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  • Writer's pictureJohn San Filippo

Corelation 2024: Cornerstone’s Shevlin Says Financial Education Doesn’t Work

By John San Filippo


Corelation’s 13th annual client conference was held May 28-30, 2024, at the Manchester Grand Hyatt in San Diego. The keynote address was provided by Cornerstone Advisors Chief Research Officer Ron Shevlin. The premise of his presentation was that, while financial “education” doesn’t work, financial “wellness” represents a significant opportunity for credit unions.


The Problem at Hand

Ron Shevlin

Shevlin opened with a couple of humorous remarks, but quickly changed his tone. “We can't joke about the state of financial health and wellness in in our society and in the industry today,” he told the audience, “But I think there's a big opportunity that stands in front of credit unions to make financial health and performance the core strategy of your credit union. What I want to do this morning is lay out this opportunity for you.”


He continued, “I don't think I have to convince you that financial health, wellness, literacy and all of that is important. I think that you've built that into the DNA of your organizations, but I have some data that you might find a little bit surprising.”


Shevlin then shared the results of a Cornerstone survey that simply asked: What impact does your primary financial provider have on your financial health and performance? The options were Improves, No Impact, or Detracts. (see figure)

“I don't know where you think your own credit union stands or where credit unions as a whole stand,” noted Shevlin, “but those large institutions that you love to knock for not caring about their customers actually have higher ratings, have a higher percentage of their primary customers who say that those institutions improve their financial health and performance.”


Shevlin clarified that all respondents provided answers related to their primary financial, e.g., those who answered about Citibank consider Citibank their primary financial provider and those who answered about credit unions consider credit unions their primary financial providers.


“I think the reason why you're not having the impact is because you focus on financial education and literacy and financial literacy programs that don't work,” stated Shevlin, “and I'm not the only one who believes that. Jen Tescher is the CEO of the Financial Health Network and even she says they don't work. She says financial education rarely leads to lasting knowledge gain and it does nothing to change behavior.”


According to Shevlin, there are four primary reasons financial education doesn’t work:


  1. Financial education is not contextual. “People make decisions out in the wild. They can't just stop and pick up some financial education material to read before they make a decision.”

  2. Financial education is not behavioral. “Much of that education is not trying to change how they act.”

  3. Financial education is not holistic. “You're ignoring the physical and mental health aspects of consumers that have such a huge impact on their financial health.”

  4. Financial education is hard to measure. “This is a big problem. We often ask consumers, how financially healthy are you? And they answer with some range that’s not very scientific.”


It’s All About Financial Performance


Shevlin then asked, by a show of hands, how many in the audience strive to be financially healthy. “Put your hands down; you’re lying,” he quickly added. “You're really not striving to be healthy; you are already financially healthy. But there's a higher bar to clear. The higher bar is performance. That's the goal. Not just good health, but high performance.”


He then showed a slide that contrasted good financial health and high financial performance. (see figure)


“There is a difference between good financial health and high performance,” said Shevlin. “If you spend less than you earn, you're generally considered to be in good financial health. But high performance is about maximizing the discounts in deals you get, making sure you're paying the right amount for the things you buy or getting better deals and discounts. You're generally considered to be in good financial health if you're saving a certain percentage of your income. But high performance is about optimizing the rate of your savings and optimizing the rate of your investments. You're in good health if you're paying your bills in full and on time, but high performance is about reducing those bills, canceling subscriptions and unwanted and unneeded expenses. Finally, you're generally considered to be in good financial health if you're insuring your physical assets. But today there's a different goal and a higher goal and that's protecting your data and your privacy. High performance is the goal. The opportunity in front of credit unions today is to focus on your members and your prospective members' financial performance.”


A Three-Step Plan


Shevlin told the audience that there are three steps credit unions must take to capitalize on the financial performance opportunity. The first step is: Make financial health a product, not a resource.


“I think it's a good bet if I went to most of your websites, there's an option called ‘resources.’ And if I click on resources, there's financial education or literacy.” He then asked by a show of hands how many people work at a credit union where the financial education link is one of the three most popular links.


“I don't see any hands up,” he observed, “but you're very committed to financial health and education and literacy and wellness and yet nobody is using any of the resources that you provide because you need to make it a product. There are credit unions that are doing that today.”


Shevlin then showed the audience the mobile app of $158 million Magnolia Credit Union, located in Jackson, Miss. (see figure) The credit union’s app includes features that enable better financial performance.


“The second step is measuring your member's financial performance,” Shevlin continued. “I can walk into any health clinic where I live and within a couple hours after taking a couple of drops of blood, they literally have hundreds of scores about my physical health. Yet in the financial services business, we've got one score and it only purports to measure credit worthiness. We need a more multi-factor financial performance score that looks at spending and saving and borrowing and protection.”


He predicted that credit union marketing of the future won’t focus on loans and CDs. “What you're going to do,” he explained, “is go out and tell the community, we helped our members improve their financial health and performance. And we can measure and quantify it.”


The third step, said Shevlin, is to take a more holistic approach to financial health and performance. “I see very few providers who are looking at the other aspects of consumers’ lives like their mental health and their physical health,” he noted. “We've got a lot of problems in this country. There's no question about it. But from the surveys that Cornerstone has done, we found that especially with younger consumers, they believe mental health is the most important social challenge.”


There is a tight link between mental health and people's financial lives, he noted. “Younger consumers tell us that there is stress that they feel in just managing their money on a day-to-day basis,” he said. “What that means in English quite simply is mental health problems cause financial health problems, but the reverse is true, as well.”


Mental health isn’t the only issue that affects financial health. Many members also face challenges with physical health.


“I live about 45 minutes from, from Portsmouth, N.H.,” Shevlin said. “And for as beautiful as Portsmouth is and as and as prosperous as it is, there’s a serious food insecurity, hunger and homelessness problem in New Hampshire and the southern Maine. Three years ago, ($1.9 billion, Portsmouth-based) Northeast Credit Union hired Chris Parker to be their CEO. As he studied the situation in New Hampshire, he was struck by the paradox that here was this town that lived off fishing and food and restaurants, but yet had this homeless and food insecurity and hunger problem. And so, he set out to remake the credit union because he believed it could help address that problem.” He said that Parker transformed the credit union into an organization that creates relevant value beyond quality products and excellent service to eliminate food insecurity and create accessible housing.


“This isn't charity folks, this is strategy,” Shevlin stated. “It’s understanding that members are going through not just a financial health problem, but a mental health problem or a physical health problem and understanding that look, there's just going to be a certain percentage of the loans you’re going to have to write off if you’re going to truly be committed to helping members achieve that interstitial lock between physical, financial and mental health.”


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