Woeful Investment, Planning Habits Drive Wisconsin CU 18-Month Project

When a member turns to his or her credit union for help with long-term financial planning and investment goals, it would help if the employees are able to speak some of the lingo.That’s the impetus behind a study that that aims to prove that financial education can motivate members to use investment tools to build wealth. A $200,000 grant from the Investor Protection Trust, a nonprofit organization devoted to investor education, will involve Wisconsin’s credit union employees with the aim of proving that financial education can motivate members to use investment tools to build wealth.The study is expected to last 18 months and will provide as much as 30,000 hours of online investment education to 4,000 credit union employees. Some of the areas to be tested include knowledge of 401(k) plans, housing costs and paying for a child’s college education. A pre- and post-test will determine if the employees were able to take away practical and applicable knowledge. Behavior will be tracked quarterly during the following year to determine whether participants have initiated investment activity.The Wisconsin Credit Union League, Gov. Jim Doyle’s Council on Financial Literacy and the Wisconsin Department of Financial Institutions will handle the coordination and promotion efforts. John Hoffmire, director with the Puelicher Center for Banking Education at the University of Wisconsin-Madison, is spearheading the study.“We’re trying to understand human beings as holistic beings where all parts of their lives have a financial component,” Hoffmire said.Employees will complete up to ten hours of online learning, receive additional information about investment products and opportunities and have access to an educational coach. The online courses are part of the Educated Investor University, an online investment education program developed by Precision Information.It was approximately a year ago while speaking at a teaching conference at a college that led to the Wisconsin league getting involved with the study, said Jim Drogue, vice president of credit union development at the league. Drogue met with David Mancl, director of the state DFI’s office of financial literacy. Mancl pitched the idea of the league getting involved and linked Drogue with Hoffmire last summer. Together, they applied for the Investor Protection Group grant and since receiving the funding, coordination activities have been underway to launch the study.Drogue said the timing could not be more ideal. The average score on a statewide financial literacy test was 56%. Wisconsin fared better than many states but was still among those that failed, he added. It was part of the reason the league was one of the first to sign on with the Filene Research Institute’s REAL Solutions, a program that helps credit unions develop product and services for people of modest and low means.“The concept behind [the investment study] is that employees can become more knowledgeable so that they can help themselves build wealth and then pass that information on to members,” Drogue said.Since Wisconsin has 7,500 credit union employees, Drogue said the biggest initial task will be finding the best way to reach out to the financial institutions while staying within the parameters of the 4,000 participant threshold. The league has already sent out letters to 10 credit union CEOs to gauge their interest on serving on an advisory board. So far, seven said they would serve. At its recent annual meeting, 800 press releases were handed out to attendees; several more credit union CEOs told Drogue that they would to become involved.Meanwhile, one of the study’s component will involve tax preparation and its link to investments and long term plans, Drogue said. Tax preparation time is a prime “teachable moment,” Hoffmire noted. For that reason, the study will focus heavily on converting tax filers to investors and what mix of educational information for different types of filers- based on age, income, education level, geographic location and other attributes-works best to encourage investment behavior.“A lot of people may not have a lot of money to invest during the year but they do at tax time,” Drogue pointed out.Although Americans are saving more now than in prior years because they fear imminent job loss, Hoffmire said it shouldn’t be this level of economic pain that pushes the average person to do what’s in their best interest, and saving is just part of the remedy. The investment scams and frauds that may have contributed to economy’s slowdown could have been avoided with better financial education, he offered. Part of the problem is apathy.“Americans are seriously under-prepared when it comes to investing for retirement and commonly fail to use other investment vehicles, such as savings programs for health care and higher education,” Hoffmire said. “We need to identify what can be done consistently to motivate the average household to take advantage of the investment opportunities they’ll need-in addition to just saving-to reach future goals.”Another culprit is people simply making mistakes that can have devastating consequences.“We see that in cases where people invested in people like Bernie Madoff; but we’re also seeing troubles with mortgages,” Hoffmire said.–[email protected]