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Why clients need to be ‘money smart’

by Jul 3, 2019Advisor perspectives

Why clients need to be ‘money smart’

by Jul 3, 2019Advisor perspectives

Successful financial advisors see financial education for their clients as critical to the overall planning process—helping to drive high levels of client satisfaction.

Did you know that April was Financial Literacy Month?

And that March 30 through April 6 was Money Smart Week?

Financial Literacy Month was designated officially by the United States Senate in 2004, via Resolution 316, during the administration of George W. Bush. (Interestingly, Barbara Bush was passionate about many literacy causes and started the Barbara Bush Foundation for Family Literacy in 1989.)

Money Smart Week is a national education campaign designed to help consumers and investors better manage their personal finances and develop a greater understanding of a variety of financial concepts.

Started by the Federal Reserve Bank of Chicago in 2002, the program consists of public and private partner organizations offering thousands of free classes, seminars, online educational programs, and other activities. In 2017, over 1,000 libraries from 50 states participated, along with many financial, government, and educational institutions.

In a blog post in March 2018, Cindy Ivanac of the Chicago Fed wrote, in part,

“We all seem to love … the idea if people only knew more about their personal finances, they would avoid mistakes. It is true that there is a knowledge gap on a range of issues. However, it is also true that knowledge alone has not proven to change people’s behaviors. Just think about the last time you counted calories. It wasn’t a knowledge gap that you struggled with; it was likely a behavior gap. So, we are left with the messy world of a lot of financial education content and the associated difficulty of evaluating its effectiveness in changing people’s behavior. Money Smart Week partners nationwide are working to solve these challenges.”

There is good reason for the institutional concern over financial literacy in the United States.

Gallup research from 2015 shows that almost half of all Americans do not grasp basic financial literacy concepts and that the U.S. ranks 14th in the world in financial literacy.

Many of the financial advisors I have interviewed for Proactive Advisor Magazine consider financial education to be one of their top priorities in working with clients.


Several financial topics come up frequently as they describe the issues they discuss with clients, such as the following:

One savvy advisor we interviewed from Wisconsin, Tony Hellenbrand, holds frequent educational seminars for prospective clients and the general public. His story about the “icebreaker” he uses to start his seminars relates directly to the issue Ms. Ivanac referred to above—the wide difference between the availability of financial information and how that translates to actual knowledge and sound behavior by financial consumers.

Tony Hellenbrand • Appleton, WI
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“I have a warm-up exercise at the beginning of all of my seminars and speaking engagements that is very effective. I first ask the people in the room to indicate how they think they will do on a basic 10-question, multiple-choice quiz about investing and financial-planning issues. They have to write down the score they think they will get. I emphasize that they will not be asked to turn in their answers or be graded.

“Next, they have a few minutes to take the quiz. Here is a sample question:

“Over a long period of time, which has a bigger impact on your investment results?
A. The negative impact of missing the 10 best days of the S&P 500.
B. The positive impact of missing the 10 worst days of the S&P 500.

“Although they don’t have to turn in their quiz, from the many people who have approached me after my talks (and from papers left behind), I typically see an expected score of 9 or 10. The typical achieved score is usually between 2 and 5. This represents at least a 100% overestimation of ‘financial competence.’

“After this exercise—when people see how they have scored compared to their expectations—they are usually more open and engaged. This sets the tone that this will be an educational presentation that is focused on teaching meaningful financial concepts that they may not have been exposed to before. (By the way, the answer is ‘B.’)”


Many other advisors we have interviewed have their own take on the importance of financial and investment education for their clients and prospective clients. Here, in abbreviated form, is a quick look at what several advisors have told our publication.

What do financial advisors say about the importance of financial education?

Grace Himmelright • Eastlake, OH
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“Knowing how money works can positively impact just about every area of people’s lives. I believe that when you can change a person’s financial literacy, you can change that person’s life. I am driven every day to help families build a future that matches their goals. I am a true believer in the power of financial education and empowering people to be knowledgeable about financial decision-making. …

“My goal by the end of the planning process is for each client to be able to answer three questions: (1) What are they doing? (2) Why are they doing it? (3) How is it going to help them proceed more successfully on the path toward their goals? These goals should be clearly articulated and quantified wherever possible. I am not necessarily looking for the detailed answers that a professional might give, but we will not proceed with implementing a plan until I am convinced the client has a firm grasp of these issues. It is very important in our process to explain financial concepts and the role of various tools and strategies to clients.”

Tedd Bradley • Lakeville, MN
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“When thoughts of retirement start to surface, most people are at the very high point of their lives in terms of earning power. They start to contemplate a future without that job income, when they are not adding to their investments, and, instead, will start depleting their lifelong savings and investments. That can be a scary scenario.

“I see my challenge as helping clients unravel an equation that doesn’t seem to be working in their favor. I want to help provide the financial education for retirees and potential solutions that will help them face retirement and their financial future with more confidence than they thought possible. I conduct regular seminars and workshops for the public on the topics of retirement planning and Social Security strategies.

“We cover topics such as life planning for retirement and thinking about objectives; determining retirement needs, expenses, and income; identifying common retirement mistakes; managing distributions; estate planning; investment alternatives; and risk management and asset protection. This comprehensive course helps pre-retirees and retirees see the big picture in planning for their financial future.”

Judson Gee • Charlotte, NC
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“I like to use an analogy with clients related to advances in automotive technology. I ask them if they would rather be taking a long trip on busy highways in a Model T, which has essentially two gauges, one for fuel and a speedometer. Or would they rather take that trip in a Tesla, which has not only all of the most modern safety features and incredible fuel efficiency, but also active driver warning systems, easy access to GPS technology and traffic alerts, and the latest driver technology in every regard. Which vehicle do they think is going to provide a more comfortable, safer, and more interactive driving experience that can help avoid the many types of hazards one faces on the road today?

“The same concept is true for their investment portfolio. We use managers who employ strategies that are computer- and algorithm-driven and modern in every sense of today’s investment world. They have advanced indicators and trend-following techniques that seek to keep a portfolio out of harm’s way. Our educational process concerning this sophisticated approach to portfolio management is very important to our practice and our clients.”

Bryan Nakamoto • Honolulu, HI
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“Taking action also means having an educational focus at the forefront of everything we do for clients. I want our clients to be well-informed partners in the decision-making process when it comes to building a financial and investment plan. A big part of this is managing client expectations from the outset of the relationship. By thoroughly, yet simply, explaining the intended course of action, the rationale behind it, potential pitfalls, the time horizon involved, and the benefit to the client, we can help prevent emotion-driven decision-making.

“This becomes especially important in an investment environment when a market downturn occurs. The client should thoroughly understand the long-term strategy we have jointly constructed, understand the parameters of how it will likely perform in both favorable and unfavorable market conditions, and be aware of the risk-management strategies being used for their portfolio. Knowing those parameters going into periods of market stress makes it much easier for clients to stick with their investment plan.”

The opinions expressed in this article are those of the author and do not necessarily represent the views of Proactive Advisor Magazine. These opinions are presented for educational purposes only.

This article first published in Proactive Advisor Magazine on May 17, 2018, Volume 18, Issue 6. Some content has been updated to reflect the most current data.

David Wismer is editor of Proactive Advisor Magazine. Mr. Wismer has deep experience in the communications field and content/editorial development. He has worked across many financial-services categories, including asset management, banking, insurance, financial media, exchange-traded products, and wealth management.

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