Your clients need you. They really need you! A new report released by FINRA’s Investor Education Foundation shows why, and perhaps casts light on why financial planning has been ranked as one of the best careers.

While roughly 75% of Americans have “positive perceptions” of their own financial knowledge and math skills, a meager 14% were able to correctly answer five financial literacy questions compiled by FINRA’s investor education foundation. Advisors point to the dire need for financial literacy classes at US high schools and colleges.

Take a stab at the regulator’s test here, composed from 2012 and 2009 state-by-state surveys, each of which were national online surveys of more than 25,000 adults in the US.

"When I tell people I teach financial planning courses at Alfred State College, the nearly universal response I receive is: 'I wish I had taken a financial planning course in college,” says fiduciary advocate Ron Rhoades, program chair of the Alfred State Financial Planning Program. In addition to stressing education, Rhoades emphasizes the need for financial advisors to be held to a fiduciary standard of conduct, adhering at all times to the requirement to act in the best interests of the client. “Sadly, 80% or more of 'financial advice' and 'investment advice' provided today is not provided in the best interests of consumers, but rather is -- often unknown to the consumer -- designed to sell expensive investment products to unsuspecting consumers,” he says.

According to the regulator, those "unsuspecting consumers," as Rhoades describes, vary from state to state in their level of financial literacy. FINRA's survey found a significant disparity in financial capability across state lines and demographic groups. According to the findings: 

  • Citizens of California, Massachusetts and New Jersey who were surveyed are the most financially capable. Those states ranked in the top five among all states in at least three of five measures of financial capability.
  • Mississippi stood out as the least financially capable state, placing in the bottom five in four out of five measures. Arkansas ranked in the bottom five in three out of five measures, and Kentucky ranked in the bottom five in two out of five measures.
  • Younger Americans, especially those who are 34 and under, are more likely to show signs of financial stress, including taking a loan or hardship withdrawal from their retirement account or making late mortgage payments.
  • Younger Americans are more likely than older Americans to have unpaid medical bills. Of those surveyed, 31% of Americans aged 18-34 reported having unpaid medical bills compared to 17% for Americans aged 55 or older.

The regulator notes that the five measures of financial capability used to rank the states measure how well Americans are managing their day-to-day finances and saving for the future. The national averages among survey respondents for these key measures are the following: 

  • Fewer than half (41%) of Americans surveyed reported spending less than their income.
  • Over a quarter (26%t) of Americans reported having unpaid medical bills.
  • More than half of Americans (56%) do not have rainy-day savings to cover three months of unanticipated financial emergencies.
  • Over a third of Americans (34%) reported paying only the minimum credit card payment during the past year.
  • On a test of five basic financial literacy questions, the national average was 2.88 correct answers.

“This survey reveals that many Americans continue to struggle to make ends meet, plan ahead and make sound financial decisions — and that financial literacy levels remain low, especially among our youngest workers. No matter how you slice and dice it, this rich, new dataset underscores the need for us to continue to explore innovative ways to build financial capability among consumers,” says FINRA Foundation Chairman Richard Ketchum in a statement.
View the full results of FINRA's quiz.

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