Mark Tibergien says there's a fairly straightforward way for financial advisors to both improve their business and that of the broader industry, while getting more Americans to improve their financial health: Boost financial literacy.
The CEO of Pershing Advisor Solutions made his push on Thursday during the company's INSITE gathering in Hollywood, Fla. His views were echoed on Friday by Brian Shea, president of investment services at BNY Mellon, Pershing's parent company.
"I want to appeal to you about something that can transform" our society, said Tibergien, "since we know that financial illiteracy is rampant."
The advisor guru explained that today's young adults do not get exposure to basic financial issues in high school and are simply "not prepared to deal with credit cards, banking, etc."
Many individuals today "are in dire straits, once again," Tibergien explained, "and at its core are many of the factors that contributed to financial meltdown in '08," such as large levels of debt and the use of risky financial products.
At the same time, he notes, the level of trust in banks and financial institutions is very low, and the industry is unable to attract the talent it needs to thrive.
That raises the question, he says, "Is there a correlation between the level of financial literacy, the reputation of the industry and its lack of appeal to those looking at this work?"
As today's advisors retire, the financial-advice business will need about 230,000 replacements. Yet, the industry is only about to hire about 12% of its workforce right out of college.
"Only about a third of consumers think advisors look out for their best interest …," Tibergien said. "Many in Congress say our business is for criminals and crooks, and there are plenty of folks who think the [financial] system is rigged against them."
Among advisors, 37% say they would not recommend the job to their children or others.
Literacy Lesson
But advisors can turn this around.
"My premise is that the Great Recession was caused by the rampant level of [low] financial literacy … which makes it easy for consumers to be susceptible to those who want to take advantage of them," he shared.
"If you had more literacy, would you be as vulnerable?" Tibergien asked, suggesting that the answer to the question has serious implications for the advice business.
"The point is not to depress you, but to stir you," the practice-management expert said. "Is there anything we can do? Our industry is not trusted by prospective employees and clients. It's time to act!"
One step that can make a difference is for advisors to define their legacy and then move on it. "Could you help create a better environment for investors to do business in?" Tibergien posed.
