Americans Learning To Invest Their Personal Money

This is a great article/piece on SM, regarding the education citizens need to invest their own money wisely, and prosper. Interesting to see a lack of interest these days.

Let’s face it, it’s more fun to be at the golf course, than sitting in front of a computer, with a phone attached to your earlobe.   

Taped to the big wooden doors of the Charlotte, Michigan, library, a photocopied flier offers a free Saturday afternoon course on investing. The program is new to the community library, the pilot in a statewide investor-education campaign. Funded with $30,000 of government money, with more on the way, it looks like a gem: It's free, it isn't selling anything, and participants can sign up for one-on-one financial counseling.

But 10 minutes before the seminar, something is missing — people. The flier, it turns out, was posted only two days ago, and the only other advance notice came in the form of a few radio ads. Standing before an almost empty room, Linda Cena, the state's securities regulator, welcomes two senior citizens and the library director and introduces a financial planner who has driven 80 minutes from suburban Detroit. He begins his PowerPoint presentation with "What is the stock market?" and ends two hours later with "Three keys to building wealth."

The septuagenarian couple don't take notes, nor do they really want financial counseling. "I wish we'd heard this 30 years ago," says one of them, wondering aloud "why more people hadn't come." Her rhetorical question is swallowed by the library's stuffy, echoing stillness.

That silence may be the sound of squandered opportunity. For four years now, Uncle Sam and all 50 states have been engaged in an unprecedented effort to educate Americans about investing, coaching them in everything from 401(k) plans to how to avoid fraud. It is a novel idea indeed, made possible by the high-profile 2003 settlement between the Securities and Exchange Commission and the brokerage industry that earmarked $85 million for investor education. But if you haven't heard about it, or had a chance to sit in on a free seminar, you're not alone. Even some of the officials who are funding the programs concede that some efforts have been disappointing.

At a time when more Americans than ever are interested in the stock market and retirement planning, this money would seem to be a welcome windfall. But a SmartMoney look into just how it's being spent doesn't inspire much confidence. In Minnesota, it's gone to distributing a free CD in supermarkets with such generic financial tips as "obtain information about your investment possibilities from reputable sources" — in Ojibwa and Amharic, among other languages. Meanwhile, in Buffalo, N.Y., a new PBS show called MoneyTrack offers wiser tips but with one drawback: It runs only on Tuesdays at 5 a.m.

The settlement brokered by the SEC divided the investor-education money into two parts: $30 million was turned over to the Investor Protection Trust, a nonprofit group set up to fund state-by-state programs; the rest was designated to support a national initiative. Four years later, however, the states have used less than $8.5 million. Meanwhile, the national endeavor, which started making grants only a year ago, has deployed just $2.1 million, largely for research projects. For now, it's uncertain when the rest will be spent, or on what. "No one has ever had $50 million to spend on doing the right thing, and it didn't have to be hard," says Charles Ellis, a prominent investment consultant tapped by the SEC to develop a national investor-education plan — only to see his efforts dismissed. "We really ended up surprised and disappointed."

For their part, the folks in charge of the money say better programs are on the way. But financial education, even when it's done well, is a tricky proposition. As any financial planner will tell you, people are often reluctant to examine their finances, and for those just getting started, the whole idea of saving and investing is often abstract and confusing. John Gannon, who heads the NASD Foundation, which oversees the national programs, says there's too often a disconnect between the programs that are proposed — which involve creating web sites, brochures and curricula — and what actually works. "They don't focus on how to get those materials into the hands of people who need them," he says.

JIM LOWE ISN'T AN investing expert, nor is he an educator. What the former salesman does know is how to raise money for a consortium of 12 Minnesota public radio stations, where he serves as development director. So when he heard there was grant money available for investor-education programs three years ago, he says, "I immediately saw the potential." Lowe quickly drafted a proposal for a series of public service announcements warning recent immigrants about fraud and shipped it to the Investor Protection Trust. After five months of back-and-forth discussion, Lowe's plan to use foreign-language radio to reach these new groups was approved with a budget of $210,000 — nearly half of the state's allocation for investor education. How far that money went, though, may seem a little disappointing. Most paid for 40-second radio spots — in Ojibwa, Hmong and Amharic, Spanish and English — with advice that ranged from "get things in writing" to "stay alert." The ads, which were also recorded on CDs and distributed free at local supermarkets, referred listeners to a web site — that doesn't offer any investing resources, only information about the consortium. Lowe argues that the project was a big success. "It's hard to gauge any kind of advertising," he says. "But people have told us they think this is fantastic."

Multiply that effort times 50, and you start to understand the problem with this exercise in good intentions. In Texas the money is being used to promote the state regulator's office, says Texas Securities Commissioner Denise Crawford, "or no one would even know we exist." California spent some of the money to warn members of the military about payday lending. And several states pooled their money to award a $1.6 million grant to develop the public television series MoneyTrack. The first 13 episodes, which aired last year in Buffalo and elsewhere, averaged 450,000 viewers per episode — less than half the audience for reruns of Mama's Family. So does any of this help investors make better choices? "We don't have any data, but I think we're making a difference," says Montana State Auditor John Morrison. His state has used some of its money to sponsor seminars covering, among other things, lottery fraud. It's not saving or investing, Morrison concedes, but "if it's what you want to do with your money, better to play the real lottery than a fake one."

TO BE SURE, MOST of this was not what the SEC had in mind in 2003, when it reached a $1.4 billion settlement with 10 brokerage houses in which they neither admitted nor denied allegations that they had provided misleading stock research during the dot-com boom. With the money set aside for the national education effort, the agency drafted Ellis, the Wall Street consultant, and George Daly, now dean of the McDonough School of Business at Georgetown, to develop a strategy. For a year, they and a team of experts combed through research on the topic and came to an alarming conclusion: There was no chance that people would sit down for even a short, relatively convenient, relatively entertaining program on the principles of investing. "The smartest people I knew said, 'You will fail,'" says Ellis.

What would work? The team wanted to direct the funds toward educating the people who run workplace-based savings plans, like 401(k)s. But to some, that plan appeared to hand the money right back to the financial-services industry. "It wasn't a frivolous idea," says a person who worked at the SEC at the time. "But it wouldn't play in Peoria." Frustrated, Ellis resigned, and the funding for national investor education was turned over to the NASD Investor Education Foundation, a nonprofit attached to the National Association of Securities Dealers, in September 2005, more than two years after it was first set aside.

Academics and financial planners alike agree that money spent producing still more web sites, brochures, public service announcements and curricula falls almost uniformly short of helping investors. For one thing, consumer groups and mutual fund companies have been doing that for a long time. "The last thing we need is more materials," says Nancy Smith, who ran the Office of Investor Education at the SEC before becoming vice president of investment services for AARP Financial. "We're not one web site away from successfully teaching people about investing." The folks in charge of doling out investor-education money seem equally frustrated. Don Blandin, who runs the Investor Protection Trust, which distributes money to the states, says the efforts are by definition all over the map. "Every day I'm trying to turn 50 dials, trying to make some progress. But I can't turn them all at the same time."

For its part, the NASD Foundation thinks it has a solution — one that's supported even by people who wonder whether traditional financial education can work at all. Instead of starting from scratch, the foundation plans to tap into groups that already have a wide membership base. Among the early recipients is the Association for Financial Counseling and Planning Education, which was awarded $630,000 to teach marriage counselors to talk finances with divorcing couples. Similar reasoning yielded funding for the Center for American Nurses to create a financial-education program directed at the country's 2.9 million nurses. "We want the information to be accurate, unbiased and objective," says the NASD Foundation's Gannon. "And we want to make sure it's targeted to the audience."

Neither program is beyond the planning stages, but they seem closer to the right idea: getting information to people who might not otherwise ask. But projects like these are rare. Given what's out there, Gannon doesn't think the foundation will be able to give away more than $25 million by 2015. The rest of the money will go to programs sponsored and developed by the foundation itself.

Still, even projects that seem innovative in the planning stages can struggle in the execution, which may be among the biggest challenges for this experiment. The NASD Foundation funded and applauded, for example, a program designed by the Partnership for After School Education to teach investor education through its 1,400 member organizations. And on a frosty Thursday afternoon in February at a public school in the Bronx, more than a dozen young adults grab a slice of pizza and settle in for the day's "Dollars and Sense" lesson on investing. It all seems very promising until Ken deRegt, a 20-year Morgan Stanley veteran and a member of the PASE board, starts talking about risk-return strategies. He discusses the difference between bond yields and dividends and mentions the 2001 market crash. He's been talking for at least 30 minutes when a young woman raises her hand with a fundamental question: "I don't get it," she says. "Why do I have to invest, anyway?"

"What doesn't make sense to you?" he asks, smiling patiently.

"Everything," she says, shaking her head.

[Source SmartMoney.com]

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