Financial literacy has become a real buzzword in banking these days. A little ironic, perhaps, when you consider that the industry is under fire for the lax lending practices that led to the current near-crisis in the subprime mortgage market. But some of those same dynamics underlie the moves by banks and others to educate the public about how to use financial instruments. A lot of the effort today stems from the fact that, much like the types of mortgage products currently available, financial management has become far more complicated. “Forty years ago, we lived in this big brother economy,” said Dr. Christopher Thornberg, a principal with Beacon Economics. “These big companies took care of everything, your health care, your retirement. You worked at one company for 50 years, and they gave you a gold watch and you went to Florida and died. We went from defined benefit to defined contribution plan. What that is is Wall Street speak for guess what? You have to start being responsible for yourself, and sadly, people aren’t doing it.” Studies like one Beacon did for the American Institute of Certified Public Accountants show that Americans are spending more than they earn. The number of young people aged 25 to 34 who maintain a savings account has declined from 65 percent in 1985 to 55 percent in 2004. Americans racked up about $17.5 billion in overdraft fees in each of the past two years, up from $10.3 billion in 2005, according to the Center for Responsible Lending. The non-profit center would like to change banking regulations so that some fees are considered loans and subject to the same disclosure rules. Meanwhile, the banking industry says it is up to consumers to better understand and manage their finances. Banks for some time now have been active in providing financial literacy programs, and what they have learned is that the programs do not simply provide a public service. They often turn out to be very effective marketing tools. Some are geared to relatively new immigrants who may not have had much banking experience. Home workshops Wells Fargo, several years ago began a grassroots program in Pacoima, holding workshops in the homes of residents. “We would teach them about credit, checking and savings, mortgage and retirement,” said Steven Contreraz, vice president and branch manager who was involved in the startup and is now vice president and branch manager for Wells in Panorama City. “Depending on the topic we would invite one of our partners. That’s how it started.” As the initial efforts progressed, Wells began to train those people who went through the program to train others. “They were trained to gather their own networks of people and create their own groups,” Contreraz said. “It’s continued to grow. Most recently we were running five programs simultaneously with 15 or 20 people in each program.” The Wells effort stems largely from its decision to open a Pacoima branch, an area that is vastly underserved by the banking industry and where many residents had never used banks. Contreraz said that the bank wanted to establish itself as an institution with a real interest in the community, not just a “big corporation coming in.” But what it found was that the seminars also helped to boost business for the bank. “We really did by large numbers surpass the goals that were set,” Contreraz said. Mentoring seminars The marketing advantage of these programs is one of the reasons that startup Americas United Bank in Glendale is getting ready to launch a series of mentoring seminars for its customers and would-be customers. Because it is a business bank, Americas United is taking a somewhat different approach. Beginning in the next few months, the bank will hold two-hour seminars designed for the mostly Hispanic entrepreneurs it hopes to attract. “Everybody is doing financial education,” said Gil Dalmau, president and CEO of AUB. “The difference with us is we happen to have many relationships with Hispanic entrepreneurs and professionals. That’s one of the strengths of the bank.” AUB has enlisted the assistance of many of its shareholders and founders to lead the seminars. Each will be geared to a specific topic, like management or a specific industry focus, led by a successful business executive in that area. Dalmau sees the effort as a service to the community, but he also concedes that it can help the young bank to grow. “The other part is it is a marketing tool,” he said. “It provides the bank with visibility. Many of the attendees may be very small businesses, but we still have a responsibility to the community. And they may grow up to be very nice sized businesses.” Studies have shown that financial literacy training has a positive effect on managing credit, reduces mortgage delinquency rates and debt levels. Still other research suggests that those who are familiar with financial concepts are more likely to balance their checkbooks, budget for savings and hold investment accounts. Thornberg, however, worries that these programs are only attracting those folks inclined to be more fiscally responsible to begin with. “There is a shocking number of Americans who desperately need more financial literacy,” he said. “The question is, are these the Americans who are showing up to take these courses at banks? My guess is, probably not. The people we should be worried about are those that are far more interested in what Paris Hilton’s next faux pax will be than going to a bank and taking a financial literacy class.” ley, one has found work with a competing manufacturer. The employees making the move are ecstatic, especially over the housing options, Glenn said. “Up there the reality is they can afford a house if they can get the financing,” Glenn said. “They have workforce housing up there they are very mindful of.” To prepare for the move, Titan is getting ahead with orders now. As 40 percent of the customers are out of state it’s a non-issue to them that the company is moving as long as they get their orders in time, Glenn said. For the move, Glenn plans to pack up on a Thursday, with the least-used equipment going first and the most-used going last. A new computer system waits in Hayden. When everything is unpacked on a Monday, the company will be up and ready to go again. Industry Reaction Good for you. That was the response from David Goodreau when Glenn announced the Idaho relocation. “He’s a good student of the game of knowing when to do something,” said Goodreau, the executive director of the San Fernando Valley chapter of the National Tooling and Manufacturing Association. Those in the manufacturing industry aren’t surprised by Titan’s move or the reasons behind Glenn’s decision. Brad Ward also knows Glenn and wishes him luck with his golf game. To keep companies from moving, the state needs to show it cares about Titan Spring and other manufacturers and develop an overall strategy, said Ward, president and CEO of the Small Manufacturers Association of California. After all, it’s a strategy taken by lawmakers both state and local to keep film production from leaving, Ward said. “All I know is you are seeing the living proof statement of a ‘We don’t care’ attitude,” Ward added. That attitude contributes to companies being open to listen to a pitch from a Bob Potter or Steve Griffitts. Potter plans another visit to the Valley in August and already has one appointment lined up. For manufacturers, it’s a matter of when they move from California, not if they move, said Glenn. “We’re moving when the time is right. You don’t want to move when you have to,” Glenn said. “When you have no money and you can’t get a loan, that’s the wrong time.”
