Yale prof, author of “Irrational Exuberance,” and co-creator of the Case-Shiller Home Price Index Robert Shiller had an opinion piece in the New York Times that I just got around to reading. He thinks the government should spend $15 billion on subsidized financial advice for the masses.

Here’s an exerpt:

SUBSIDIZED financial advisers should be licensed by self-regulatory organizations that verify their qualifications. Licensing will be imperfect, and some incompetent advisers will end up with subsidies. Still, the net effect of getting professional advice to the public is surely positive.

To qualify for a subsidy, the advisers would have to sign a statement promising loyalty to their clients and agreeing to accept only the subsidized hourly fee, and never any commissions or kickbacks. The subsidies might come to $75 an hour, at a very rough estimate, and if 50 million Americans averaged four hours of consultations, the eventual cost might be $15 billion a year — a substantial expenditure, but a worthwhile one.

If personal financial advisers had been subsidized years ago with the best incentives, they still might not have stopped their clients’ bubble thinking during the boom. Many advisers probably thought that housing investments were a good bet. But it’s still likely that advisers who built long-term relationships with their clients, and who pledged to look after their welfare, would have been a helpful influence, suggesting caution to those who were getting over their heads in debt, and warning that adjustable-rate mortgages could be reset upward, just as the fine print said. For these reasons, financial advisers probably would have reduced the severity of the housing bubble.

Professional financial advice is now generally accessible only by the relatively wealthy. Changing this would be an important corrective step. Giving the general public access to trained advisers would be a boon for the nation in this time of doubt and distrust.

Given how much we’re spending on other things these days, what’s $15 billion to educate the public on money matters?  Think it would be $15 billion well spent?

This entry was posted on Thursday, January 22nd, 2009 at 5:59 pm and is filed under budgeting, economy, saving. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.