Helaine Olen has begun an important discussion in the world of money: Is anybody's advice worth paying for?
The author's new book, “Pound Foolish: Exposing the Dark Side of the Personal Finance Industry,” has rattled quite a few cages since it was published in January. It's also gotten a lot of attention, including glowing praise from The Economist. We sat down with Olen at our studio in 30 Rockefeller Plaza recently. (You can watch the interview by clicking “play” above.)
Olen points out the folly of simplistic mass-market advice, such as the notion that forgoing a latte every day will make one a millionaire by retirement. She's an equal-opportunity critic, poking fun at everyone from late-night TV stock pickers, to financial gurus who make millions writing books, to newspaper business reporters who have no credentials for doling out advice.
In fact, that's how Olen started her career -- writing "Money Makeover" columns for the Los Angeles Times, where she matched up eager consumers with even more eager finance wizards, and described the advice that was doled out. Ten years on, these stories still gnawed at Olen, as she wondered if the consumers were genuinely helped by the advice. Her book's most telling moments detail meetings with these sympathetic characters, who unsurprisingly have not fared better after hearing the normally high-priced money wisdom.
Olen gets some cheap laughs by going back in time and showing mistakes made by financial prognosticators -- citing Suze Orman's advice to her fans that real estate was the best investment. But something more nefarious is at play in American culture, Olen says, when the myth of the latte millionaire persists. The subtle message from many financial gurus is that consumers simply have to suck it up a little, ditch the extravagances and everything will be fine. That's just not true, she argues.
"We believe very deeply in this country in the myth of Horatio Alger, which is ... this idea that we can do it all by ourselves," she said. "And that's just not true." Harsh economic realities, such as skyrocketing housing and health care costs, play a bigger role in our financial future than our ability to skip pricey coffee, Olen says.
It's undeniable that much personal finance advice is overly simplistic. But it's also undeniable that Americans are terrible at math, and many don't want to take even the simplest steps at improving their financial futures. So it may not be fair to criticize those who give simple advice to consumers who seem to want it. And behavioral economists have produced research for years showing that financial education doesn't do much good anyway, because people tend to take the path of least resistance when making decisions on 401(k)s, mortgages and so on. They prefer nudges from companies and governments, such as automated enrollment in the most beneficial retirement plans.
What's the harm if financial gurus provide that nudge of inspiration to pay down debt or build up savings for someone who otherwise might not act? Olen didn't have a good answer. Still, her critique is eye-opening, particularly when readers are confronted with tale after tale of advice gone bad.
Taken as a whole, “Pound Foolish” is a good reminder that you are as qualified as anyone else to control your financial future. As the saying goes, if you want something done right, you should do it yourself. You'll be saving a lot of money in the process, too.
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