Don’t Take Money Advice From Companies That Make a Profit When You Fail.

Money advice from a lender is like health advice from a tobacco company. The advice may be correct, but there is probably a better source for you. Namely, the one that is not beneficial because of your bad habits.

The Consumer Financial Protection Bureau (CFPB) recently sued student loan service Navient for several questionable business practices, such as misapplying student loan payments and misleading credit bureaus. If that’s not enough, they have reportedly also misled borrowers with questionable advice about their options for assistance.

So how did Navient, the company whose blog Financial Tips tout its mission to “help student loan borrowers find their way to financial success,” responded to the lawsuit? Here’s what they said:

There is no expectation that service personnel will act in the best interest of the customer.

Whether he is guilty or not, such an answer is a kind of slap in the face of the borrowers.

How companies hook you with big ideas

Navient’s defense is that they are not here to help, but it is a conflicting message on their website that encourages readers to frequent “the latest tips and strategies you can use to achieve your goals.” …

The Navient fiasco highlights a problem with a popular line of business: marketing big ideas.

You’ve come across some form of marketing for big ideas. This is when companies try to hook consumers with an idea that is larger than the actual product they are selling. You don’t just buy a phone, you are an innovative rebel . You are not just buying shoes, you are improving your life . Marketing big ideas isn’t always a bad thing, though. Helping someone in need is a great idea and a good idea!

But marketing big ideas can become problematic when the idea conflicts with the company’s way of making a profit, such as when predatory financial services promote financial literacy. You are not in debt and you are not getting huge interest, you are on the path to financial success!

When money advice becomes a marketing plan, it’s problematic

Navient is certainly not the only example of this. Recently, writer J.Money of the popular financial blog Budgets Are Sexy complained about a media advertisement he received from a credit card bank that wanted to encourage millennials to use credit cards more often:

When asked what is the greatest benefit from using cash, most millennials said that using cash ensures they spend within their limits, and a fifth said they were worried that using a credit card would lead to debt. … However, strategically using credit for regular purchases can help millennials keep track of their overall budget.

J.Money’s answer to this presentation summarized my own thoughts pretty well :

LET’S!!!! If people are afraid to get into debt and spend within their means, then leave them alone! They are smarter than most adults! Who cares about the reward if you’re going to end up digging in a hole and paying more for that privilege.

Of course, using a credit card can help you get credit if you do it responsibly , but sound money habits are more important than good credit . Also? Credit card companies do make a profit if you don’t use them responsibly. Financially, they make a profit when you fail.

And here’s the problem: the advice isn’t entirely wrong. These companies don’t completely misinform consumers, they manipulate them with a little truth.

The border is blurring. For example, while J.Money’s example is pretty obvious, the fact that these companies are turning to bloggers, personal finance experts, and journalists to get their message across just shows that there is a fine line between reliable advice and marketing.

How to protect yourself

So how do you protect yourself from big marketing ideas masquerading as money advice?

First, you can think like a journalist. The journalist must be aware of the source and avoid unpleasant conflicts of interest. Likewise, when you’re faced with a little financial advice, whether it’s a blog post or a quote, it can help consider your source. How does the source get paid? Is this a podcaster that gets paid through advertising? Good financial advice doesn’t exactly contradict how she makes money (in fact, it supports her success). On the other hand, if it’s a credit card company that gets paid when you go into debt, good financial advice is completely at odds with their way of making a profit. It doesn’t necessarily make financial advice good or bad, but conflicts of interest are certainly worth considering.

You can also research the reputation of the company. CFPB’s extensive consumer complaint database contains a number of different banks, credit unions and other financial services clients that have been complained against. Let’s say you’re passionate about a blog, podcast, or video series, but it’s sponsored by a large bank or investment firm. Again, this does not mean that the advice is automatically wrong, but the least you can do is research the reputation of the organization.

It goes without saying that you should also check any advice. For example, if this is monetary advice on how FICO calculates your credit score, it might not hurt to go straight to the FICO website and check the information.

Finally, if you are getting advice from a financial planner, you should definitely make sure that he is a Certified Financial Planner® . Real CFPs must take a fiduciary oath to give advice that is in your best interest. The alternative is to work with someone who is just trying to sell you an investment product, even if it doesn’t work best for your portfolio.

Personal finance is not nearly as difficult as people think. It’s great that there are so many blogs, books, videos, and podcasts out there that make financial literacy more accessible to people. The downside is that this advice is so accessible that you have to be careful about where to access it. The loan officer’s advice may not be entirely wrong, but don’t expect him to act in your best interest, even if their blog suggests otherwise.

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