America Needs Financial Advice

5. Creating a Retirement Plan

A plan to accumulate retirement savings and, once full-time work stops, a retirement income plan. There are numerous decisions that need to be made to develop these plans including asset management, benefit elections and properly covering expected healthcare needs.

6. Creating A Personal Financial Safety Net, including an Emergency Fund

The pandemic has taught us that the unexpected can and does happen. A cash emergency fund (ideally six months' – worth of essential living expenses (e.g., groceries, housing, transportation, debt service and utilities) should be established to help offset the unexpected costs of life, including medical bills, house repairs, accidents or a period of unemployment.

7. Putting Proper Insurance Coverages in Place

Insurance coverage is purchased to provide cash for future delivery to help minimize the costs of financial risks. Consumers need to have a comprehensive set of coverages in place that should include:

• Health insurance
• Long-term care insurance (for over age 50 individuals)
• Disability insurance or income protection insurance
• Auto and homeowners'/renters' insurance
• Liability insurance
• Life insurance
• Longevity insurance

8. Developing A Legacy or Estate Plan

At a minimum, households need wills and other essential legal documents in place. Having a professional highlight which documents are needed and should be in place will create a much stronger household if an unexpected life event takes place.

In my view, completing the above basic personal financial planning actions would strengthen and better prepare America's households for the future. A more financially secure future.

Suggested Industry Actions

If each American household were able to have even the most basic financial plan in place, backed by increased personal finance knowledge, we would likely have more financially secure and less money-stressed families. Here are some suggested actions the financial services industry should consider:

• Examine existing licensing standards with the objective of creating the ability for more professionals to provide basic money management advice to consumers.
• Carefully consider any new regulatory proposals for their impact on consumer access to advice.
• Continue to increase the number of financial wellness programs available through employers and benefit plan providers.
• Agree that it costs to provide financial advice and/or services and that for many households an up-front commission included in the product allows them to access products and services they would not if they needed to pay up-front costs. Product commissions are not always bad and the result of conflict of interest. For every piece of advice delivered or financial product sold someone is paid to deliver the service or product. We need to better acknowledge this.
• Develop new standards to create "advice-lite" offerings that would allow more professionals to work with consumers on their money basics such as budgets, expense management and debt repayment.
• Create an above-the-line deduction for households to get and pay for financial advice. Without this advice many households have nowhere to go to get the basic financial education they need.

Given the levels of personal financial knowledge in our country today, American households need advice to help guide their savings, investing and cash flow management decisions. All constituencies, including product providers, advice organizations and their respective regulators need to join in this effort to expand the availability of advice.

Harry N. Stout has been the president of Fidelity & Guaranty Life, deputy chief executive of Old Mutual Financial Network, and managing director of Insurance Insight Group. He is also the author of the new book Good Money Habits in 17 Minutes Per Day and host of the FinancialVerse Podcast.