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A Different and Better Type of Financial Counseling For Low and Moderate Income Consumers May be on the Horizon

posted by david lander

After many years of lingering between mediocrity and dishonesty there may be early signs of improvement in the industry that provides financial counseling or coaching for low and moderate income consumers in financial difficulty. Sparks started by Single Stop/Robin Hood Foundation in the NYC area and Cities for Financial Empowerment in NYC and several other cities may have the potential to provide much needed help. This comes at a particularly important time since the search is on for providers to help consumers wend their way through the student loan default maze. There is considerable concern that dollars will go to mediocre providers who see their bottom line as more important that the needs of their customers and/or which do not have sufficient quality or quality controls.

Many of the sparks of hope are located within a multi-service center, often a community development corporation or well-established neighborhood non-profit organization. Because there has not been a well-established career line for high quality professional financial counselors, the academic ladder into these jobs is slippery and has more holes than pegs. Likewise, the credentialing has been uneven. Over the past several decades there have been moments when quality research was undertaken but in the past decade such research as there has been has focused on financial literacy or savings and not this segment of the safety net. For these sparks to kindle it will be necessary for the academic preparation programs that do exist to step up. The bulk of the teaching has been at land grant universities in programs that send most of their graduates to financial planning where salaries are better or to the military which has generated a healthy career line since they have realized how important financial stability is to the psyche of their members. There is also some noise in the social work academy to infuse greater emphasis on things financial and perhaps create a relevant field of concentration. The development of a new set of courses at the City University of New York is a welcome first step, but it is crucial that quality control be maintained as those courses are expanded to institutions of learning at other Financial Empowerment cities. And it is crucial that PhD programs be developed to provide quality research and writing that is not subject to the conflicts of interest that have dominated in this field as the very credit counseling providers fund or otherwise control most of the research and writing that does exist.


I think there is a simpler step than financial planning. My experience (an unscientific opinion based on my kids and their friends) is that a lot of people leave high school not knowing how a checking account works, what's the difference between checking and savings, and even how banks work (e.g. they don't keep your money in the vault until you want it back).

Perhaps we should begin by schools teaching some basic life skills. I've watched schools require more and more math and science in a (misguided IMHO) attempt to stimulate interest in STEM careers. Most kids would be in much better shape knowing what a loan is, how interest works, etc. than learning how to graph polynomials.

Thanks for your comment. The spectrum from financial literacy education for all to savings/ida to coaching and then counseling consumers in financial distress definitely needs more public policy analysis. Unfortunately, there are too few public policy schools that focus on these topics. There is some excellent work going on regarding financial literacy education. The debate between Anna Lusardi at Cornell and Lauren Willis is insightful and Michael Collins at Wisconsin is attempting to use a public policy lens. The related work on savings/i d a accounts spearheaded by Michael Sherraden at Washington U here in St. Louis has spread and has been adopted by public policy makers around the US and in several other countries.

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