State treasurers around the nation are spearheading efforts to improve financial literacy. While they may have different experiences or motivations for their efforts to impact positive change, they all agree that more needs to be done to improve people’s financial knowledge and change consumption habits. The efforts of these elected officials, while commendable, fail to adequately warn the public about widespread finance industry scamming and could leave their constituents in harm’s way.
According to the Financial Industry Regulatory Authority (FINRA), about 66% of the American population is considered financially illiterate. This alarming statistic underscores the fact that financial literacy is more important today than ever, due to factors such as employers shifting responsibility for retirement planning onto workers, financial and technological innovation, the student loan debt crisis and an estimated 78% of Americans living paycheck-to-paycheck.
A high-level view of various states’ financial literacy programs shows a multitude of approaches in addressing these issues:
South Carolina Treasurer Curtis Loftis debuted the inaugural cohort of S.C. Financial Literacy Master Teachers in January 2020, a professional development and training program that utilizes financial incentives to encourage teachers to incorporate financial education into their curriculum and teach workshops to their peers. In addition to making financial literacy in K-12 schools a priority, Loftis is also well known for shining a light on the mismanagement and lack of transparency in his own state’s pension fund investments, taking on the state’s Retirement System Investment Commission and Wall Street advisors who charged exorbitant fees while having among the worst pension performance in the nation.
Scott Fitzpatrick, Missouri State Treasurer has his own Financial Literacy Portal which provides information about planning for education costs, understanding student loans and credit and planning for retirement.
Michael Frerichs, Illinois State Treasurer lists on his official website financial education resources and activities for students at all grade levels, including elementary, high school and college. The extensive resources on his website include brochures from the Consumer Financial Protection Bureau about mortgages and U.S. Department of Health and Human Services about retirement planning and security. There are also links to educational material created by financial services firms BlackRockBLK, State StreetSTT and MorningstarMORN.
Each of these approaches overlooks that there is a lot to be learned about commonplace industry abuses that may be jeopardizing the public’s financial well-being.
My decades spent forensically investigating trillions has led me to believe that lying, cheating and stealing are so commonplace in financial matters, that they are not the exceptions. Sadly, teaching the “rules” of finance without addressing the industry’s history of taking advantage of uninformed consumers makes little sense.
And you don’t have to look far to find inspiration for teaching these lessons. Remember the mutual fund and financial analyst scandals in the early 2000s, following the dot com bubble burst? Enron? Madoff? For investors young and old, the choice is simple: Either study Wall Street bad behavior and be forewarned, or risk losing everything you own.
Just like how he cracked down on the public pension players in his own state, Curtis Loftis agrees that the public needs to be forewarned about bad behavior in finance. “In order to accumulate wealth, you need to avoid the snares and pitfalls laid out by a host of unscrupulous scammers,” says Loftis.
This, of course, is precisely the financial education Wall Street doesn’t want promoted—the ugly outcomes Wall Street doesn’t want advertised. Who better than elected state treasurers to ensure the public learns truths private industry doesn’t want told?