For decades, investment professionals have focused on wealth management, trading, selling funds products and 401(k)s, but there has always been one glaring omission: These same professionals have intentionally avoided the millions of Americans who live paycheck to paycheck and have no savings.
And since they are unable to participate in the investment game and generate commissions and fees, they have been ignored by financial professionals and the entire investment industry.
The obvious problem is that this group represents millions of Americans who are unable to pay their bills since they live paycheck to paycheck. Many of these people work full time, but due to low wages, they fall into the category of the working poor. According to the Bureau of Labor Statistics (BLS), the number of “working poor” in the United States was 10.5 million in 2013. “The working poor are people who spent at least 27 weeks in the labor force during the year—either working or looking for work—but whose incomes were below the official poverty level,” the BLS said. The working-poor rate, or the ratio of the working poor to all those in the labor force for at least 27 weeks, was 7% in 2013.
This group is also expanding because of facile credit card access, prompted by living in a commercial society. In a recent trip to the large Sawgrass Mills shopping mall in Sunrise, Florida, the largest lines I saw were for luxury goods stores, such as Chanel, Jimmy Chew, Versacci, Armani, Coach and Venga. The allure of owning a luxury item overwhelms the ability of many people to pay for them in cash.
This number of people under financials stress will increase under the new presidential administration and it represents a huge loss to the nation, as well as the investment industry, since these people could also
use investment guidance.
Financial stress also has specific impact on physical and mental health. An article on AlterNet noted the specific reactions to people who are under constant financial stress. These negative reactions include:
–an increase in mortality rates due to physical stress. This includes coronary disease and PTSD;
–lower cognitive abilities;
–the lack of a “financial personality” that prevents people from managing their own finances;
–an increase in PTSD-type symptoms from people who have suffered financial losses due to divorces and inability to manage money. The article found that 23% of adults and 36% of millennials fell into the diagnostic category of PTSD as a result of losing money or financial stress;
This article also notes that people are traumatized by their inability to manage money and pay their bills. These huge debt loads, including student loan debt that will prevent people from owning their own homes, affects everything from personal relationships to sleep. Financial pressures are cited as the leading cause of divorces, far outstripping infidelities and inter-personal incompatibility.
So as financial professionals and the overall investment industry think about the ramifications of the new Trump administration and its stated goal of privatizing Social Security, giving tax breaks to the rich and increasing income inequality, they should not feel that they don’t have role in how these radical goals will impact their industry and even their own financial livelihoods.
Even the auto industrialist Henry Ford, who endorsed the Nazi regime (Ford trucks were used by the Nazi army), favored giving his workers an above-average living wage, pensions and unionization since he realized that they were workers, as well as consumers. Without a living wage they could not buy his cars.
This means the investment industry has a role in shaping policies where a rising tide lifts all boats, including those who have trouble paying their bills and constitute the working poor.