08.17.22

The Power of Financial Literacy

by: Martin Powell, CUNA Mutual Group

In honor of National Financial Awareness Day that took place earlier this week, we had the opportunity to interview Martin Powell, head of annuity distribution at CUNA Mutual Group and a supporter of BISA’s Black Voices Unmuted task force, to share how providing more coaching and education for clients will help them better understand their financial choices looking forward. 

According to the Financial Literacy and Education Commission, there are five key components of financial literacy: earn, spend, save and invest, borrow, and protect. During today’s inflationary environment, do you think that one or more of those components that should be further stressed?

No matter the economic circumstances, these are all important components to keep in mind.

Rather than emphasizing one over the other, people should instead think about how they can adjust their habits to complement their long-term goals and counteract any negative impact the current environment may be having. Though it’s understandable that recent market volatility and concerns around inflation are making consumers uneasy, being reactionary and dramatically changing spending habits or completely revamping savings and retirement plans is rarely the answer.

However, making minor adjustments to a financial plan with the guidance of a professional can be smart, and temporarily increasing the amount an individual is saving or choosing to invest in a guaranteed income product, like an annuity, can provide the sense of security some people may need in the current environment.

 Ultimately, the most important rules for people to keep in mind when retirement planning are to start saving early and be consistent about contributing regularly.

Is the Rule of 25 and 4% still relevant today?

These rules of thumb remain relevant as flexible concepts to guide the creation of an individualized retirement plan.. 

Every person has different goals in retirement, and there are a lot of assumptions that are baked into these rules that leave little room for considerations like the recent market volatility and inflation, as well as the year-to-year changes in spending habits than can occur throughout retirement.

These rules only account for 2-3% inflation each year, and we’re currently seeing much higher rates. H – however, this doesn’t mean these rules go completely out the window, as retirement is a long-term goal and the average over time may stay in that lower range.

At the end of the day, it is important to “know your number” and set a target for your retirement. I; if these rules lead people to having a conversation with a financial advisor, then they remain helpful. 

What do you see as the most significant change that could be made in the United States to better support financial literacy?

To increase financial literacy and expand access to financial services in the United States, industry groups should continue to focus on promoting diversity by making open roles more accessible to applicants from all backgrounds. This can be done by building robust recruitment pipelines and increasing the accessibility of financial services to consumers by focusing on the affordability and promotion of financial products and services to diverse populations.

Targeting these underserved communities will have a lasting impact on the financial knowledge of Americans who have historically been excluded from the financial services industry and better equip them to build sustained wealth.

Lastly, all groups involved in financial services should focus on promoting financial literacy by providing more coaching and education for clients to help them better understand their financial choices. Doing so will help them to be confident in the decisions they are making for their families and themselves, and lead to a brighter financial future for all.

 

About Martin Powell

Martin Powell is a vice president and the head of annuity distribution at CUNA Mutual Group, a leading insurance, financial services and technology company focused on helping people achieve financial security through all life stages.

Based out of Philadelphia, Martin serves on the BISA Leadership Advisory Board and is a supporter of BISA's Black Voices Unmuted task force.

Martin is also a founding member of Coalition of Equity Wholesaling and a member of Association of Wholesaler Diversity.