A Spoonful of Sugar Helps the Medicine Go Down

Today I just want to tell you a story, so sit back and relax. Once upon a time . . .

How many times have you attended a class that began like that? Not too many times, I’m guessing. And I’m guessing that storytelling becomes rarer and rarer the more advanced the topic. Am I right?

But people’s brains are built to give attention to stories, so they tell us. So why don’t we use the technique more often?

In financial education, stories tend to appear in examples that are set aside from the text. Examples could be the real teachers in these courses, but they tend to be afterthoughts. What’s worse, savvy students might often feel they can skip over the examples. And they can, if the story is poor and the learning point is merely repetitive of the preceding text.

In my career, I’ve had a few opportunities to turn it around. The first one was a course called Introduction to Trusts. The original was a dry course that listed one estate planning concept after another. Examples were few and short. In revising the course, I decided to drop the dry recitations of property law and build the course entirely out of a half-dozen case studies. The property law was “discovered” in the process of solving a client’s problem.

The course was much more engaging. The student could see property law principles at work. My team soon was building more reality-based courses. Many years later, I learned that instructional design research supported many of the techniques we used.

It often seems impossible to get these topics on their feet. But any useful knowledge has a use! That is the key.

In every job that must be done
There is an element of fun
you find the fun and snap!

Boomers Retiring Earlier . . . I Mean, Later . . .

As Baby Boomers age, stories in the financial press (and the mainstream press) are beginning to shift from “Boomers Retiring Early!” to “Boomers Retiring Late!” There are even stories saying that “Boomers Are Secretly Retired!” Or “Secretly Unemployed!” Whatever!

Of course, it’s all happening. There are tens of millions of us (76 million born between 1945 and 1964 and a large majority of us are still around). In a group this size you’re bound to find early retirees, late retirees, and secret retirees. We didn’t all go to Vietnam. We didn’t all burn our bras (not even 50% of us). We didn’t all do drugs. Sex and rock-and-roll were probably pretty widespread, but not universal.

And not only are we individuals, we live in a time of increased life spans. When we were born in the mid-twentieth century, life expectancy was just creeping out of the 60s! We forget that, at least 10 years have been added during our lifetimes.

Our grandparents had very few years of retirement, on average. Early or late, it wasn’t a big difference. Today, a boomer could be looking at 20 years of retirement (that’s the approximate average) or even 30 years (not too much of a stretch).

And as our lives have been stretched out, so have our life milestones. We married later. We had kids later. We put kids through college later. And these life milestones have become more expensive (college, medical, etc.) All these changes have increased the variability in boomer life experience.

Policy-makers and actuaries may look at the averages, but financial planning professionals look at the individual. The boomers are all individuals. Every single one of them.

Learning Lots of Long Lists

I have a rule of thumb: if I have to remember a list of items that’s longer than three items, I have to write it down. Otherwise, I will always forget one of the items. It’s my N-minus-1 rule. If the list is N items long, I will remember N-1 of them. I discovered this rule running to the grocery store for my wife. Now, when she asks me to pick up a few items, I always ask how many items she wants. If it’s more than three, I write it down.

Insurance education has lots of lists: lists of things that are covered, lists of exclusions—you get the picture.

I didn’t realize this when I first got into the insurance education business because my area was life insurance. Here’s the list for life insurance:

  • Dead—covered
  • Undead—not covered

Two items. I can handle that one. Of course it’s more complicated than that, but the life insurance list isn’t in the same league as health insurance, with its lists of procedures, or property-casualty insurance, with its lists of perils and hazards and risks—oh my!

Pure lists are hard to teach because, if the typical learner is anything like me, their brains operate on the N-minus-1 rule. And more often than not the forgotten 1 is the item they need to know.

In designing a learning experience, then, you have to decide exactly what it is you want to teach people. Here are some possibilities:

  • Instead of teaching people to recite a list, you might want to give them the list to take away with them (remember my grocery list)—then teach them how to use the list.
  • You might want to teach items on the list the learner might encounter with some frequency: property-casualty producers might have a greater need to understand the coverages and exclusions relating to employee dishonesty than they need to understand the exclusion for nuclear war.
  • You might want to teach why things are on a list: cosmetic surgery is on the list of exclusions because cosmetic surgery is normally elective, whereas an appendectomy is not.
  • Instead of pure memorization, you might have activities requiring the learner to sort items into “piles”: covered versus excluded. You can get really fancy and have a secondary sort of the excluded pile into exclusions that you can buy separate coverage for (like flood insurance) and exclusions that you can’t (like for war).


Handling the Math

People have a hard time with math. Even people who write about it.

Take a recent article in Slate called “Obamacare and the ‘Young Invincibles,’” that purports to evaluate the recent enrollment figure under the Affordable Care Act. This article is not written by an Obamacare basher, and yet the author’s failure to do the math possibly paints a more negative picture than warranted.

It all has to do with the health insurance enrollments of young people in the age 18-34 bracket.

Enrollment of young people is important because young people tend to avoid buying health insurance, but they are needed in the risk pool to balance off people of my age. The ideal risk pool has full representation from all ages.

The article says that 40 percent of the uninsured in this country were in this age bracket. Final enrollment figures say that 28 percent of those who enrolled were in this age bracket, far short of the 40 percent.

Is 28 percent good enough?

The article says that there is no benchmark because underwriting information is unavailable from the insurance companies. But it does compare the figure to the initial enrollment figure when the similar Massachusetts program was first launched. The figure for that age group in Massachusetts was 28.3 percent. The Massachusetts program went on to be a success.

Is the national figure of 28 percent comparable to the Massachusetts 28.3?

The article correctly states that it depends on how the enrollments break down by state. Some states encouraged enrollment, some states discouraged it. Some states made Medicaid available, some did not.

Another factor to be considered is the fact that, under Obamacare, young adults up to age 26 may now be included in their parents’ employer-provided health insurance. The article doesn’t account for these young adults. They would not have enrolled through the health exchanges and would, therefore, not be part of the 28 percent. The question is: were they or were they not counted as part of the 40 percent who were uninsured.

Unless we know about these young adults, how can we even come up with a figure? We can’t. The figure could be 28 percent or it could be more. Health exchanges were not the only avenue for young adult enrollment. You have to account for them all.

Unreality of State-Mandated Continuing Education

State insurance regulators take a dim view of sales training. There’s no continuing education (CE) credit for that. But this misses a key principle of androgogy (adult learning): adults need to be motivated. They need to know that there will be a payoff if they invest time and mental effort. When state regulators nix content that seem too sales-y, they are nixing the motivation that could drive learning. Without this motivation, agents are just putting in the time to get their license renewal. They take the easiest courses and learn very little.

Of course, it’s not that black and white. There’s certainly a spectrum of learners. Many people in the field lap up learning, spending way more time than CE rules would require. I’ve done it myself and gotten rewarded with a variety of advanced designations—and with knowledge.

I do sympathize with regulators, though. If you are going to require regular education, you have to require something with a minimum level of meatiness. I just think they go a little too far.

As a writer of continuing education courses, I want to set my concepts in a world that has a reality that is recognizable to the learner. The real world is a world of sales. When we remove that, we need at least to ask the learner to reflect on customer needs and suitability of solutions we offer to meet those needs. It’s not sales per-se, but it’s close (needs and suitability are components of many effective sales strategies). And it puts an ethical slant on the material that usually pleases the regulators.

Metaphorically Speaking

What do metaphors have to do with financial education?

To explain this, let me ask you to think back to the last time you worked a jigsaw puzzle. At first the task of assembling the puzzle seems daunting. But then you start noticing similarities in pieces. There are pieces with straight edges that form the borders of the puzzle. There are similarities of color or pattern that enable that help you start to group the pieces. Soon you begin to find pieces that fit together. The more you assemble, the easier it gets. It has to do with framework. The framework helps you connect each new piece. The more framework, the easier it is to incorporate a new piece.

Your mind works the same way. You have a hard time remembering a stray fact. It’s much easier if you have something to connect it to. This is born out by much research. Metaphors are one way to provide a connection.

Some financial concepts have richer networks of connections than others.

Take the concept of risk.

Risk can mean something very different for an insurance underwriter than it does for a securities rep. The insurance underwriter’s view of risk is probably closer to the common layperson idea of what the word means. Risk is bad. Risk is a chance of a loss. To the securities rep, the concept is expanded. Yes, risk is a chance of a loss, but it is also a chance of a gain.

These different views lead to different strategies for managing risk.

There is an old story about four blind men who encounter an elephant. One touches the trunk and describes the elephant as like a snake. Another touches the tusk and describes the elephant as like a sword. Another touches the elephant’s side and describes it as like a wall. The last touches a leg and describes the elephant as like a tree.

Metaphor is a tool to approach understanding and knowledge, but a metaphor is not the thing itself. It provides connections but not complete pictures. Skillful use of metaphor is a powerful tool, but it is only a part of the puzzle.

Countering Conventional Wisdom

If you are financially sophisticated, I want you to think about how you talk to a person who knows nothing about the topic. If you are a financial know-nothing, I want you to think about talking to a financial professional.

The question I have for both of you is the same: How do you talk to each other? What is you common language? What assumptions does one make that are totally foreign to the other?

This is the challenge of financial education. Knowledgeable or not, people make assumptions about money.

Often assumptions are heavily colored by public debates about taxes and insurance and entitlements and regulation. Even though we know that public debate is loaded with misinformation, we can help being swayed by it.

In some fields of education, students are blank slates. They know nothing. In the field of financial education, however, student can be steeped in the “conventional wisdom” and the conventional wisdom is wrong. As an educator, how do you counter this?

Well, you can’t become a counter-advocate. You are not there to advocate for policy. You are there to educate people about concepts. You need to be aware of common misconceptions, but leave the polemics at the door. You need to be the authority. And you have to make sure you don’t inadvertently buy into the controversies yourself.

Serving Two Masters: The World of Continuing Education

Okay. Your license renewal period is almost over and you haven’t met your CE requirement yet. You need to find a course on something you already know so you can breeze through the course and pass the exam. You have to get through it fast. You’re out of time. Next time you’ll plan better. Maybe there’s a course that could really give you something to grow your book of business. But that’s next time.

And next time never comes.

This is the challenge for people writing continuing education courses. You see CE as a blank canvas for your creativity. You could teach great things. Training directors are in total sympathy. If they are the ones footing the bill, they may actually prefer courses that teach deep things. But they know the score. CE time is not your most reflective time. You need the hours and you need them fast.

How do you design courses for learners who are, well, resistant?

CE hours are, of course, somewhat related to the amount of time a student is expected to spend in a course. Different states try different strategies to try to force students through the material. Other states are more laissez faire. But students who are resistant are not the eager faces you’d like to see.

In my mind, you need to be pretty modest about what you can achieve. You plan your course with solid instruction, but you lace it with a few compelling take-aways. The idea is: if they get nothing else from the course, this is it. They get the hours, but they get a little tidbit of knowledge they can use.

You got your hours, just in the nick of time, but you got something extra. Maybe you’ll set aside more time next time around.

And I served two masters well. I delivered the hours as painlessly as possible. And I served up a little bit of knowledge to boot.

Ethics Education Is Very Sticky. But Does It Stick?

This evening, I washed the dishes after a tasty meal of my wife’s lasagna. Naturally, my 20-something sons took the opportunity to take showers at the same time, so we all rapidly ran out of hot water.

This turned out to be a blessing in disguise for me. Hot-water cleanup of sticky cheese tends to do little but spread and smear. Turn on the cold water and the cheese becomes more brittle and washes away without contaminating anything else. Hot water is good for many cleanup chores, but cold water has it’s place.

I don’t suppose that cold water was good for my son’s showers.

A sticky subset of financial education is ethics education. Most, if not all, licensing bodies in the financial professions require ethics education. The idea is that the public—consumers of financial services—are protected by teaching financial professionals about ethical rules. But does it? And does the run-of-the-mill ethics education stick?

Being able to recite rules is different from applying them in day-to-day practice. This is true in many areas of knowledge. And this difference is captured in a framework called Bloom’s Taxonomy of Learning Domains. Different learning strategies are required to be effective in teaching, say, application of ethical rules versus the ability to merely recite them. Just like hot water is good for some cleanups but cold water is good for others.

Ethics is situational. Now, I’m not talking about situational ethics, where the rules change depending on the situation. I’m talking about rules that are meant to be followed.

The situational part is where applying ethical rules gets difficult. When you are in the heat of a situation, you need to recognize an ethical problem and you need to decide how to act on the fly. The heat of the situation makes us forget the rules we learned to recite so well.

Unless we rehearse our responses. And, of course, we can’t rehearse our responses on real clients.

What we need is what many organizations use to train people with dangerous jobs: similators. Can you imagine a pilot being trained to respond to a flight emergency without a flight simulator?

The job of a financial professional may not be so dramatic, but people’s fortunes are at stake. Ethical lapses can wipe out a couple’s retirement savings or leave parents unable to send their kids to college.

So some sort of ethics situational simulator is required. It doesn’t have to be fancy, but the purpose is to put the learner into a situation, get them to respond, and give them feedback on whether their response was appropriate or not.

By giving the learner experience in solving ethical dilemmas in simulation, maybe we can keep them out of hot water when they’re out on the job.

Wall-Street Topics Can Be Written in Main-Street Language

Did you know that a wall-street topic can be written using main-street language? If your mission is to make a difference in the lives of your learners, you better figure this one out. 809’s founder Steve Froikin has made a career doing this.

Here, as an example, is a piece of writing about a financial concept called the “time-value of money” as it relates to an annuity.

An annuity is a stream of regular payments over a fixed period or over and indefinite period like a lifetime. Here are a few examples:

  • You win $1 million in the lottery, but they don’t pay it to you right away. Instead they send you 20 annual payments of $50,000. Your winnings are a 20 year annuity of $50,000. You get $1 million dollars, sure, but the state lottery commission only had to invest $743,874 at 3% interest to make this happen for you.
  • A particular kind of investment is called an annuity. You invest $200,000 and collect an annuity of $19,268 per year. This represents an annual interest rate of 5%.
  • You set up a regular savings plan through payroll deductions calling for $5,000 to be deposited into an account. The $5,000 payments are an annuity. At the end of 10 years, you will have $62,889 if the funds are invested to earn 5%.
  • You borrow $225,000 to buy that new home you’ve always wanted. You get a 3% mortgage that will require you to pay $11,479 per year over 30 years. The $11K is an annuity to the bank.

Did you notice the common features of all these transactions? Here they are:

  • Equal periodic payments
  • A time period
  • An interest rate
  • A stated value today or at some time in the future (known as present value or future value)

In this course you will learn a simple method for tying these factors together. This method is known as the time-value-of-money calculation (TVM). You can calculate an initial investment (like the lottery commission did). You can calculate payments you can expect to receive if you purchase an annuity product. You can figure the results of a regular savings plan or, just as important, you can figure how much your regular savings investments need to be to reach a financial goal. You can calculate mortgage payments. And much, much more.

. . . and so on . . .

The concepts discussed in this piece could be part of a college-level finance courses or part of a professional education program for financial planners. These concepts are a challenge when you first learn them, so why make the learning process more difficult with opaque language?

There is a neat online app called Hemingway that you can use to rate the readability of any passage of writing you want to put to the test. It’s not the be-all or end-all of good writing, but it is interesting. According to Hemmingway, the passage I just cited on annuities is rated at a 6th grade level of readability. Out of 28 sentences, only 2 are rated as hard to read and none are rated as very hard to read. Only 4 use the passive voice, while Hemmingway advises you to aim for 6 or fewer.

So, it is possible to write difficult topics in clear and understandable writing. Click here to access the Hemmingway App and compare other financial writing.