Data & Research December 11, 2008

What’s a Subprime Mortgage?

Participants might know less than you think about personal finance and the economy, a poll of Americans suggests.
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It may or may not come as a surprise that a survey from the Center for Economic and Entrepreneurial Literacy (CEEL) found that the majority of Americans are unable to answer some of the most basic questions about borrowing, interest rates, financial terminology—and even math. The CEEL said in a release the survey “underscores the need for increased education on personal finance and economic issues.’

Some highlights from the survey include:

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  • 54% of respondents could not identify what a subprime mortgage was.
  • 56% of respondents could not identify FICO score as the most important factor in getting a loan.
  • 65% of respondents could not identify what would remain if you subtracted 25% from 8. One in three respondents could not identify what 1% of 50,000 was.
  • 75% did not know that when in need of short-term emergency cash, bouncing a check costs more than wire transfers, credit card advances, and short-term payday loans.
  • Half of respondents have overdrafted their checking account at one time, while a third of respondents have paid a bill late in the past year.
  • 35% of respondents admitted to not having a family or personal budget that would allow them to conceivably eliminate their credit card debt by the end of 2009.

“It is clear that we need to increase personal finance education at all ages so we have better informed employees, borrowers, and voters,’ said James Bowers, managing director for CEEL, in the release.

The telephone survey was conducted by Opinion Research Corporation among 1,004 adults in private households in the U.S.

More information about CEEL is availalbe at www.econ4u.org.

Compliance December 11, 2008

Financial Planning Organizations Band Together

Three financial planning organizations—Certified Financial Planner Board of Standards, Inc. (CFP), Financial Planning Association (FPA), and National Association of Personal Financial Advisors (NAPFA)—said they have come together to pursue industry reform.
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The groups plan to hold a series of meetings to discuss a unified response to widely expected reform of the financial services industry by the next Congress, though the specifics of reform have not yet been determined.

The groups said in a press release that the leadership of the three organizations met Dec. 3 at CFP Board’s Washington, D.C., offices. The purpose of this meeting was to review regulatory gaps in the delivery of retail advice and other financial services to consumers, as well as the opportunities and threats with respect to establishing appropriate standards of conduct for the financial planning profession.

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Speaking with PLANADVISER.com, Diahann Lassus, national chair of NAPFA, said the financial crisis and the entry of a new Congress and administration made the timing right to have these talks, especially as the market affects individuals—making sure consumers are protected and know where to get advice is a large part of what the organizations do, she said.

“We are very pleased to have opened positive lines of communications within the financial planning community to discuss an issue that is so critical to consumer protection,’ the group said in a joint statement. “As a component of regulatory reform, we anticipate that, at some point in the near future, Congress will consider enhanced protections for consumers of financial services.’

Financial planning is currently regulated indirectly through licenses held by investment advisers, securities brokers, and insurance producers or consultants, but not as a separate, stand-alone profession. “We would like to see smart regulation for financial planners…so that we can eliminate some of the complexity…and make it clear to consumers who they need to go to for advice,’ Lassus said.

The group intends to reach out to other organizations in order to seek feedback from stakeholders on future regulation of the financial planning profession.

“I just think that going forward this is really important that the three of us work together and that other organizations that share our goals step up and work with us, because the more organizations that work together, the more likely we are to be successful,’ Lassus said.

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