Shelley A. Lee
The Journal of Financial Planning talks with Mellody Hobson, president of Ariel Capital Management and financial contributor to ABC's Good Morning America.
How she got her role on Good Morning America:
Diane Sawyer saw me on the cover of a magazine and had her sister call me. When I got the phone call, I started laughing and said, "Who is this…really?" When I finally met Diane, she told me how neat she thought it would be to have a young African-American woman talking about personal finance on the show. The first show, I was absolutely sweating bullets. But the folks there made me feel comfortable and I'm happy to work with them, even though it can mean crazy hours. I've now been doing it for six years.
On how the national media cover personal finance:
The media aren't doing a good enough job. The general assumption on the level of knowledge of individuals is too high. It doesn't match up with reality. I once interviewed people "on the street" and some even thought the S&P 500 was a car race. This is troubling, especially because we're all being handed the keys to our financial future and most of us have never had financial driver's ed!
Why individuals stumble on their own:
I try to approach the topic in a way that doesn't create too much fear and doesn't make people feel stupid. If you hear for the umpteenth time that you'll never be able to afford retirement, eventually you'll give up. I want to give people some hope that they can do it. I'd like to see a great combination of professional help from planners and advisors, and personal empowerment. Unfortunately, I think many people don't seek professional help because they're embarrassed to ask questions for fear of seeming ignorant. But the wonderful thing is that individuals can educate themselves about basic personal finance and planning for their future. This is not quantum physics.
Her "platform" as a highly visible financial services professional and the role of the industry in national dialogue about big issues:
I've been amazed at how silent my industry has been on some really difficult issues, from the privatization of Social Security to our pension crisis to the bad situation at the Pension Benefit Guaranty Corporation. True, some issues are controversial and big firms may be silent for fear of offending customers. The financial services industry hasn't been lobbying and we haven't been actively engaged in the political arena. We need to do more. But human nature is to stick with the status quo.
On the current state of regulation in financial services:
I'm not sure I believe the pendulum is really swinging back to a time of more reasonable regulation. Sure, there was some bad—even inexcusable—behavior and the public trust is everything in this business. But the regulatory changes put in place during the last several years really had nothing to do with solving certain issues. You can't legislate ethics. I'm worried that a lot of the regulatory reforms are window dressing. When I testified before Congress, I told the committee that I'd never in my life taken a question from a consumer on 12b-1 fees. That is totally a inside-the-Beltway issue.
On results from the Ninth Annual Ariel/Schwab Black Investor survey:
Very disturbing. The black community has not earmarked as much for retirement as our white counterparts. I'm concerned that we're banking on the pension promise. But it may not be realistic. One-third of black investors surveyed say that the government should step in to secure individuals' retirement. This may come from the fact that more blacks work in the public sector and they believe they've made the trade-off to get a great pension. But it could be giving a false sense of security. The numbers on the pension crisis are staggering: $450 billion worth of corporate pension funds are underfunded and almost 300 companies in the S&P 500 are underfunded. It's definitely a bad assumption that the government is going to step in and make things right. The average Social Security check in this country is about $1,000 a month.
When the wake-up call will come:
In the next ten years, I believe the pension crisis story is going to drive behavior. Today, only 20 percent of people work for a company with a defined-benefit plan. Twenty years from now that number will probably be in the low single digits. I think as that sinks in, it will ratchet up personal investments…I hope!
On being named a Global Leader of Tomorrow by the World Economic Forum:
I have a simple philosophy: do good work every day. I'm only 37 years old. I consider myself a work in progress.
Mellody Hobson appears on Good Morning America on ABC. Read more about her at www.arielcapital.com .
Shelley A. Lee is a writer in Atlanta, Georgia, and owner of
Ashworth-Lee Communications. She can be reached at firstname.lastname@example.org