How Some Financial Experts May Be Misleading Consumers

Journalist and former financial columnist explains what’s wrong with the personal finance industry.

Your school's financial aid director should be ready to discuss student debt issues with you.
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According to Helaine Olen, many television and radio financial experts who advise people on what to do with their money are often not, in fact, giving good advice.

Olen explores this and other problems with personal-finance industry experts in terms of some of the ways they instruct Americans to save, spend, and invest in her new book, Pound Foolish: Exposing the Dark Side of the Personal Finance Industry. She believes many of these poor financial tips aren't openly discussed, which she says can lead people to assume if they do everything they're told, everything will be OK. Olen says she picked up on this alarming trend while working as a financial columnist for The Los Angeles Times from 1996 to 2001.

There is no "right" financial advice, according to Olen. Naturally, some tips are better than others, but she says the belief that you can fully prepare for an economic cataclysm or bad financial luck isn't true. U.S. News chatted with Olen about why she thinks national financial tutors like Suze Orman and Dave Ramsey get it wrong, what financial advisers lie about the most, and just how dark the dark side of the personal finance industry is. Excerpts:

In what ways do you think financial experts feed people bad advice?

I think they do it in a couple of ways. The past several years for people have really been a financial Hurricane Sandy. By telling people that if they put up a few financial umbrellas and sandbags that they're going to be OK, it's just not necessarily true. And then you turn around and add the fact that all too many financial advisers are really glorified salesman brokers, and they're the ones who are selling you the sandbags and umbrellas.

[Read: 3 Questions for Your Financial Advisor.]

Generally, the whole idea many of them try to sell that "if you do this, you will definitely be saved" is by definition a false one. If you look at the email solicitations or the letters for free lunches, it's very much "Seniors afraid about living on your retirement savings: I have a plan! Come this way!" And what their plan many times is, of course, to tell you something that they're going to make money off of.

In Pound Foolish, you assert that no one can accurately predict the future outcome of investments—that they would need a crystal ball to foresee which investments will turn out well and which will turn sour. Is that truer now than in the past, or has is always been a guessing game?

I think it's always been a guessing game. What we've been told is the stock market has gone up consistently in the past, but to assume that this is a given for the future really is not true. We learned this in 2008, when people who needed their money right then and there no longer had it.

I don't want to say it's absurd for someone to think they can predict the path of the stock market. Warren Buffett has done quite well for himself. But most people can't beat the market on a regular basis, and there's a whole infrastructure telling them that they can.

In the book, one reason you say people in their twenties and thirties aren't good at planning for retirement is that they're so concerned about their current priorities—paying off student debt, saving for a house, living in the moment. How many of them do you think would save more if they could meet their future selves?

Studies show people would save a little bit more after meeting their future selves. But most people can't save the right amount of money because they simply can't afford to. So I think seeing your future self would help, but it wouldn't solve the problem.

Merrill Edge recently launched an online tool called Face Retirement. A person can use it to take a picture of their face and watch it render an illustration of how they'll look as a senior citizen. Do you think it would be beneficial for people to use a tool like that?

The big picture is this: More than half of us, depending on what survey you look at, are living paycheck to paycheck. And there's this assumption that we're a bunch of slacker slobs and we just need a little push or nudge to save more money. When we see that many people having a problem, I don't assume that they need a nudge—I think there's a bigger problem out there.