Mueller Jackson
Jackson Mueller
Associate Director, Center for Financial Markets
Jackson Mueller is an associate director at the Milken Institute's Center for Financial Markets. He focuses on fintech, capital formation policy and financial markets education initiatives. Prior to joining the Institute, Mueller was an assistant vice president at the Securities Industry and Financial Markets Association (SIFMA), where he focused on...
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Getting from Financial Inclusion and Literacy to Financial Health

By: Jackson Mueller
June 05, 2017

Does being financially literate automatically lead to overall financial health?

In today’s financial marketplace, consumers have unprecedented access to a variety of financial products and services, but understanding which products and services are the right fit to build financial resilience and opportunity—the foundational elements to building positive, sustained financial health—is a challenge. This challenge is amplified when you consider the following realities: 

  • Financial education is changing. The approach to greater financial health through early intervention and hands-on education efforts is daunting when you consider the lack of interest in financial literacy across the 50 states, the need for teacher training, generational differences, societal issues that are not uniform across the nation or state-to-state, the difficulty of building financial habits among children and their parents, and being open to leveraging advancements in technology to drive behavior.
  • The workplace is changing. Americans are increasingly becoming untethered from past employer-based benefits systems as subsequent generations are moving into an era of personal responsibility, diminishing pension plans, and emerging defined contribution plans, among other life-changing developments. Issues concerning contribution amounts, mobility and portability present challenges especially in an age where life expectancies are getting longer and longer.

How do we move the goalposts from just including more people in the formal financial services system to enabling them to build financial health—and what is it going to take (or look like)?

In May, the Milken Institute Global Conference convened panelists and participants to address challenges like this—how to drive overall financial health by focusing more on understanding consumer behavior and engaging with individuals at the right time to effectively bridge the current gap between “knowing” and “doing.” In part, it is the responsibility of organizations to develop the right set of incentives that lead to positive and sustained behavioral changes that move individuals beyond inclusion and literacy to financial health.

To start, financial education needs to begin early on and often, as Nan Morrison of the Council for Economic Education (CEE) stated during the Getting from Financial Inclusion and Literacy to Financial Health panel at the Global Conference. Engagement through interactive financial lessons where kids can learn about the management and control of money can have a long-lasting impact on one’s financial health, as described further in a Financial Industry Regulatory Authority (FINRA) study. Positive developments can also lead to secondary effects where parents of children engaged in financial education programming are also influenced by the material via their children.

Beyond the human element, advancements in technology have made it possible to provide the right kind of products and services to consumers. For example, Kari Dohn Decker, managing director of corporate responsibility for the Western region, discussed how JPMorgan Chase continues to glean as much behavioral insight as possible based on the data from the firm’s 50 million U.S. customers. Leveraging data analytics in real-time, the firm can identify the various shocks to U.S. households across all income spectrums, while developing products and services that provide enough of an incentive to change consumer behavior to spur healthier financial choices. In addition, the firm has made significant investments (more than $100 million) in nonprofits serving the unbanked and underbanked nationwide in search of scalable opportunities.

Among the investments JPMorgan Chase has made is a $30 million investment in the Center for Financial Services Innovation’s (CFSI) Financial Solutions Lab. Jennifer Tescher, president and CEO of CFSI, says the Lab’s efforts focus on identifying and championing platforms building resilience, knowledge, and communication into the product experience to drive behavioral change.

The built-in experience is manifested in companies like Earnest (a tech-driven lender focused on student loan refinance and personal loans). The platform allows more effective communication with customers by providing them with interactive tools that coach customers from a basic understanding to making informed financial decisions, ultimately raising the financial health of the individual. Louis Beryl, founder and CEO of Earnest, goes so far to say it is the responsibility of Earnest to educate clients as they make their decisions using precision pricing—a tool that provides for a more personalized level of service where the company actually instructs the borrower on the different types of options available and total costs in a real-time, transparent environment.

According to Jerry Patterson, Senior Vice President of Retirement and Income Solutions at Principal Financial Group, that sort of personalized engagement is reflected in the firm’s efforts to provide a more individualized, down-to-earth conversation on retirement planning through the My Virtual Coach resource that has enabled Principal to deliver more tailored products and services. Interactive engagement has provided the six million participants and individual investors that Principal serves with in-the-moment learning with a service that can be accessed anywhere, across any device, at any time. Through this service, Principal has been able to break through a customer’s aversion to providing financial information due to feeling ashamed—one of the top reasons for not seeking financial advice—through the guise of technology.

From financial inclusion to financial literacy to financial health. If the end game is truly fostering financial wellbeing, the ability to withstand financial shocks and build intergenerational wealth must be a part of the equation. As Tescher said during the panel: “Financial literacy is what you know. Financial capability is what you do. Financial health is what you achieve.” Focusing on the behavior of an individual, engaging with customers through leveraging technological advancements, and developing the right kind of incentives builds bridges between “knowing” and “doing,” while simultaneously expanding the level of choice we all have to build better, healthier financial lives.


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