With all the chest-bumping and back-slapping going on over the stock market’s comeback this week, it makes us appreciate even more the kind of finance experts who aren’t afraid to take a step back, look at the big picture, and tell everyone to calm down already.Helaine Olen is certainly one of those people. The writer behind the new book called “Pound Foolish: Exposing the Dark Side of the Personal Finance Industry
,” Olen tears down some of the biggest names –– and common pieces of financial wisdom –– in the business one by one.
“[My book] will tell the story of how we were sold on a dream –– a dream that personal finance had almost magical capabilities, that it could compensate for [stagnant] salaries, income inequality, and a society that offered a shorter and thinner safety net with each passing year,” she writes.
Needless to say, we were intrigued, so we called up Olen this week for a chat on how consumers may have been duped all along.
Here’s an excerpt from our discussion. We’ll post more later:
Business Insider: You make a case against following the gospel of gurus like Orman, Bach and Ramsey. You also point to pressing economic issues that are at the root of struggling consumers’ financial problems. But do you think seeking personal finance guidance is a bad idea –– even if it provides some sort of short-term relief?
Helaine Olen: The point of my book is not totally to give people financial advice. I just wrote this whole book taking down the industry and the first question [reporters have] is well, what else can people do? My point is obviously, there are people you can read like [MSNMoney’s] Liz Weston … and I still swear by ‘Personal Finance For Dummies.’ I think for what it’s worth, it’s the least intimidating thing out there.
But I think the greater problem is an economic problem. We’ve been turning to personal finance to fix an economic problem. You’re not gonna fix 325 million Americans in this sort of economy. Probably in a great economy, it’s not going to make sense. We need much greater help.
BI: There is some good financial advice out there, including plenty of experts who have championed low-cost, long-term investing, and the like. Part of the problem you address it that it’s Jim Cramer and other talking heads that get all the attention in the press, right?
HO: People really take this stuff seriously. I mean, they think what they’re watching on CNBC is [real]. I don’t know the process in which this works but people think they’re getting some kind of inside scoop. Even if somebody’s dumping mass information on CNBC, the second they say it, it’s no longer insider information. It makes it the definition of non-information.
You and I can sit there and say it’s sport and it’s funny, but you know people take this stuff really seriously.
BI: So should cable news stop letting these sorts of guests on the air?
HO: Well, they don’t have a functioning business model if they get up there and say, hey, 98 per cent of our readers would be better off investing in a low-cost index fund. So they don’t. And maybe they really believe they’re helping people. Regardless, we all know that work has prompted many ill-fated things over the years
BI: These days, the Consumer Financial Protection Bureau and the FTC have both stepped up when it comes to protecting consumers from cracks in the financial services industry. Do you think it’s enough?
HO: We desperately need more regulation and any regulation out there will help. Is enough being done? Absolutely not. My particular bugaboo at this point is to get the fiduciary duty extended. Retirement accounts are [regulated by] the Department of labour and [investment] brokers are regulated by the SEC. Oviously we need much more regulation.
Check back soon for more from our chat with Olen.