Tuesday, March 27, 2012

Another Call to Arms

Time's Moneyland column this week has a call to arms for proponents of financial literacy.  Looking at new data froth Council for Economic Education (OECD), the piece suggests financial literacy is losing momentum in states. Sadly, this isn't the first column like this.  We blogged about another one here.

What are the reasons?  The reason is not that financial literacy is not important.  But behind the scenes is a robust debate about finding out what works.
They also reflect recent criticisms that have surfaced in the U.S., where academics disagree as to what works as it relates to teaching kids about money. Some think kids don’t retain enough to make the financial education effort worthwhile. Indeed, a series of JumpStart student evaluations has shown that kids, on average, aren’t getting any smarter about budgets and debt. The JumpStart test is now being re-evaluated and recently missed its cycle. At the same time, the prominent financial education booster Lewis Mandell, a senior fellow at the Aspen Institute, even argues that such simple time-honored teaching tools as paying kids a weekly allowance may do more harm than good. He and others would prefer scarce resources be spent on financial education programs aimed at adults and in support of regulations that dictate things like clearer mortgage documents and credit card statements. This is largely what the Consumer Financial Protection Bureau is all about.
Thankfully, the column quotes one OECD official as saying financial literacy is not falling off the federal radar.  It may be time to redouble efforts to ensure it stays on state radars too.

Tuesday, March 20, 2012

Louisiana and Insurance Regulation

Jim Donelon, Louisiana Commissioner of Insurance, has published his 2010-2011 annual report.  For those interested in the effort to ensure underserved communities have access to affordable and appropriate insurance products, the report contains some unfortunate data.

For starters, page 30 shows that over half of those applying for a license to sell insurance in Louisiana will fail.  Why is this a problem?  It's a problem because research by LIMRA and others (including CFS) shows contact with an agent is perhaps the single biggest difference between those who purchase a product like life insurance and those who have the means but do not.  If we want to help more families achieve financial security, we must make sure all communities have access to qualified financial professionals.

Page 32 has more puzzling information.  The report shows that just 62 percent of those with a college degree who take the LA life agent exam pass.  Consider, for a moment, that in most states, over 70 percent of ALL candidates pass the exam.   What is it about the Louisiana exam that has even college graduates struggling?

Finally, the report also includes pass rates by race/ethnicity.  Looking at Table 15, one can see that those most likely to work in underserved communities are the least likely to get a license.

The report is a wake up call.  Like what we saw in the Texas post, numbers like this do not have to exist.  Other states have found ways to encourage more entrance into the profession without sacrificing consumer protection.  Remember the words of the Ohio Insurance Commissioner?  Ensuring fairness in licensing is in the best interest of consumers, job-seekers and society.  No no benefits when the pool of financial professionals is artificially and arbitrarily kept small.

Looking below at how Louisiana's pass rate stacks up against the rest of the region, one can't help but wonder if Louisiana regulations - like regulations we discussed in Texas - have gone too far and are hurting consumers, job-seekers and small businesses?

 Life Agent Licensing Exam First-Time Pass Rates 2011

Latest on Fiduciary

Late last year saw a big debate between the financial industry and the Department of Labor over the proposed redefinition of the fiduciary standard.  The DOL's proposal was so broad and so far reaching that even consumer advocates urged the department to put on the breaks.  As one said, the industry was "not exaggerating" that the rule would force broker-dealers to stop marketing and working with small savers.  At a time when more and more Americans are falling behind their savings goals, less advice is not a good thing.

Reuters is out today with news that the DOL is still working on its proposal.  Exactly when it will come out is not know. 

Friday, March 9, 2012

Is the Financial Literacy Movement Losing Momentum?

There is a great article over at CreditCards.com that looks at the movement to include financial literacy instruction in public schools.  Pay particular attention to the great info-graphic, which suggests the movement may be losing some momentum.

Perhaps more interesting than just the raw number of states teaching financial literacy, is the article's look at different strategies and the search for what works best.

Of note:
Experts are still searching for the holy grail of financial literacy education.
"We economists would love it if someone came up with a methodology to teach people how to use credit cards to maximum advantage and do it in high school, when we can reach them, with the notion that it will be retained until they're adults and using credit cards," says Mandell. "We haven't found any silver bullets, but that doesn't mean we're not looking."
Limited time in the classroom.  Teachers who are not "masters" of the subject.  Factors like patience that can't be taught.  The article lists a great number of challenges facing advocates who understand we need to help teach kids money skills.

While the overall message of a slow down in the movement is alarmist, the details suggest the debate is more alive than ever and the search for the best path forward continues.

Friday, March 2, 2012

Serving the Middle Market

Part of the CFS mission is to shine a spotlight on solutions that will put more working-class (or middle market) Americans in contact with financial experts who can help them get the tools that are necessary to finding financial security. These consumers are often overlooked as professionals chase higher commissioners and larger portfolios.

While there are a number of public policies to promote in this area, there is also a need for the industry to recruit and retain more agents who will work in the market.

New York Life announced recently a plan to add 3,700 more representatives in 2012. The company is putting a heavy emphasis on underserved communities in its recruiting.

From the press release:
New York Life actively seeks to hire women and individuals who serve ethnic markets. In 2011, 57% of the company’s hires in the field were women or individuals who represent the cultural markets. An additional recruitment focus for 2012 is men and women transitioning to the workforce from the military.