New investigation of personal finance industry reveals leaders, gurus often serve themselves

"Pound Foolish: Exposing the Dark Side of the Personal Finance Industry" (Portfolio/Penguin), by Helaine Olen

After the financial crisis began in 2008, it suddenly became OK, even desirable, to talk about the illogic of ballooning borrowing and runaway stocks — and the inevitability that bubbles pop. For years, financial journalists had been required to "balance" their realization that lending had come loose from its moorings with industry assertions that things simply worked differently now. In 2008, we finally could say the emperor — the overavailability of all types of debt, the expectation that markets would heal all ills — had no clothes. We no longer had to wait for his side of the story.

That was a good thing. It made possible a whole new genre of nonfiction — highly readable deconstructions of how regulatory and moral gaps spawn financial excess and contributed to the collapse. There are even subgenres, including half-investigation-half-confessions. It is in this burgeoning category that Helaine Olen presents "Pound Foolish: Exposing the Dark Side of the Personal Finance Industry." Olen is taking on the sellers of a particularly insidious form of snake oil, the idea that if you try really hard — and maybe pay $29.95 for a book or $89.95 for an online "membership" or even more to attend a live program — you, too, can achieve financial success. A former Los Angeles Times reporter who made a career interviewing people about their personal finances and getting them professional advice, Olen opens with a rundown of major self-promoters in the field.

Taking a thorough and deserved drubbing are Suze Orman ("rebuilding America one wallet at a time"), David Bach ("the Latte Factor"), Thomas J. Stanley and William D. Danko ("The Millionaire Next Door"), and Dave Ramsey (with seminars in Cancun and in churches and military bases across the U.S. promoting the elimination of personal debt). He's particularly galling, given that he and his wife filed for bankruptcy protection in 1990, and his main recommendation is to get unemotional, stay out of debt and avoid bankruptcy. His prescription at for a family living on $5,000 a month after taxes — far more than the U.S. median income — includes paying $1,250 for housing and $350 for health care. That's a great idea, just not a reality for most middle-class Americans. Many of these self-styled advisers look absurd on close examination. And a huge red flag should pop up for anyone who knows that Orman largely refuses to invest in the same stocks and funds that she frequently promotes.

Olen then translates the doublespeak of traditional personal finance institutions to reveal lots more hot air. There are mutual funds and retirement plans promoted for their safety that actually charge fees so high they can cut an account's value by 28 percent over time (that's from a U.S. Labor Department report about 401(k) plans). She convincingly argues that the fad for "empowering" women to manage their own finances ends up doing the opposite. Olen sees even financial literacy education — with the simplistic message that security comes from planning and self-control — as a "myth," especially given that much of it is sponsored by usurious lenders reaping the considerable benefit of brand loyalty from their students. And forget variable annuities. Just forget you ever heard of them.

Olen's biggest gripes are that no one — not the policy makers, not do-gooders and not the industry whose advice she conveyed to hundreds of her Los Angeles Times subjects — is addressing income inequality and that American public policy offers little real support for low- and moderate-income Americans. But the part where she offers alternatives and outlines the new thinking she'd like to see gets short shrift. And that makes her incisive criticism of the personal finance world sound like an intellectual exercise. Her closing observation, for instance, could have enriched her analysis throughout: She notes that the era of personal responsibility and economic growth that we're asked to harken back to as we get our financial houses in order actually was an era when many government and corporate financial supports first matured. Maybe, just maybe, the rise of pensions and employer-sponsored health insurance, the G.I. bill, welfare as we knew it, and the building of the interstate highway system weren't drags on prosperity. Could it be that they contributed to Americans' personal financial security as they bolstered the economy as a whole?