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The Personal Finance Scam
March 9, 2013 12:14 AM   Subscribe

I'm absolutely shocked, just shocked I tell you. Olen got her start in the personal finance world when she ran a series for the Los Angeles Times called Money Makeover, which involved helping regular folks connect with financial gurus sort out their personal finances. “My question was, did we mislead people?” Olen said. “That was really the genesis of the book.” As she found out, the personal finance industry is a swamp of conflicts of interest, shoddy advice, and prognosticators who profit off of the economic anxiety of everyday Americans.

“These empires of personal finance sort of start up, in part, as a way to explain it all to us,” she said, and they proliferate during hard economic times:

"People are desperate, and we live in this society where there’s deep shame around money, and there’s this idea that everybody should be able to make it…And so we feel very bereft and alone. Until very recently — like the past year recently — I would argue the average person really had no idea that they weren’t alone in this. The number in our 401(k)’s is roughly $25,000. That’s not enough money to get you through more than a year or two, nevermind a 30 year retirement. But everybody thought this was their individual failure. It didn’t occur to anybody that this was the average number and everybody was in on this. We’re all bereft here.

And the personal finance industry really preys on this idea that you can do it alone. And that you are alone in this. And that to not be able to do it is a personal failure. For instance, to give one very specific example, Dave Ramsey, who’s the big radio guru, has explicitly denied income inequality exists. And has told people they can choose not to participate in a recession."
posted by bookman117 (42 comments total) 41 users marked this as a favorite

 
She was a guest on the Daily Show.
posted by discopolo at 1:07 AM on March 9, 2013


the personal finance industry is a swamp of conflicts of interest, shoddy advice, and prognosticators who profit off of the economic anxiety of everyday Americans.

I'm certain, absolutely certain, no one saw this coming.
posted by saysthis at 1:22 AM on March 9, 2013 [1 favorite]


he personal finance industry is a swamp of conflicts of interest, shoddy advice, and prognosticators who profit off of the economic anxiety of everyday *people*.

This thing is rife in Australia too. Is there anywhere it isn't?
posted by Mezentian at 1:47 AM on March 9, 2013 [1 favorite]


"I'm shocked, shocked to find that gambling is going on in here!"

Well still and all, good for her for calling bullshit eventually. I guess my problem is I don't understand how people can actually see it as not-a-scam to begin with; it's the only game in town, isn't it?
posted by mwhybark at 2:15 AM on March 9, 2013


Personal finance guru seeks attention and money by setting their advice against every other guru out there through mass media. I'm not shocked at all, no. She's not remotely the first to make money off of saying saving and investing are difficult, or to write to/about the people who don't have money for "lattes."
posted by michaelh at 3:06 AM on March 9, 2013


To go on, she and Dave Ramsey really need each other to exist. And they both need day trader book authors to exist, and the day trader author needs both of them to exist. Meanwhile, the curious reader is pin-balled around until they give up or survive and probably start a personal finance blog that reviews all the books for Amazon.com affiliate commissions. This blog is the start of a new cycle of crappy personal finance books that play badminton with the average reader.
posted by michaelh at 3:11 AM on March 9, 2013 [3 favorites]


But it is possible to objectively understand personal finance topics without reference to "gurus".
That there are scam artists around doesn't necessarily mean that ordinary people can't 'do' their finances. The article cites as a fallacy that giving up a coffee can make a difference to your finances, but doing things like saving the money you would have spent on a coffee, taking your lunch from home, buying modest stuff and working hard *does* routinely lead to financial success, albeit not riches.
This is objectively true. I can only assume her beef is with get-rich-quick people who suggest you can achieve financial nirvana with no risk in a short time, because otherwise she is arguing that being responsible about finances is somehow beyond the average person.
posted by bystander at 3:54 AM on March 9, 2013 [5 favorites]


She was interviewed on Jill on Money too. I was sort of shocked to find out some of the talking-out-of-both-sides-of-her-mouth stuff Suze Orman has been up to.
posted by fuse theorem at 5:22 AM on March 9, 2013 [1 favorite]


I heard her interviewed on Doug Henwood's Behind The News on KPFA maybe a month ago. This book is really making the rounds. Reviews of the actual book don't seem to be surfacing with the same enthusiasm. I'm curious what, if anything, this book reveals about financial punditry other than it is an avenue through which charismatic individuals brandishing faux expertise make money.

I also wonder if it's just being very successfully marketed through an ALTnews network type model.
posted by SinisterPurpose at 6:34 AM on March 9, 2013


This is not financial advice. I am not a financial advisor and I do not have a fiduciary duty to you.

Oh god I hate the personal finance industry for so many reasons. Let me count them.
  1. Oh you've got a sure-fire system that makes millions?
    • Why aren't you retired/independently wealthy?
    • What happens when the market tanks and your 20bps strategy with 40x leverage gets margin called?
    • What happens when EVERYONE uses your strategy at once?
    • Does your historical backtesting assume that everyone can execute trades perfectly and instantly and ignore liquidity events? (hint: it does because they all do)
    • Does your strategy include being brutalized by short-term capital gains taxes or losing tax advantages by trying to repurchase the same equity too soon?
    • What about transaction costs? Commissions? Interest on leverage?
    • I wanted to include an entire section on technical analysis but I got sad and bored so I'll just say if your 'strategy' includes big colored arrows on charts you should probably go back to selling used cars
  2. Oh no you're just recommending products for me to invest in?
    • What is the return on this product you're selling me (I'm sorry, 'advising' for me)?
    • What are your fees?
    • What taxes should I expect to pay by using your advice?
    • Does that "return" figure include taxes and fees?
    • What about dividends and disbursements?
    • ...so why didn't you include those into the return number when I fucking asked you?
    • If it's an ETF or ETP who's the issuing entity? Especially if it's an ETP are they solvent?
    • If it's a commodity-based product why should I not be afraid of contagio?
    • C-o-n-t-a...wait why am I explaining this to you?
    • What about backwardation?
    • You know what never mind.
    • What are the important days in this commodity? Am I going to just be someone else's easy money because I'm buying X days before contracts roll over?
    • If it's a short, double short or otherwise leveraged synthetic product do you understand the time horizon under which it's intended to mimic what it describes? (hint: it's almost always one trading day)
    • If it says "pink sheets" how do you sleep at night?
    • Is it generally liquid?
    • If it becomes illiquid am I going to be a ninth-tier last at the table bondholder and get a 99% haircut?
  3. Oh not a strategy but 'tips'? You've got an inside line on what stocks are going to 'outperform'?
    • Why isn't it insider trading?
    • Do you hold a position in what you're offering 'tips' on?
    • Is it the opposite of what I'd obviously do if I took your tip on face value?
    • How specific are your predictions? (i.e. up 18% by 2013-03-31 vs "strong buy")
    • ...and how many of those did you hit?
    • ...and of those how many were just cashing in on obvious bull/bear market trends?
    • Are you Jim Cramer? (because if so I think I could make a lot of money just shorting when you say buy).
Gah that made me angry just typing it out.
posted by Skorgu at 6:53 AM on March 9, 2013 [118 favorites]


Calling the financial market an "industry" is an insult to those who make and do things. The financiers are parasites who take money while contributing nothing to society.
posted by Repack Rider at 7:13 AM on March 9, 2013 [16 favorites]


I feel like there are two different questions here: is life manageable on your own, without support or a safety net? Obviously not, for most people. The myth of self-reliance and the magical thinking of success theology are both bullshit. But are there things you can do to maximize your chances in this unfriendly world where safety nets are being bankrupt by assholes? Yes, there is.

So take Elizabeth Warren's book All Your Worth. Before she was a Senator she was a bankruptcy attorney, so she basically says: there is a growing phenomenon of middle-class two-income families falling into bankruptcy, and this is how to avoid joining that trend. My wife and I use it like a religious text and it's been a boon for resolving financial arguments before they even start.

Here's the method in a nutshell: reduce your "Musts" to half your post-tax income. (Primarily by avoiding overpriced rents or a mortgage you can't afford.) Save 20% of your post-tax income. Have fun with the rest.

Of course, this only works if you're already middle-class (middle three quintiles) and living on two incomes, so it's a small niche, but that's her target audience and if you're much poorer or much richer your problems aren't primarily "personal finance" problems, i.e. budget problems, in any case, they're joblessness, illness, addiction, mental health, or dependent relatives with those problems, etc. Need a different guru for that stuff. Actually scratch that: fuck gurus, we need a social movement for that stuff.
posted by anotherpanacea at 7:19 AM on March 9, 2013 [25 favorites]


It used to be, you had a pension, you had social security, you set some of your own money aside, and you would be more or less OK. (This is the 'three-legged stool' for a financially stable retirement). Of course you'd be better off if you made more money, but you didn't really have to understand too much about investing to have an OK retirement.

In the past couple decades, though, companies have reduced and eliminated pensions (defined-benefit savings-- you knew what you'd get out) and replaced them with 401(k)s and other defined-contribution plans-- you know what you put in, and it's your responsibility to invest it wisely, not screw up on any of the behavioral sides of investing (buying when the market is high, selling when it is low), and figure out how much to put aside so that in 30 or 40 or 50 years, when the world is almost a completely different place, you'll know you'll have enough money.

The benefit has turned into a requirement-- that you learn about investing, that you choose the right people from whom to learn about it, that you be able to pick apart the people who know what they're talking about from the people who just know how to speak very convincingly-- who are usually the ones with some kind of conflict of interest about what they're recommending. And of course it's your fault if you get scammed or choose the wrong strategy.

And, of course, all this is predicated on the assumption that you have a little money left over to save to begin with, in our era of stagnant wages and rising college and health-related costs.

I don't know this is an appropriate place for book recommendations, but there are some good people in the personal finance industry, who (I think) know what they're talking about, who aren't trying to sell anything that's going to make them any money.

The Four Pillars of Investing and The Intelligent Asset Allocator, both by William Bernstein, are both solid books on constructing a portfolio, with good data, not promises. All About Asset Allocation, by Richard Ferri, is similar to 'The Intelligent Asset Allocator' but with a slightly different view on some things. The Bogleheads' Guide To Investing, by Taylor Larimore et al, is a good overview by several members of the Bogleheads community, a resource often linked in Ask Metafilter questions on the subject.

Yes, we need to get a social safety net back. I do feel, however, that even as we try to make change happen, we still have to life in the world we live in, unless we are able to opt out completely. As much distrust as I have for corporations, I at least trust them to try and make money, and I'll participate in that to the extent that I am able-- even as I recognize the conflict of interest that that puts me in.
posted by matcha action at 7:31 AM on March 9, 2013 [21 favorites]


What about you stop assuming you should get to sit of your ass for a third of your life? The reason the pension age was around the mid 60s is that when Kaiser Bill first thought up the idea, that was the age most people were dead by. There's dignity in labour, camaraderie and social interaction with those around you. I think its terrible the pinnacle. Quite why everyone thinks dicking about on a small yacht once you reach 50 is such a great idea baffles me. Just make sure you get a job you like and if you don't then make the job you like. Better than scrimping during the fun parts of your life in order to buy an annuity and then discovered you're bored and have wasted your life for a retirement you never wanted.
posted by Damienmce at 7:43 AM on March 9, 2013 [1 favorite]


Just make sure you get a job you like and if you don't then make the job you like.

Alternatively, you should just grow a horn out of you forehead and become a beautiful unicorn and enjoy unbound magical abilities.
posted by Hypnotic Chick at 7:52 AM on March 9, 2013 [77 favorites]


A lot of people don't have the option to work when they're in their seventies. There are a lot of jobs that take a physical toll on the body that you pay back when you hit retirement age (if you're lucky).

There aren't a lot of unskilled (or skilled) jobs out there looking for people over sixty.

Those two facts, taken together, clearly and unequivocally spell out the need for retirement... oh wait. I've been trolled, haven't I?

Damn.
posted by MrVisible at 7:53 AM on March 9, 2013 [11 favorites]


Here's the method in a nutshell: reduce your "Musts" to half your post-tax income.

If I rented a room in a shared house, the rent would cost me half my post-tax income.
posted by tel3path at 8:10 AM on March 9, 2013 [2 favorites]


Here's the method in a nutshell: reduce your "Musts" to half your post-tax income.

If I rented a room in a shared house, the rent would cost me half my post-tax income. (tel3path)


I think you are reading too selectively. From the next paragraph:

Of course, this only works if you're already middle-class (middle three quintiles) and living on two incomes, so it's a small niche, but that's her target audience (anotherpanacea)
posted by d. z. wang at 8:22 AM on March 9, 2013


It worked for me--clearly, it will work for everyone else!
posted by box at 8:23 AM on March 9, 2013 [1 favorite]


What about you stop assuming you should get to sit of your ass for a third of your life? The reason the pension age was around the mid 60s is that when Kaiser Bill first thought up the idea, that was the age most people were dead by

Really? After forty years of working at a microscope or pipetting under a fume hood I ended up at 62 with shoulder damage requiring an operation and nerve damage to my neck that is barely manageable after therapy. My job was at a major university, very careful in providing a safe and ergonomic place of work. I suppose that I could have stuck another four years and ended up with further operations and worst pain.

Not all jobs are equally suited to permit retirement at 75. I know people who made enough money to be able to retire comfortably at fifty, but I also have a friend who retired at sixtyfive but who has to work at Walmart to make ends meet. I'm lucky that I don't have to do that if I'm careful in my spending.
posted by francesca too at 8:42 AM on March 9, 2013 [5 favorites]


People also often become disabled in other ways as they age. My own mother started going blind from macular degeneration in her 70's, and was legally blind by 80. Then she got Alzheimer's, which some people get in an early-onset; sorry, but there's no way to work at much if you're blind and cognitively impaired.
I also think that working for 50+ years is generally enough, and if at all possible, one should be allowed to rest awhile before one's final rest.
posted by dbmcd at 8:54 AM on March 9, 2013 [4 favorites]


I also think that working for 50+ years is generally enough, and if at all possible, one should be allowed to rest awhile before one's final rest.

Guys, there's a Commie here!
posted by Mezentian at 9:17 AM on March 9, 2013 [5 favorites]


What about you stop assuming you should get to sit of your ass for a third of your life? The reason the pension age was around the mid 60s is that when Kaiser Bill first thought up the idea, that was the age most people were dead by.

So I suspect, despite my lack of detailed knowledge about Bismarck's Prussia, that your argument here is based on what I've seen called a "zombie lie" — a lie that gets debunked over and over and over again, but keeps coming back as a shambling, falling-apart mess.

The context in which I've most often seen arguments like yours is in discussions of FDR and Social Security, rather than Bismarck and the Prussian pension system. It's certainly a zombie lie in the context of the American 1930s, one that relies on a lazy sleight-of-hand.

Here's the trick, at least in that context: The average life expectancy in the 1930s was indeed less than today (a bit under 60 for men, a bit over 60 for women). But the average life expectancy for people actually paying into the social security system was much higher. This is because the average life expectancy was dragged down by infant mortality.

People who actually lived long enough to work could expect to live into their 70s, much like today. Social Security, at least (I can't speak to the Prussian pension system), is in fact designed to indicate that we believe that it's more important for old people to be free than it is for us to milk the last bits of value out of our current elders and our future selves. Rather than being, like, the joke you're presenting it as ("ah, well, if you're supposed to be dead already I guess we can let you not work").

Do you have actual data on Prussia, or are you just trying to seem fancy by transposing your zombie lie into an earlier context? One that makes it look dangerously foreign? Apologies in advance if you've got something real to say.

Also, why Prussia as the starting point for opposing the idea of retirement? If I were trying to construct a specious argument against retirement as a concept, I'd start with Lear.
posted by You Can't Tip a Buick at 10:26 AM on March 9, 2013 [32 favorites]


I've never known a person who expected or did retire in their 50's. And that's before the financial disaster of the last several years that is forcing people to stay on the job longer.

I've been working in the news biz since I was 16 years old; I'm about to turn 61. I'm hanging on by my fingernails, having had to use my 401k to survive more than 2 years unemployment. I'm hitting the point where working long, long stressful hours and running out in the middle of the night to cover a story is hard physically, not even taking into account recent health problems.

And the younger generation needs this work. I should be getting ready to retire--not this year and maybe not a couple of more. But it should be within sight, which it is not now.

I am not a financial investment expert but I do know when 401ks were first offered they were billed as supplements, not replacements, for real pensions. Expecting the average person to understand the complexities of the market run by people who do it as a living feels like a setup, a way for the markets to use our naivete to further empty our pockets. And a third of my life, sitting on my butt? Ha. I'll be lucky to get a few years of retirement.
posted by etaoin at 11:25 AM on March 9, 2013 [7 favorites]


Asset allocation and portfolio management is the only way to go for the average 401k investor. In other words, pick a mix of asset classes and invest a percentage in each one (using ETFs). Once a quarter, rebalance the percentages if they have changed.

Of course the trick is picking the right asset classes and percentages. I've been happy with the allocations described in Unconventional Success: A Fundamental Approach to Personal Investment.

The beauty of this approach is that you can then safely ignore everything that comes out of the financial guru industry for the rest of your life.
posted by diogenes at 11:26 AM on March 9, 2013 [1 favorite]


Quite why everyone thinks dicking about on a small yacht once you reach 50 is such a great idea baffles me.

Jesus. You've been watching far too many retirement fund commercials. No one in their 50's thinks like that. Most people I know in their 50's (including me) are scrambling to shore-up what they thought were going to be reasonable savings for later in life, before some assholes on Wall Street decided to help themselves to it.
posted by Thorzdad at 11:33 AM on March 9, 2013 [22 favorites]


I'm curious what, if anything, this book reveals about financial punditry other than it is an avenue through which charismatic individuals brandishing faux expertise make money.

Just like every other sort of punditry that is out there from politics to advice. It is all a sham that is useless filler used to pad the time between the commercials. We have a glut of attention-loving loud mouths who say what everyone wants to hear, but if you actually believe one word of what they tell you, you shouldn't be allowed to run around loose on the streets...
posted by Alexandra Kitty at 1:24 PM on March 9, 2013


I know it was a troll comment, but the "guys retired on yachts" is such a dumb trope that it's worth a reply. If you want to see these guys on boats, walk around any harbor on the coast or on the lake or the river, whatever's around, and you will see a lot of dudes in their 50s and 60s on boats. Most of them live on the boats, and if you talk to one of these beer-bellied guys in Costco clothes you're going to dislike the human race a lot more by the time you excuse yourself.

These guys almost always have a little nautical bookshelf full of personal finance and conservative radio host books (also bought from Costco) next to their booze supply (Costco) and they live on these boats because they got divorced and couldn't afford another house once the wife and kids got the family home. These guys are bitter, they're usually alcoholics, and they lean toward the Tea Party and Falling Down racism, although they lack the energy to do anything about it but spout bullshit from the deck of their run-down cabin cruiser. In California, a lot of them were downsized out of defense contractor jobs. A lot of them in Virginia or the Carolinas are retired military.

I got to know this crowd when my parents moved onto their boat for a while after they had their own financial troubles in the early '90s recession. They were one of the only married couples around, although I did occasionally see guys with a girlfriend from the harbor restaurant/lounge. Power boats cost a lot to maintain. I'd guess about one in three could leave the dock without a tow.
posted by kenlayne at 1:37 PM on March 9, 2013 [12 favorites]


Thanks kenlayne, you've just made me appreciate _Burn After Reading_ all the more.
posted by Balna Watya at 2:42 PM on March 9, 2013


I know it was a troll comment, but the "guys retired on yachts" ... Power boats cost a lot to maintain.

I was all ready to be angry at your sweeping stereotype, but then I saw you're talking about power boats. Carry on.
posted by tylerkaraszewski at 3:01 PM on March 9, 2013 [2 favorites]


Speaking from retirement experience. I have been retired for almost 30 years. I left a position in education that would have provided a $40,000 annual pension with fully paid medical benefits.
I chose to give that up to retire while I was physically able to do the things I wanted to do.
The wife and I worked and raised a family during a time when you could do that and also save for your future.
Others who have accomplished what we have attribute it to their skill, intelligence and determination.
We don't see it that way at all. We see it as 90% luck and the remainder as skill, intelligence etc.
We are both still very active physically but I am in the mid stages of dementia.
I see people a lot younger than myself still working and I marvel at their ability to do so. As active as I am there is no way I could do a job that required me to stand or even concentrate on something technical for eight hours a day.
The people who believe that since we live so much longer now than when S.S. was passed into law are mistaken. The old folk they see still able to perform tedious tasks are an anomaly.
I feel bad for young folk today looking at their retirement prospects. Many of the comments on here are disheartening and telling. My guess is the average mefite is in the upper quartile of the US intelligence scale. For so many here to be lamenting their economic situation says more about our system than it does about them.
posted by notreally at 3:11 PM on March 9, 2013 [13 favorites]


Skorgu's comment is one of the best I've ever seen on Metafilter.
posted by Catblack at 9:42 PM on March 9, 2013


In addition to biting wit and so on, skorgu's comment is also a treasure-trove of Google queries. I am slowly looking up all the words I don't know, and learning bucketloads.

Although I suspect contagio is an auto(mis)correction of contango.
posted by d. z. wang at 10:43 PM on March 9, 2013 [1 favorite]


I've never known a person who expected or did retire in their 50's. And that's before the financial disaster of the last several years that is forcing people to stay on the job longer.

I've known several. All teachers.
posted by not that girl at 3:38 AM on March 10, 2013


I've known several. All teachers.

That's the beauty of pension plans. People can retire at a reasonable age, and make room for younger talent entering the field. It also frees them up to pursue other interests while they are still able to.

Switching to defined-contribution/401k-style plans, beholden to the whims of Wall Street and the financial industry, ended that system, to everyone's detriment (except, of course, Wall Street and the financial industry. Funny that.)
posted by Thorzdad at 8:39 AM on March 10, 2013 [6 favorites]


Someone once described to me a clever refinement of the usual stock-tip bulk mail: half your bulk mail says the stock is going up and half says it's going down. Since most stocks tend not to stay exactly still, your tip will be accurate for n/2 people. Drop the other half and repeat k times. Now you've delivered k accurate stock tips to n / (2^k) people. In the k+1 mailing, tell those people to go buy something you're shorting.

For the record, I have not ever done this and I'm pretty sure neither has the guy who described it to me. I have no idea if anyone has ever done this.
posted by d. z. wang at 11:40 AM on March 10, 2013


I've heard stories about a very similar scam involving sports betting--I imagine somebody has tried it at least once.
posted by box at 12:19 PM on March 10, 2013


She was a guest on the Daily Show.

Helaine Olen Extended Interview Pt. 1

Helaine Olen Extended Interview Pt. 2

Helaine Olen Extended Interview Pt. 3
posted by homunculus at 4:45 PM on March 10, 2013


Although I suspect contagio is an auto(mis)correction of contango.
God @#$% dammit. Yes. How did I manage that one?
posted by Skorgu at 4:32 AM on March 11, 2013


Ooo. I read her book as it came through the library and I have to say it was a delightful and refreshing alternative to all the "financial advice" books that come through.

Aside from the fact that Dave Ramsey is self-rightous boob, he's just plain wrong on a lot of things, from telling people to not get an advanced degree to telling them to pay down the smallest credit card first rather than the one with the worst interest rate. These "financial advisors" are much like the "doctors" that write books about how herbs and fasting to remove toxins will cure your cancer and "nutritionists" that tell you the only reason you are fat is because you don't love Jesus enough.

Sometimes, I regret following a professional code that says I shouldn't censor or deny people access to books and information. I'm not saying these harmful type of advice books should be banned...but I do wish our public library didn't spend valuable funds on hurtful schlock.
posted by teleri025 at 9:45 AM on March 11, 2013 [1 favorite]


...telling them to pay down the smallest credit card first rather than the one with the worst interest rate.

From a strict numerical standpoint you are right, but I believe there is some wisdom in this. People often (although not always, so please don't take this wrong) get into a debt situation due to emotional reasons that compel them to make poor decisions. By paying down the smallest balance debt first creates an emotional win sooner even though paying down the highest interest loan is the smart money. After a person has "won" a few times they are in a better position to think strategically and internalize the value of paying down debt.
posted by dgran at 1:19 PM on March 11, 2013 [3 favorites]


For the record, I have not ever done this and I'm pretty sure neither has the guy who described it to me. I have no idea if anyone has ever done this.

Darren Brown did this with horse racing.
posted by empath at 4:33 AM on March 15, 2013


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