As someone shamefully financially illiterate into my 40s, yes, I couldn't agree with this more. It would have been infinitely more useful than learning how to make English muffin pizzas in Home Ec in school.
Seriously! I hate to do the consumer-blaming thing like when we ask people to replace their HVACs rather than ceasing burning coal for electricity, but I feel like it'd be awesome to have an entire population be able to look at financial products and be like "Fuck off with that nonsense I'd rather keep my profits thank you very much."
It is, in many! More than half the states require financial education now, and there’s a movement to take it to all 50 over the next few years. The problem is that they don’t teach stuff like this.
Financial literacy classes, by and large, ignore the workings of the systems or the policies that uphold them. They teach individual responsibility: make a budget, build a credit score, choose stocks, stay out of debt. The current state of “financial literacy” perpetuates the problem Hamilton is writing about; it doesn’t solve it.
I wish I could find the exact number somewhere, but between interest and fees, The average American is paying something like 400+ dollars a month to the Financial sector. Over time, 2/3 of your 401k earnings actually go to the managers of it. This is why the Neoliberal turn desperately wanted to move from pensions to 401k's.
The history of how 401(k)s came about is pretty interesting: https://www.cnbc.com/2017/01/04/a-brief-history-of-the-401k-which-changed-how-americans-retire.html. The main impetus is that employers realized they could shift the risk of investing money for retirement from themselves to employees instead. The man who invented the 401(k), Ted Benna, has expressed regret that they have largely replaced pensions (aka defined benefit plans).
The problem is that financial literacy alone does very little to to change actual financial behaviors. Just because we know we 'should' do something doesn't mean we follow through and do it. I say that as a financial educator and coach.
Also, the Consumer Financial Protection Bureau (https://www.consumerfinance.gov/) is a great resource for financial education and information.
Good lord, man! This site is impossible. I loved this article, and I've been loving all of your articles. I can't even remember how I found you, but it's all quality stuff. And I've also appreciated how you're handling the account: not trying to force us immediately into a subscription. I understand that rent has to get paid, etc. But I have a job where I haven't had a raise since I started in 2018. Anyway, I hope you're getting adequate funding.
I've known for a long time that something stinks in the land of the FED. Just look at the Panama Papers where all the Europeans are trying to hide shit that is PERFECTLY legal in the States and requires nothing to hide. Or the shameless cash-grabs that keep happening with politicians betting one way on a legislation THEY are about to pass. Or the shit that happened during COVID where a bunch of thirsty ghouls just jumped on that fish and rode it. All the way back to 2008.
Explaining the mechanisms around how this works, and how these people fuck you is priceless and should be required reading. The problem is that the rubes can't believe that it might be true. In fact, they're invested in the very cognitive dissonance that will allow them to confirm in their heads that it's not true. The lefty, hairy scumbags are just trying to trick them. You're taking away my freedom, if you don't allow me to keep putting bills into this shredding machine... Not really a shredding machine, actually, because it transfers wealth to this vampires that do nothing and add no value. Gotta work on that one.
Anyway, I'm here to read the next one. Keep doing the good work.
The whole “financial advisor” gig ALWAYS seemed like a racket to me from the first time I heard about it. It just makes no sense. If you know how to make money from the market, you’d be making money from the market, not trying to make money off me. And if you have the secret to getting rich, the last thing you’re going to do is share it with anyone and risking the system being changed so your trick doesn’t work anymore.
Eeeehhh, I don't think it's a "racket" so much as it's a not-regulated-enough response to an obvious demand. Financial products are pretty byzantine to most people (so many Americans aren't invested in the stock market at all), so there's a pretty obvious need for a class of professionals who can make sense of it all and guide people through the maze. The issue is that those professionals don't have enough guardrails to keep them from skimming an obscene amount of money off their clients' accounts in the form of fees and expense ratios.
The thing to be wary of is the assholes who promote their classes on YouTube ads as the secret to getting rich quick. THOSE are the ones about whom you wonder why they're not just doing the thing in the first place.
Excellent piece on the importance of the fiduciary regulation. Another idea would be for the government itself to establish a retirement fund that each individual could pay into. Contributions to the fund could be tax free to a certain annual maximum, with the income drawn from the fund being taxable upon retirement. All funds to an individual's credit would form part of their estate on their death. The government could guarantee a return, say 1% or 2% above the annual CPI. That would be a reasonable return, with no agency fees, and it would be guaranteed against stock market fluctuations. The legislation could require that the fund be fully financed, so guaranteed for its payout liabilities. That would be the safest bulwark against the predatory investment industry.
This is such a good way to explain it. Financial advisors are not going to be a thing in my life but my relatives certainly, and I'm sure some of them have been preyed upon. The fact that no one is looking out for the client and that's by design doesn't ring true to them.
I like the open access nature of HTW. i would love to donate, but I saw you recommended donating at around 75k/year salary. I work at a public library and make 42k/year. How much would you recommend i pay per year for support? im glad you added the one time payment option. i bought your book last week, too. ive been a reader for decades (love all the baby gawker, employee owned media companies) and find you to be an effective communicator when i send your articles to my friends. i subscribed to ITT last night too.
i love your article on john bogle, i send it to all my friends to get them pumped about index funds and retirement accounts. in fact i wrote an open access book on index fund investing and diy planning: https://archive.org/details/they-began-to-open-fire i will add you, including this article, as an open access resource in my next version!
Thanks for reading Ryan. Don't feel pressed to donate if you can't afford it, I appreciate people just reading and sharing it and the people who can afford to pay can pay, and that will all work out. RIP Bogle.
you know, most of my friends think vanguard is a vast right wing conspiracy "because it owns 1/3 of the market." while markets are bullshit and governance /is/ an issue, articles like your deadspin bogle piece explain to them in ways i never could that vanguard being mutually owned is the best outcome for a crappy system where no one has pensions and everyone is personally responsible for their own retirement. until that is fixed, mutual ownership is as cool as employee ownership, nonprofit, open source, etc. thank you for connecting the dots and showing how important bogle was for the best attempt at derigging the system. RIP Bogle!
By far one of your best pieces, HamNo. Once again you’ve managed to succinctly articulate something that so many know is going on, but in a way that makes it much easier to convey to those who are unaware. In that way, you are arming the masses.
Grateful to have a fiduciary we trust. We can’t know all the ins and outs - and volatility - of financial matters but we can participate with them in the best decisions for us with the information at hand.
I agree that fiduciary responsibility should be a requirement, but it's also important for anyone saving for retirement to know that fiduciaries still might not actually give the best advice. Since past performance is not indicative of future success, it's hard to prove recommendations on which funds to invest in are blatantly not in a client's best interest. We need more education and more reform on what retirement investments are available to workers. There has been some progress on this front.
Additionally, I suppose there is an argument against the fiduciary requirement as it may invite frivolous lawsuits by opportunistic law firms such as we see when stock prices decrease in value, creating another way to victimize unsuspecting retirement savers. Crappy financial advisors would also use this as an excuse to drive people into less risky investments, reducing investment opportunity.
Agreed. Imagine how much money we could save if we could buy cars without seatbelts. Consider the savings of being able to buy salmonella contaminated leafy greens. Behold the cheaper vibrant colors available with leaded paint. Choice! And I'm a consumer first and foremost, that's how I identify.
You compare dismantling the FDA with eliminating peoples’ ability to choose a financial advisor. Let me guess, you’ll gleefully ban combustion engines as well.
Always ask how they are being compensated. If the advice is free, then they are probably selling you a 'financial product'. Some RIAs also charge an hourly rate or flat fee instead of a percentage of assets under management.
Does anyone actually enforce this, tho? Keep reading about how IRS doesn't have enough agents to audit millionaires and my understanding is SEC is even worse.
There are usually penalties for misrepresenting yourself to cheat people out of their money, and I’m pretty sure this would qualify. The goal is to bend the law, not break it. Getting caught and sent to prison takes a lot of the fun out of it.
I agree with all of this. The personal finance industry shrouds itself in a fog of mysticism selling either self-interested guidance (at worst), or low value advice at best, all while skimming from your accounts, and often whether the actual account performance is up or down.
When I first had a little extra money and wanted to up my financial education, I came across Bogleheads.org, which has a message board and wiki that helped me enormously. They are named after John Bogle who was a founder of Vanguard and who advocated for low fee index fund investing for the average person as a means to saving that was simple to understand and proven over time. It’s demystified, free financial advice for the average person. I cannot recommend them more.
Man it'd be nice to have financial literacy be a required class in public high schools. Like Home Economics but for the 21st century.
As someone shamefully financially illiterate into my 40s, yes, I couldn't agree with this more. It would have been infinitely more useful than learning how to make English muffin pizzas in Home Ec in school.
Seriously! I hate to do the consumer-blaming thing like when we ask people to replace their HVACs rather than ceasing burning coal for electricity, but I feel like it'd be awesome to have an entire population be able to look at financial products and be like "Fuck off with that nonsense I'd rather keep my profits thank you very much."
It is, in many! More than half the states require financial education now, and there’s a movement to take it to all 50 over the next few years. The problem is that they don’t teach stuff like this.
Financial literacy classes, by and large, ignore the workings of the systems or the policies that uphold them. They teach individual responsibility: make a budget, build a credit score, choose stocks, stay out of debt. The current state of “financial literacy” perpetuates the problem Hamilton is writing about; it doesn’t solve it.
I wish I could find the exact number somewhere, but between interest and fees, The average American is paying something like 400+ dollars a month to the Financial sector. Over time, 2/3 of your 401k earnings actually go to the managers of it. This is why the Neoliberal turn desperately wanted to move from pensions to 401k's.
The history of how 401(k)s came about is pretty interesting: https://www.cnbc.com/2017/01/04/a-brief-history-of-the-401k-which-changed-how-americans-retire.html. The main impetus is that employers realized they could shift the risk of investing money for retirement from themselves to employees instead. The man who invented the 401(k), Ted Benna, has expressed regret that they have largely replaced pensions (aka defined benefit plans).
Nice!
https://wallstreetonparade.com/2013/04/pbs-drops-another-bombshell-wall-street-is-gobbling-up-two-thirds-of-your-401k/ (source for 2/3 of 401k going to Wall Street). I believe I read the source on the 400 bucks a month was a Michael Hudson book.
Twenty-five states do require high school students to take a financial literacy course: https://www.financialplanningassociation.org/sites/default/files/2024-06/Financial%20Literacy%20Fact%20Sheet%20-%20061424.pdf. It seems like a good thing but it's not enough. People need an opportunity to apply the information they are learning or else they forget it.
The problem is that financial literacy alone does very little to to change actual financial behaviors. Just because we know we 'should' do something doesn't mean we follow through and do it. I say that as a financial educator and coach.
Also, the Consumer Financial Protection Bureau (https://www.consumerfinance.gov/) is a great resource for financial education and information.
Good lord, man! This site is impossible. I loved this article, and I've been loving all of your articles. I can't even remember how I found you, but it's all quality stuff. And I've also appreciated how you're handling the account: not trying to force us immediately into a subscription. I understand that rent has to get paid, etc. But I have a job where I haven't had a raise since I started in 2018. Anyway, I hope you're getting adequate funding.
I've known for a long time that something stinks in the land of the FED. Just look at the Panama Papers where all the Europeans are trying to hide shit that is PERFECTLY legal in the States and requires nothing to hide. Or the shameless cash-grabs that keep happening with politicians betting one way on a legislation THEY are about to pass. Or the shit that happened during COVID where a bunch of thirsty ghouls just jumped on that fish and rode it. All the way back to 2008.
Explaining the mechanisms around how this works, and how these people fuck you is priceless and should be required reading. The problem is that the rubes can't believe that it might be true. In fact, they're invested in the very cognitive dissonance that will allow them to confirm in their heads that it's not true. The lefty, hairy scumbags are just trying to trick them. You're taking away my freedom, if you don't allow me to keep putting bills into this shredding machine... Not really a shredding machine, actually, because it transfers wealth to this vampires that do nothing and add no value. Gotta work on that one.
Anyway, I'm here to read the next one. Keep doing the good work.
Hey! As a hairy lefty, I...uh...what were we talking about?
The whole “financial advisor” gig ALWAYS seemed like a racket to me from the first time I heard about it. It just makes no sense. If you know how to make money from the market, you’d be making money from the market, not trying to make money off me. And if you have the secret to getting rich, the last thing you’re going to do is share it with anyone and risking the system being changed so your trick doesn’t work anymore.
Eeeehhh, I don't think it's a "racket" so much as it's a not-regulated-enough response to an obvious demand. Financial products are pretty byzantine to most people (so many Americans aren't invested in the stock market at all), so there's a pretty obvious need for a class of professionals who can make sense of it all and guide people through the maze. The issue is that those professionals don't have enough guardrails to keep them from skimming an obscene amount of money off their clients' accounts in the form of fees and expense ratios.
The thing to be wary of is the assholes who promote their classes on YouTube ads as the secret to getting rich quick. THOSE are the ones about whom you wonder why they're not just doing the thing in the first place.
Excellent piece on the importance of the fiduciary regulation. Another idea would be for the government itself to establish a retirement fund that each individual could pay into. Contributions to the fund could be tax free to a certain annual maximum, with the income drawn from the fund being taxable upon retirement. All funds to an individual's credit would form part of their estate on their death. The government could guarantee a return, say 1% or 2% above the annual CPI. That would be a reasonable return, with no agency fees, and it would be guaranteed against stock market fluctuations. The legislation could require that the fund be fully financed, so guaranteed for its payout liabilities. That would be the safest bulwark against the predatory investment industry.
This is such a good way to explain it. Financial advisors are not going to be a thing in my life but my relatives certainly, and I'm sure some of them have been preyed upon. The fact that no one is looking out for the client and that's by design doesn't ring true to them.
Hi Nolan
I like the open access nature of HTW. i would love to donate, but I saw you recommended donating at around 75k/year salary. I work at a public library and make 42k/year. How much would you recommend i pay per year for support? im glad you added the one time payment option. i bought your book last week, too. ive been a reader for decades (love all the baby gawker, employee owned media companies) and find you to be an effective communicator when i send your articles to my friends. i subscribed to ITT last night too.
i love your article on john bogle, i send it to all my friends to get them pumped about index funds and retirement accounts. in fact i wrote an open access book on index fund investing and diy planning: https://archive.org/details/they-began-to-open-fire i will add you, including this article, as an open access resource in my next version!
best of luck to you!
Thanks for reading Ryan. Don't feel pressed to donate if you can't afford it, I appreciate people just reading and sharing it and the people who can afford to pay can pay, and that will all work out. RIP Bogle.
you know, most of my friends think vanguard is a vast right wing conspiracy "because it owns 1/3 of the market." while markets are bullshit and governance /is/ an issue, articles like your deadspin bogle piece explain to them in ways i never could that vanguard being mutually owned is the best outcome for a crappy system where no one has pensions and everyone is personally responsible for their own retirement. until that is fixed, mutual ownership is as cool as employee ownership, nonprofit, open source, etc. thank you for connecting the dots and showing how important bogle was for the best attempt at derigging the system. RIP Bogle!
By far one of your best pieces, HamNo. Once again you’ve managed to succinctly articulate something that so many know is going on, but in a way that makes it much easier to convey to those who are unaware. In that way, you are arming the masses.
Great tip on Working People’s Podcast.
Thanks.
Grateful to have a fiduciary we trust. We can’t know all the ins and outs - and volatility - of financial matters but we can participate with them in the best decisions for us with the information at hand.
I agree that fiduciary responsibility should be a requirement, but it's also important for anyone saving for retirement to know that fiduciaries still might not actually give the best advice. Since past performance is not indicative of future success, it's hard to prove recommendations on which funds to invest in are blatantly not in a client's best interest. We need more education and more reform on what retirement investments are available to workers. There has been some progress on this front.
Additionally, I suppose there is an argument against the fiduciary requirement as it may invite frivolous lawsuits by opportunistic law firms such as we see when stock prices decrease in value, creating another way to victimize unsuspecting retirement savers. Crappy financial advisors would also use this as an excuse to drive people into less risky investments, reducing investment opportunity.
The issue is choice, not white hat cowboys and black hat cowboys.
We can have politicians regulating our affairs or let consumers in the marketplace regulate for themselves.
I choose not to pay fees to an advisor, but I have in the past.
My money, my choice.
If you don’t trust yourself, I understand why you would prefer politicians making choices for you.
This is the United States, where consumers want more choices, not fewer.
Agreed. Imagine how much money we could save if we could buy cars without seatbelts. Consider the savings of being able to buy salmonella contaminated leafy greens. Behold the cheaper vibrant colors available with leaded paint. Choice! And I'm a consumer first and foremost, that's how I identify.
You compare dismantling the FDA with eliminating peoples’ ability to choose a financial advisor. Let me guess, you’ll gleefully ban combustion engines as well.
What's wrong with dismantling the FDA? People should do their own research. Vote with their dollars.
Um, dumb question, but if i am paying someone for financial advice, how do I figure out if they are a fiduciary or a robber?
Just ask them if they're a fiduciary.
But can't anyone just SAY they are a fiduciary? Are there any penalties for misrepresentation or, y'know, LYING about it?
https://smartasset.com/financial-advisor/is-my-financial-advisor-a-fiduciary
Always ask how they are being compensated. If the advice is free, then they are probably selling you a 'financial product'. Some RIAs also charge an hourly rate or flat fee instead of a percentage of assets under management.
I’d start with asking them. I suspect it’s illegal to represent yourself as a fiduciary when you’re not.
Does anyone actually enforce this, tho? Keep reading about how IRS doesn't have enough agents to audit millionaires and my understanding is SEC is even worse.
There are usually penalties for misrepresenting yourself to cheat people out of their money, and I’m pretty sure this would qualify. The goal is to bend the law, not break it. Getting caught and sent to prison takes a lot of the fun out of it.
"Getting caught and sent to prison takes a lot of the fun out of it."
2 marks for the clarity.
Billionaire’s Ball at Trump inauguration to celebrate tax cuts for the super-rich: Gotta Pay-to-Play!
https://thedemlabs.org/2025/01/16/billionaires-ball-at-trump-inauguration-to-celebrate-tax-cuts-for-the-super-rich/
I agree with all of this. The personal finance industry shrouds itself in a fog of mysticism selling either self-interested guidance (at worst), or low value advice at best, all while skimming from your accounts, and often whether the actual account performance is up or down.
When I first had a little extra money and wanted to up my financial education, I came across Bogleheads.org, which has a message board and wiki that helped me enormously. They are named after John Bogle who was a founder of Vanguard and who advocated for low fee index fund investing for the average person as a means to saving that was simple to understand and proven over time. It’s demystified, free financial advice for the average person. I cannot recommend them more.