Financial Advisers Selling Bogus Advice?

Skipping $4 lattes will save you some money — but buying into bogus financial advice won't. Finance journalist Helaine Olen says many of the so-called 'financial experts' are selling you advice to make themselves rich. She discusses her book, Pound Foolish: Exposing the Dark Side of the Personal Finance Industry with host Michel Martin.

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MICHEL MARTIN, HOST:

This is TELL ME MORE with NPR News. I'm Michel Martin. In these tough economic times, you might be looking for some advice on how to handle your finances, and you are, not only, not alone, you have a lot of advice to choose from. Our next guest says that there were more 300,000 financial advisers in the U.S. in the year 2011 alone. The only problem is, according to our guest, some of these people have no idea what they're talking about or are just trying to sell you things to make them rich.

Helaine Olen is the author of the book, "Pound Foolish," exposing the dark side of the personal finance industry and she is with us now.

Welcome. Thank you so much for joining us.

HELAINE OLEN: Thank you for having me.

MARTIN: Now, Helaine Olen, yours is a name some people might know because you actually used to write for the Los Angeles Times Money Makeover series. You've written for Forbes and now you've written a book that says a lot of these people don't know anything and, oh, by the way, they are snake oil salesmen.

OLEN: Right.

MARTIN: How did you come to this conclusion? Was it a gradual thing or did you know from the beginning that it was bunkum?

OLEN: It was both gradual and sudden. I should go back and tell the story of how I became the Money Makeover columnist for the Los Angeles Times, which involved somebody calling me up one day while I was freelancing in Los Angeles and saying, do you know anything about writing personal finance? And what I knew at that time was that personal finance paid a lot more than politics and feature writing, which is what I was doing. And so, of course, I said, yes. And I thought, I'll get one check. This will be a disaster and I will go on my way.

And, of course, that's not what happened. I ended up buying "Personal Finance for Dummies," doing the interview and somehow getting another assignment, and another assignment and another assignment.

And I quickly realized two things. The first was that a lot of this stuff wasn't really very complicated. Things like mutual funds, which sound mysterious, are actually very easy to understand once you look at a definition. On the other hand, of course, I could be an expert because no one was an expert. Nobody knew what the stock market was going to do in six weeks, never mind six months or six years. No one knew if you were going to keep the job you were in, or if you were going to get fired or if the economy would go into the crapper and your company would go bankrupt. All sorts of bad things could happen, and we really had no way of knowing, but we pretended we did.

MARTIN: How did these financial gurus get to be so popular with the public? And I do want to mention that you name names in this book. You go down the list of some of the most popular names and you point out that there are unusual circumstances in some of these people's backgrounds that led to them achieving the success that they have. How did these people get to be so popular?

OLEN: I think what it is is we're desperate for solutions. We've been living in an environment since the late 1970s, early 1980s where our salaries have stagnated and fallen. Our net worth, alone, between 2007 and 2010 plunged by 40 percent. At the same time, we were expected to do more and more with less and less. It used to be we had pensions. Now, we have 401Ks - if we're lucky. Half the population doesn't have them at all.

So we began to look outside ourselves for advice and these people were there.

MARTIN: You write in the book, it occurred to almost no one that we were looking to personal finance, real estate and the stock market to fix long-term economic problems. Our increasingly individualistic culture caused us to embrace a self-help approach to what was clearly a greater social issue. What's the greater social issue, and why wasn't it - if it's so clear, why wasn't it clear? Why isn't it clear now?

OLEN: The greater social issue is that, as I said, our salaries are falling and we have very limited resources, from pensions to 401K savings to any form of real help with these things. And it is obvious, I think, to people. I think people understand that they don't have what we used to have, but I think we've lost the language to articulate that, so we keep thinking it's us. We're alone. We don't see ourselves in all of this together.

MARTIN: Is it your view that relying on these personal finance gurus are covering up bigger economic problems that are actually better handled politically? These are really political problems?

OLEN: Yes. And I've always said the genius of the Occupy Movement, whatever else you thought of it, was that they were the first group in probably more than 30 years to make the link and say, hey, if you have a problem with your house being foreclosed on, and you can't pay your student loans and you're going bankrupt for medical expenses, instead of saying all of you have an individual problem, you messed up your financial lives; they turned around and said, maybe we all have a problem here and maybe we should look at this as a group effort, not as a solitary effort.

MARTIN: But, even so, what did you call it? The personal finance industrial complex?

OLEN: The personal finance industrial complex.

MARTIN: Personal finance industrial complex, kind of, rolls on. So what does that say?

OLEN: I think people don't totally have a choice at this point. It's one thing to say, she's right and we have a greater problem, but that's not going to necessarily help you in the short run. I mean, we still need to manage our money. Just because the 401K has not really helped very many people - for example, the vast majority of us have less than $100,000 saved for retirement - that doesn't mean it's going to go away tomorrow and you shouldn't be looking at what to do with your money that you're putting in there.

MARTIN: Who can you trust?

OLEN: Yourself.

MARTIN: Really? I mean, but part of the point that you make, though, is that most people don't really feel that they understand this stuff. Stuff's complicated, but you're saying maybe it isn't that complicated.

OLEN: Well, I think it's twofold. Obviously, some of the terms are quite easy and the financial services industry preys on us by making it seem much more complicated than it is. On the other hand, a lot of the stuff they're selling us is very complicated and they put out this idea that, if we were just financially literate, we could understand it; when, in fact, it would just be simply a lot easier to pass laws and legislation so that this stuff was explained to us or couldn't even be marketed at us.

MARTIN: What's the biggest myth that you would want to explode with your book?

OLEN: That we're responsible for all of our own financial failures. I mean, obviously, somebody who's a shopaholic is responsible for their financial failures, but we know from all sorts of academic work that that's not what's going on with most people. That most people declare bankruptcy because of medical bills or because they lose a job or because of fractured families; that it's just not our fault that, if we retire and we're not millionaires, that we somehow failed. We didn't.

MARTIN: Helaine Olen is the author of the book, "Pound Foolish," exposing the dark side of the personal finance industry. She's with us from our bureau in New York.

Helaine, I want to thank you so much for joining us.

OLEN: Thank you for having me.

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