To paraphrase Will Rogers, the banks are not concerned about the return on their money; they're concerned about the return of their money. Scott Tucker
-these programs do not prevent investors from becoming victims of fraud;
p.40-For example, the National Association of Securities Dealers found elderly consumer fraud victims to be more financially literate, on average, than elderly non-victims: A major hypothesis going into the survey was that investment fraud victims do not know as much about investing concepts as non-victims and would therefore score lower on financial literacy issues. In fact, the study found the exact opposite: investment fraud victims scored higher than non-victims on eight financial literacy questions.271 Rather than the conclusion supported by the data, that financial literacy is positively associated with the incidence of fraud, the study asserts "[t] his finding suggests that financial literacy programs are necessary but probably not sufficient to Prevent Fraud." 272
-they do not ensure that investors master the increasingly complex products that Wall Street puts on the market.
- They may give a false confidence among investors who falsely believe they can analyze the risks and understand complex products.
p.55 In the world that financial literacy education advocates, consumers are but wealth maximizers, looking out for their own financial interests rather than shared societal and civic goals. Covertly, the model fool consumers into thinking they can master the financial services market, while placing blame upon them for their failure to do so, deflecting political pressure for change.
- They provide an opportunity to blame investors (why did not you attended to find out more), which can remove the pressure for legislative or regulatory changes that better protect investors.
p.43-Now that financial products are so complex and fluid that few can understand them well, financial literacy education is a necessary detour on the path to moral blameworthiness. Given the vagaries of the stock market, a consumer's losing investment strategy would be difficult to characterize as a direct result of her Irresponsibility, laziness, greed, or abject stupidity. But with the education model, she can be blamed for failing to become sufficiently expert to handle her retirement savings. Financial literacy education as a policy tool blames the consumer for her own plight, but shifts from an indictment of raw moral character traits to the consumer's "choice" about whether to attend classes and use the information and skills purportedly taught.
Financial literacy is an
amiable smokescreen-a way to blame consumers and head off reform that will
really make a difference. Eric Schurenberg
Conclusion
In principle, we can only support initiatives designed to increase financial literacy. In theory, these initiatives should lead to increased financial knowledge and subsequently to better financial decisions. There seems to be broad consensus that they encourage and result in increased savings, which if true would be quite a feat.
But do they make you a better DIY investor? The aim of our site is to provide information to help people with the required profile (see the Independent investor: our five prerequisites
on our website) to become independent investors. But we note that many programs advocate approaches to investing that appear to be contrary to the lessons of market efficiency, and the resulting implications: the futility of trying to beat the market by selecting individual stocks or investing in high cost actively-managed mutual funds.
Our final comment: if novice investors, young or mature, rely solely on the information in such programs they may end up adopting a behavior that is expensive in costs and produces below average returns, which would be regrettable since products exist to realize market returns with minimal effort, knowledge and expense.
