What is a Financial Educator?

December 05, 2013

A few weeks ago, I wrote about my journey towards a career in financial education. But now whenever people ask me what I do, I always prepare for a longer conversation than if I were to say I’m a lawyer or I work for Google. If I say I’m a financial planner, people assume I’m selling something. If I say I’m a financial educator, people assume I teach at a school or university. To understand financial education, let’s take a look at how it relates to financial media, sales, and advice since I have some experience with each of them:

Financial Media

Pro: It’s widely available for little or no cost. You can Google practically any financial topic and get lots of free “information.” The “financial gurus” on radio and TV can be quite entertaining. There are also numerous financial books, magazines, and newspapers you can purchase for a relatively low cost or borrow from your local library.

Con: There’s a ton of information out there and you have to sift through quite a bit to find something that’s currently accurate, unbiased, and applicable to your situation. This can take a lot of time and mistakes can be costly. The media also has a bias towards stories that are entertaining and sensational while a lot of the best financial wisdom is relatively dull and not “newsworthy.”

Financial Sales

Pro: A financial representative or advisor can save you time in providing information that’s relevant to your situation.

Con: That information is often biased if the person providing it has an agenda to sell you a particular financial product or service. They may emphasize the pros rather than the cons and leave out other options that may be better for you but do not pay a commission to the salesperson. The only legal obligation may be to sell you something “suitable” but it may or may not actually be in your best interest.

Financial Advice

Pro: You have a much better chance of getting unbiased information. Financial advisors have a fiduciary liability to act in your best interest. Some are “fee-only,” which means they only sell advice and are not compensated by commissions from the sale of particular products.  They often can manage your assets for you on a discretionary basis, which saves you the most time.

Con: Advisors who charge an investment management fee still have a bias toward you investing money with them rather than paying off debt or investing somewhere else. That management fee, generally around 1% of assets, can also be very expensive. A small number of advisors charge hourly or annual fees but they are hard to find and people are often reluctant to write a big check for advice.

Financial Education and Guidance

Pro: Pure financial educators (as opposed to salespeople doing financial education to attract clients) are the most unbiased source of information because there is no other agenda to sell a product, manage assets, or sign you up as a client in any way. The service is also usually free and paid for by institutions like employers and credit unions. With guidance, you’re provided the information that’s most relevant to you.

Con: It’s generally only available if you’re an employee or a member of an organization that provides it. You also have the responsibility of making the final decision and “pulling the trigger” to implement. A financial educator can lead you to water but can’t make you drink it.

Your best bet is to use a combination of each. Financial education is a good place to start so you don’t get pulled towards someone else’s agenda. A financial educator can provide you with accurate and relevant articles to help you better understand your options. They can also help point you in the direction of advice that may be appropriate for you. For example, many employers and retirement plan providers offer programs like Financial Engines to employees that can provide unbiased investment advice online at no additional cost to you. Finally, a financial educator can help you decide to purchase long term care insurance and understand what to look for in a policy but when it comes time to make the purchase, a specialized agent can be helpful in finding the right product and walking you through the application process. Each source of information has its own place. Just make sure you know it and keep them there.