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More on "Financial Literacy"

Hard on the heels of a recent post on the perceived need for financial literacy in clients and the role of advisers in helping with that, another real life client experience underscored the point. This particular client (not my own) is a professional in higher education and earns a good living. Like many of us, this individual is a procrastinator, particularly with regard to issues that are not of interest and in this client’s case that would be financial issues. The client is one of those persons who spends most of income and does not really keep track of the flow.

Now for the example this client’s story provides: The client owns a home and for years has been plagued with leaking areas of that home’s roof. Though estimates have been provided – running the gamut from a whole roof replacement to effecting the minimum repairs immediately necessary – the client has not taken any steps to rectify the problem and protect the investment the home represents. The client says it is too expensive and the money is not available to pay for the work.
At the same time, the client, tired of the harsh winter, expressed interest in purchasing a new car. The reasoning being that the current vehicle is not four wheel drive and there are times when it is difficult to get out of the driveway because of packed snow and ice where the driveway meets the street.  The client will almost certainly go ahead with this significant expenditure because that is what is wanted.

I am not certain if I have any sympathy for either the client or the adviser who related this tale. An important role for the adviser is to advise and educate the client about financial decisions. If the adviser can make the client understand why it might be wise to at least effect the minimum level of roof repair and take the time to shovel out the end of the driveway, then a great service has been done. If not, the best bet is to fire that client since it is unlikely that the client will ever benefit from financial advice. The point of this story is to underscore the need for clients to better understand financial issues and make better decisions. 

1 Comment to More on "Financial Literacy":

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Intraday Tips on Monday, January 18, 2016 7:14 AM
I must say that overall I am very taken with this site. It is apparent that you know you subject matter and you are passionate about it. I wish I had got your ability to write. I have bookmarked your site and look forward to more updates.
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