Information overload

By Nancy Turner | November 1, 2010 | Last updated on November 1, 2010
3 min read

Virtually every day some new investment product, economic issue or financial woe makes the lineup on the evening news, the front page of the paper or the latest issue of a trusted magazine.

The result: Clients are literally bombarded with information — creating, for many, a state of fear and confusion.

So what’s an advisor to do? One school of thought suggests there needs to be more client education to increase the level of financial literacy. But is that really the answer?

According to some advisors, maybe not.

For this month’s Final Words, we took to the forums to see what your peers are saying about the issue. Since the forums are anonymous, we don’t know who’s speaking, but we do believe these frank comments capture a universal advisor voice.

So here’s what your colleagues are talking about:

Redirect the focus

“Some food for thought: With all the information we have available to us, is financial literacy the answer to all of our financial problems? Quite frankly, the concept of spending less than you earn and saving is nothing new, so what more is there to learn?

“Instead of task forces being assembled and emphasis being placed on financial education, why don’t we focus on identifying how people relate to money? Let’s help people identify the money disorder they have or the money scripts that guide their lives. Once people understand how they relate to money, then we should educate them about finances.”

Living within your means?

“I had an epiphany the other day: I’ve been having a back-and-forth with a friend about living within one’s means.

“She keeps telling me she and her husband do in fact live within their means, but I know they have major debt, continue to buy cars and things, and pay for all of their child’s post-secondary education.

“I finally realized that living within your means or deciding if something is affordable to me means, ‘Can I spend a dollar on something without using credit and also still meet all my financial goals?’

“But to her and millions of other people, the question of affordability is defined by whether or not their current cash flow will allow them to service the debt they would require to acquire the thing they want to have.

“In other words, if someone is willing to approve credit based on their debt-to-service ratio, they can afford it and are living within their means.”

The die-broke philosophy

“An excellent observation, and so true. I have friends in Manhattan, Toronto, Hawaii, and Los Angeles who live on credit. “They’ve all bought into the die-broke philosophy. “Banks and credit card companies are raking in millions upon millions of dollars at 15% to 28% interest. They’re fuelling this inevitable crisis.”

Too much info available

“My own belief is there’s too much information available already, and it seemingly makes no difference to the success or failure of financial well-being. The real issue seems to be the psychology of money.

“I have clients with very limited knowledge (except for what I tell them) who seem to understand that they need to diligently save in order to get ahead. With a little help on investment selection, they’re well on their way.

“On the other hand, I hosted a public seminar earlier this year featuring a well-known financial guru and filled the venue with people who can’t get enough of the latest info on investments, markets, etc. But when it comes time to taking action, they’re non-starters.

“They just soak up all this financial information as a psychological block to actually making a decision to move forward. I keep hearing excuses that they ‘need to study this stuff some more’ before they do anything.

“In the meantime, what they’ve managed to acquire sits in a bank account earning nothing.

“I’m going to concentrate on people who get it and are ready and willing to take action. They’re easy to work with and appreciative of the education I provide them along the way.”

Nancy Turner