Financial Literacy

Improving Financial Literacy Skills

Financial literacy continues to provide challenges for American families, despite industry-wide efforts to strengthen consumers’ understanding of basic money management techniques.
An October 2020 study by the FINRA Investor Education Foundation found that financial literacy skills are a significant predictor of future financial outcomes. However, FINRA also found little change in financial literacy levels over its six-year study period. According to a recent Gallup poll, only 24 percent of Americans use professional financial planners. The National Foundation for Credit Counseling’s 2020 Financial Literary Survey also indicated 78 percent of Americans felt they could benefit from professional guidance.

Providing educational training and tools to improve financial literacy was the driving force behind creating Trusted Capital Group (TCG) in Austin, Texas, according to John Pesce, CEO and co-founder. He said his own experiences as a youth and his early days working in the financial industry convinced him that people from all walks of life need objective advice to help them better manage their money. TCG began as a consulting advisory firm to address that need.

“It's in our fabric of our company to be out there educating people,” he said. “We have always felt if we educate people and they know what we're truly about, they would come to us and the money will take care of itself. That's how we built this company.”

JP 1Pesce said TCG primarily works with two types of clients. One group consists of institutions including private and public (such as school district and local governments) sector organizations where TCG manages both retirement and pension plans along with operating capital cash management strategies for over $3 billion dollars in assets and 700,000 participants. TCG acts in a fiduciary role, monitoring the performance of institutional plans and making adjustments as needed, that benefit the client. The second client group comprises approximately 1,000 individual investors. Most of those retail clients are business owners and executives, with many referrals generated through the advisor platforms at TD Ameritrade and others.

“We deal with both ends of society,” Pesce said. “If you look at our institutional clients, there's an abundance of people who are living paycheck to paycheck. We feel that as a mission for our company, it is just as important to help those people as it is to advise the business owner. In fact, even some business owners need help with credit scores and things of that nature.”

Pesce grew up in a poor neighborhood in Brooklyn and later served in the military. In both those settings, he said, opportunities for financial education were limited or non-existent, enabling numerous financial firms to take advantage of consumers.

“When we talk about helping people, we’re talking about avoiding the predatory lenders,” he explained. “We don't want people going to payday loan lenders, pawn shops, or rent-to-own places. That's all the stuff that I knew as a kid and saw when I was in the military.”

In 2019, TCG began supporting Foundation 99, a 501(C)(3) nonprofit public charity that seeks to build economic security through financial education to help the 99%. The company contributes funding and other resources to the foundation.

chris quote1Christopher J. Jamail, CFP®, partner and chief marketing officer at TCG and also a founding board member of Foundation 99, said the nonprofit helps those individuals who need assistance the most. Many people are not taught good financial habits growing up, he said, or are not born into situations where they can learn from their mistakes without detrimental consequences to their finances. TCG focuses considerable efforts, time, money and energy helping to build Foundation 99 so it can provide coaching to people with the greatest needs.

“There are large segments of our community where people never receive financial education,” Jamail said. “As a result, they need extra help building strong financial habits.

In school, people are taught to think and process in a rational, logical manner, he continued. However, most people make money decisions emotionally rather than rationally, and make decisions on autopilot.

“This is why good financial habits are important, and why we also spend so much time educating and working with our clients,” he said. “We focus on better financial habits with our clients, so this behavior becomes commonplace for them.”

Pesce said many groups talk a good game about coaching and financial wellness. However, in reality, the guidance from those companies often encourages clients to improve their lives by buying the firms’ products and services.

“We felt instead of just talking, we should put our money where our mouth is and start the nonprofit,” he added. “We have coaches available who do not have an agenda to sell anything. We truly are there to help people.”

One priority in coaching is to teach people how to improve their credit score.

“If you have a 500 or below credit score, life is difficult,” Pesce said. “We're trying to help get people's credit scores up over 680, but people don't know how to do that. Many people don't even know what their credit score is.”

Another example is helping people understand what the term “fiduciary” really means. Pesce said that question goes to the crux of why he and his partner started the firm more than 20 years ago.

“This is an area where the industry doesn't have a good track record,” he added. “I got irritated over the years with people calling themselves a financial planner and an investment advisor, and using these names interchangeably. For the client, it is confusing to know who really does have your best interest at heart.”

Jamail added, “It seems accountability has been missing for too long in the industry. Many people ultimately do what is in the best interest of themselves, rather than in the best interest of their clients.”

TCG also sets no financial minimums for clients. Pesce said not establishing a firm minimum was a conscious decision that grew out of his upbringing.

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“I never wanted to tell someone, ‘You're not good enough for us and you don't have enough money’,” he said. “Everyone in our entire firm feels it does not matter whether you have $500, $5 million or $50 million dollars. To the person who has $5,000, their money means as much to them as it does to the person who has $50 million.”

While there are only certain portfolios available to those with lower account balances, Jamail added, the firm has also developed sophisticated investment management strategies for wealthier clients. Those include estate planning, trust, wills, and tax preparation. Increasingly more of these services are being offered in-house as TCG evolves into a full-service advisory firm.

Jamail said that TCG creates a financial plan for each client. As their lives change and financial planning needs evolve, advisors hold conversations with clients and provide tools to modify those plans.

“The most effective plan is one that's tailored to the specific needs of each person we serve,” he said. “It's not an easily automated process – nor should it be, as you're working with clients on what is their livelihood. Our client service model meets each person where they are. Doing what is right for the client means tailoring the approach to them and their individual needs.”

An innovation that has proven particularly useful during the COVID-19 pandemic has been TCG’s new TeleWealthTM platform, introduced in early 2020. TeleWealthTM allows clients to schedule virtual meetings with their financial coach and conduct them remotely through telecommunications technology. Jamail compared the service to the emerging telehealth platforms now found in the medical field, except TeleWealthTM provides remote assistance for financial matters.

“Our TeleWealthTM platform provides new ways to continue connecting with our clients,” he added. “We allowed clients to reach out to us when they were more stressed, as opposed to waiting for an office hour time slot. Just because clients are behind a screen doesn't mean that we were not able to connect just as deeply with them.”

For more information on Trusted Capital Group, visit: tcgservices.com and foundation99.org

 

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