Wednesday, July 19, 2017

Millennials and Retirement

Financial Advisor Magazine looks at a survey by BMO Wealth Management of Millennial financial literacy.  The news is not great.

More than one-third of the respondents thought that retirement was too far off to be a priority. Another 22 percent of respondents said that they would rather pay off their accumulated debts before saving for their retirement.
As the Wall Street Journal pointed out in the last post, the best solution?  More financial literacy in schools. 

Sunday, July 9, 2017

Teen Financial Literacy Not Improving

There is a guest column in the Wall Street Journal today speculating as to the reasons why teen financial literacy is not improving.

While the reasons behind the lack of progress are interesting, the solution is too.

Key point:
The most scalable solution to this problem would be to teach financial literacy in school. We need students to be financially literate before they make financial decisions, such as whether to go to college and how much to borrow to finance that education. We also must open access to financial education to a broader group of young people. If we fail to do this, not only will our youth start on an unequal footing, but their inequality gap will continue to grow.

Wednesday, June 28, 2017

When to teach financial literacy? Answer: Early

Today the Associated Press reports on the latest financial literacy research showing US teens lagging behind other countries.  In pointing to solutions, the news service notes that the earlier parents teach money skills, the better.

Key point:

Teaching kids good financial habits can begin when children are around 5 years old, or when they typically begin asking for an allowance, according to a guide for parents published by the National Endowment for Financial Education (NEFE), a nonprofit focused on financial literacy.

Wednesday, May 17, 2017

A Look In at Life Insurance Licensing

From time-to-time this Blog looks at state insurance licensing through the lens of underserved communities' access to the financial advice and products necessary to achieve financial security. Research suggests that when there are fewer unnecessary roadblocks standing in the way of financial professionals, more communities will have access to financial advice and products.

On one front this year, there is very good news.

Fewer and fewer states are requiring candidates to pass TWO tests for ONE insurance license.  On March 1, 2017, Nevada followed in the footsteps of Virginia, Washington, New Jersey and others when it made a decision to score its General and State exams as one. Colorado is also expected to make a change at some point in the near future.

If experience in other states holds in Nevada and Colorado, the states will see less disparate impact as a result of this change and more financial professionals in communities throughout their states.

Why do some states require two tests?  
The answer is not clear.  One theory is that two-part exams stem from an era when states tested non-resident licensees and administered tests on paper.  At that time, it made sense to have a modular exam, so non-residents could sit for one portion and not have to take the general test as well.  In today's world of reciprocity and computers, the need for two exams no longer exists.

Importantly, the National Association of Insurance Commissioners (NAIC) has found using two tests does not increase consumer protection.  Instead, as one would expect, requiring two exams for one license actually increases failures.  Here's what the organization's handbook says:
Preliminary review of pass rates indicates a tendency for more candidates to fail in the states that require two-part exams. There is no evidence that two-part exams increase consumer protections or that the states that administer one-part exams license producers who do not know applicable state law. The states are encouraged to move to one- part exams to allow for more success among candidates without jeopardizing consumer protections.,
The map below shows the current state of play.  Fewer and fewer states are relying on this outdated practice and consumers stand to benefit.

* Updated 7/31

Thursday, March 2, 2017

Snapshot - New York Insurance Licensing in 2017

The New York Department of Financial Services (DFS) administers a number of exams to those who would like to work as insurance agents in New York.  According to reports released by DFS and summarized in the charts below, the pass rates on many of the exams have fallen in recent years.

Licensing exams are an important part of consumer protection, but judging from the declining pass rates, something appears to have changed in New York.  

Should stakeholders be concerned?  By digging deeper into the data, the answer appears to be "yes.' 

Screening Diversity? 
National studies show African American and Hispanics combined account for 12% of insurance agents, despite representing over 30% of the population. Other studies show that Hispanic households in particular are under-insured and less likely to know an agent.  The charts below show that agents from the communities that are most under-represented in the insurance industry are least likely to get a license.  

Is there a link between the studies and the DFS data? 

Friday, February 3, 2017

Kudos to Iowa

According to the Marshalltown Times-Republican, there is a bill introduced in the Iowa House that would require financial literacy in Hawkeye state high schools.

The specifics:
House File 28 — High School Financial Literacy: This bill requires high schools to teach financial literacy courses to better prepare Iowa’s students following graduation. These types of classes will promote important skills and concepts for adult life like money management, college planning, savings and investments, credit and debt, and insurance coverage. A financial planning course taught to University of Northern Iowa students has been credited with lowering the student debt levels for their students.
Here's a link to the bill.  Iowa lawmakers should be congratulated for tackling the problem.  It is legislation worth watching.