FINRA's Messages on Weathering Tough Times

FINRA appears to be taking a broader view of its investor protection and education roles and has recently taken to giving investors advice/warnings about weathering tough financial times.  In a recent Investor Alert, for example, FINRA warns about the dangers of excessive debt and cash-strapped individuals making ill-advised decisions such as prematurely deleting their retirement accounts, tapping into home equity through reverse mortgages, or selling their life insurance through life settlements.  It also offers tips such as keeping track of expenses and paying off high-interest debt.  FINRA CEO Mary Schapiro expressed similar warnings in a recent speech to a Women in Housing and Finance meeting in Washington, DC.

I have to confess I have a great deal of skepticism about FINRA's efforts.  First, the message seems unlikely to reach its intended audience.  Are cash-strapped individuals reading the FINRA website or paying attention to speeches in Washington D.C.?  Second, I suspect that cash-strapped individuals who may have lost their homes to foreclosure, may be unable to pay for increasing food, gas and health costs, don't need to be told that cashing out their retirement savings (if any)and entering into life settlements or reverse mortgages are bad ideas.  They make these decisions because they do not see any other solutions.  Similarly, suggestions to cut expenses or pay down credit card debt are probably not feasible for many individuals.  While these attempts at investor education may be benign, I think they are misguided.  FINRA can't solve the problem of people who, for whatever reason, don't have enough money to live and don't know how to fund their retirement. Instead, FINRA should focus on its primary responsibility -- eliminating the financial professionals who prey on the financially insecure.