners like the Citi Foundation, Charles Schwab and Bank of America, among others, to support initiatives designed to result in behavioral shifts that will enable a greater number of Americans to properly plan their finances.

One of the organization’s major undertakings is the $400 million Financial Capability Innovation Fund, which invests in grassroots organizations that are making a difference in the financial lives of middle- and low-income groups across the nation by increasing their financial capabilities in different ways.

The innovative efforts of these groups – the Financial Capability Innovation Fund has invested in 13 ventures — are resulting in the kind of behavioral changes that are required to bring about greater financial health and well being for more Americans, Sledge says.

He believes it’s important for financial advisors to get to know the work of organizations like Clarify, a Philadelphia-based credit counseling group that devised a simple yet effective way of sending text message reminders to people about bill payment dates. The frequency of the text and the framing of the text as goal-oriented resulted in an 8% increase in people more likely to meet monthly payment schedules, he says, but more important than the resulting behavior shift is that people tend to trust organizations that can get them on the right financial path, and that trust can prove key to advisors looking to broaden their client base. 

Today, more Americans are in need of financial advice but it is often hard for advisors to reach out to non-traditional client segments and harder for people, even those with improved financial situations, to access advisors.

“If advisors can partner with non-profits, there’s a great opportunity there because the non-profit is such a trusted source and families listen to them because they believe they have their best interest at hearts,” Sledge says.

“Financial capability should be everyone’s responsibility and these organizations are also the best positioned to know their client base and can help create a bridge for an advisor that can help the advisor gain access to low and moderate income communities they’d otherwise find difficult to access, but that could really use the financial planning help.”

As part of its continued efforts toward ensuring greater financial capability and participation, CFSI recently launched a Financial Solutions Lab with JP Morgan Chase.

Over the next five years, CFSI is dedicated to identifying, testing and scaling financial innovations created by tech startups and other ventures that can substantially improve the lives of Americans.


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