Ethics

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We Have Heard This Tune Before…

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Headline from last week’s Wall Street Journal: Merrill Brokers Get Ultimatum: Refer New Customers or Face A Pay Cut. Huh? Didn’t we just read about another financial services firm creating phony customer accounts because of cross-selling pressures (here and here)? The more things change, the more they stay the same.  Read through to the end for ideas on how to empower your students to not fall into this cross-selling trap of being pushed a product that may not be in their best interests.

More from the WSJ:

By |December 11th, 2016|Behavioral Finance, Current Events, Ethics, Investing|

Interactive: Grappling With The Ethics of Self-Driving Cars

Skimming this FT article about Apple’s efforts in the autonomous vehicle market, I was intrigued with the introduction of ethics into the conversation:

Apple urges the regulator to continue “thoughtful exploration of the ethical issues” of self-driving cars.

“Because automated vehicles promise such a broad and deep human impact, companies should consider the ethical dimensions of them in comparably broad and deep terms,” Apple writes. These considerations include privacy, how the cars’ software systems make decisions and the impact on employment and public spaces, it says.

As the technology gets closer to adoption, I expect the focus will shift to the ethical implications, especially this idea of how the software systems will make decisions. Which makes this next resource so engaging. Here is a fascinating interactive developed by the MIT Media Lab which forces students to grapple with these ethical issues. The 45 second video above explains the simulation in greater detail (440,000 views after just three months!):

Mini-Activity:

Video: How Did These NFL Players Lose $43 Million?

From 60 Minutes (14 minute video):

Questions:

If You Are A Teacher Enrolled In a 403(b) Plan, Please Read This!

This is a great example where your knowledge of investing can come in handy for yourself and other teachers in your building. The NY Times story shows what happens when light regulation meets rapacious financial firms. This is why financial literacy is so important! We can wait for regulation or we can arm ourselves with the knowledge necessary to avoid disasters like the story told below. Without knowing the right questions to ask or understanding the alternatives, too many teachers have seen their retirement savings swallowed by excessive fees. Actually one question may have gotten to the core of this scandal: Show me the fees (and persist until you get the answer)!

The problem:

Workplace Ethics: What Would You Do?

While on my way to the airport to catch a flight to Richmond, Virginia for the Virginia Financial Literacy Summit (stop by our Roundtable from 9:30-10:30am if you are attending the summit!), I listened to this 18 minute Planet Money podcast [warning: coarse language (bull!@#$) in first minute]:

Question: How Can Fake Bank and Credit Accounts Impact Your Credit Score?

For those of you following the Wells Fargo fake account saga (some Senators might use more choice terms to describe their actions), your probably familiar with the details of millions of fake bank and credit cards that were set-up by overzealous branch employees trying to hit their sales quotas (I posted how this case is emblematic of why consumers better understand the sales incentive structure for financial products).

Hat tip to Jessica Endlich for pointing out the additional harm that may have been caused to customers’ credit scores as a result of Wells actions. To understand how they might have been harmed, we turn to NPR (3:37 audio):

Why Do Incentives Matter In The World of Financial Services?

You might want to add another question to ask that well-dressed salesperson who is selling you a financial product (or any other product for that matter):

How are you being compensated?

I bring this up as the clouds continue to darken over a certain financial institution who has been in the headlines recently:

  • Wells Fargo opened a couple million false accounts (Bloomberg)
  • Wells Fargo fired 5,300 workers for improper sales push. The executive in charge is retiring with $125 million. (Chicago Tribune)
  • Wells Fargo fined $185 million for fraudulently opening accounts (NY Times)

Here’s a brief summary of what happened (from NY Times):

How Do You Teach Money Values and Beliefs?

Elizabeth Justema, a first-time personal finance teacher from Summit High School of Bend, Oregon, shared resources that she developed to facilitate student reflection on their money values and beliefs (listen to her podcast here). She hopes this set of resources answers a set of essential questions and achieves specific learning objectives that she outlined below:

Essential Questions:

  • What are my values/needs/wants?
  • What is my perspective on money?
  • What are the origins of those perspectives?
  • How do those perspectives affect my spending behaviors?

Students will be able to: