Opening scene, a dimly lit office with racks of servers visible to the right. A man in a very expensive suit leaving for the day, a suddenly the sound of breaking glass, our superhero Helaine Olen draws her bow and declares, “Financial Industry, you have failed this country.” No murderer, she bears right and in a flash an arrow strikes the server starting a chain reaction of explosions.
I don’t know if this is more my fantasy than her’s, but it’s fair to say that the subtitle for Pound Foolish, ‘Exposing the Dark Side of the Personal Finance Industry.’ is a pretty clear glimpse into the book itself.
The book opens with a bit of a look back to the start of the genre of personal finance columns, the name Sylvia Porter among them. Next, an overview of some of the celebrities of finance, Suze Orman, Dave Ramsey, David Bach, and more. What’s clear is that these folk are all salesmen, pushing books, courses, and in Suze’s case, a debit card that went a long way in tarnishing whatever good reputation she had. Regarding Ramsey, Ms Olen discusses the famous debt snowball, and why the “pay lowest balance” is more costly over time versus paying the debt with the highest rate. She manages to do it in a few sentences compared to how I can ramble on about this subject. She highlights the hypocrisy of how Ramsey filed for bankruptcy yet preaches to his listeners that they should pay their debts and in Suze’s case how her money is invested anywhere but in stocks, yet her advice is to be invested in the market.
Next, how the 401(k) has failed the worker. This was the theme of the PBS Frontline program, The Retirement Gamble, where Helaine Olen was interviewed as a critic of the high fees many companies were charging their account holders. As Jack Bogle pointed out, the fees make a remarkable difference over an investing lifetime. A 2% annual fee can result in a next egg less than half of what it would be with low cost index funds. High fees in mutual funds, annuities, and other financial products are often not well disclosed, why would they be? Worse, the question of whose best interest is such a product often is answered with “the salesperson.”
The book wouldn’t be complete if it weren’t for a discussion of the “Rich Dad” expensive seminar series and other similar real estate millionaire schemes. Olen exposes the story behind Robert Kiyosaki’s ‘dads’ and how much of his wealth doesn’t come from real estate but from seminars. Tens of thousands of people looking to strike it rich. These courses have been around for a long time, as Olen notes Robert Allen’s ‘Nothing Down’ was a best seller in the early 80’s.
In the end, I found Pound Foolish to be a cynical view of a corrupt industry. Note – the definition of cynic – “a person who believes that people are motivated purely by self-interest rather than acting for honorable or unselfish reasons.” It would be tough to argue that the financial industry has anything but its own self-interest in mind. This book should serve as a wake up call at the very least to check the fees your own accounts are being charged and to tread very cautiously when making investments. Ms Olen has received criticism for her writing, but that should come as no surprise. When you publicly state the emperor has no clothes or worse, that the emperor is systematically lying to you and stealing from you, he’s not going to react too kindly.
If you read the book, you’ll note, no solutions are offered. There’s a reason for this explained at her blog in the article What Should Be Done? I hope the dialog she starts can help us all achieve a better retirement. And financial industry, you better watch your a$$ets.