“We do not live in an economic environment that will permit mass personal financial progress, no matter how well meant the guidance or financial advice. As a result, the success stories offered up by the gurus of personal finance [are] individual victories in a society sliding economically downward.
The vast majority of us are not messing up deliberately. Life has a way of happening. College needs to be paid for, bouts of unemployment are not timed and their length cannot be predicted, crises from health-related emergencies to divorce do not announce themselves in advance, and, thus, are next to impossible to plan for. Even if we could somehow see our future, there would be no way to reliably invest for and save up for it. For despite what we were told, the stock market, housing market, and all other investment markets were not a guaranteed investment and savings scheme, and no amount of saying otherwise was going to change that.
Personal finance can’t do it all. As an adjunct, it can make a valuable contribution, allowing us to plan, to get out of and stay out of debt, and to hopefully better our position when the time comes for retirement and other long-term goals. But there is no personal finance or investment scheme that can fully protect us from downward spirals or plain old ill luck.”
An Ignored Message Takes on New Urgency
Olen did not write these words in April, when the U.S. unemployment rate peaked at 14.7 percent. And she didn’t share these thoughts in the past few weeks, as many parents again embraced for a school year in which they excel neither at work nor at homeschooling. Rather, she wrote these words in 2012, in her book, Pound Foolish.
These paragraphs struck me as accurate and necessary eight years ago. But I, like many financial professionals, essentially just treated them as an interesting perspective to keep in mind during the course of my work. In 2020, though, Olen’s message — and more recent, similar criticisms from other journalists – should serve as a four-alarm wake-up call.
The Definition of Financial Planning
Within the financial services industry, financial planning has long served as an afterthought to investing and insurance sales. Only in recent years have financial advisors even focused their education and practice elsewhere. As a result, young adults now have access to professionals who specialize in offering tactical help with the biggest barriers — student loan debt, housing prices, child-care costs — to achieving their financial and life goals.
Many people still view this evolution in financial planning as novel and commendable. In fact, many consumers remain unaware that such help now exists. For those who do find these financial advisors, we can help them avoid financial mistakes, evaluate trade-offs effectively, and pursue their goals. We can suggest student loan repayment plans, 529 plan funds, and salary negotiation tips that may make a big difference in someone’s financial circumstances.
What It Means to Act in Our Clients’ Best Interests
But that’s not enough, certainly not anymore. The time for patting ourselves on the backs for achieving this progress has passed. And to pretend otherwise — to just bury our heads in budgeting spreadsheets or retirement projections — seems to conflict with our commitment to always act in our clients’ best interest.
Tactics can’t make up for the lost lifetime wages when one partner (likely a woman) leaves the workforce due to insufficient paid family leave. Tactics can’t save an individual for whom losing a job also means losing access to high-quality, affordable health care. And tactics can’t help a Black family to overcome racism in the housing market, workplace, and other parts of our society that prevent them from building wealth.
The Reality We Face
In a refreshingly candid blog post last month, Elyssa Kirkham wrote:
“I’m not going to pretend [right now] that there is a lot you or I can do to change our situations. I’m not going to act like I can work well without child care, or that my freelance income hasn’t fallen by 80%. I’m not going to ignore the fact that many people are out of a job and that unemployment benefits are running out this month. I can’t turn my back on the fact that many people are months behind on rent and praying that eviction suspensions hold.”
She asked, “What advice, information, or tips could I offer that would offset the devastating financial hardships so many of us are facing?” She left the question hanging, as many of us can relate to the limitations of personal finance right now.
Becoming an Advocate to Ensure our Financial Stability
My initial response — however unsatisfying and incomplete in this moment — is to vote this fall. Request your mail-in ballot and educate yourself on the policies that we need to fix, including those that impact our personal finances. From there, become an advocate — and demand the financial services industry advocate – for real, lasting change.
As a starting point in my own efforts, I’ve created a new Vote page on my website. I include links to voting resources and highlight the systemic issues that seem to most impact my clients’ finances, with ways to get involved and take action. The list certainly isn’t comprehensive and will remain a work in progress, but it’s designed to serve as a reminder. Financial planning, however we may have defined that term previously, is no longer complete without advocacy.
About Kevin Mahoney, CFP®
Kevin Mahoney, CFP® is the founder & CEO of Illumint, a Washington, D.C.-based financial planning company for young couples. He specializes in navigating the new financial decisions that arise during our late 20s and 30s, such as repaying student loans, buying a house, & investing savings. Kevin also works with employers and brands on a variety of Millennial personal finance events and projects, including speaking engagements, financial wellness programs, and sponsored campaigns.