Ric Edelman has been named the number one independent financial advisor in the country by Barron’s three different times. He heads up a $10 billion practice, with 20,000 clients, that manages more money than nearly any other financial advisor in the industry. And, he hosts a popular syndicated radio show and a TV show on PBS. Among independent financial advisors—known as Registered Investment Advisors (RIAs)—Edelman’s a legend for his ability to attract “the mass market,” or those of us who wouldn’t consider ourselves wealthy enough to afford a financial advisor.

The only problem? You’ve probably never heard of Ric Edelman.

“We’re an open secret,” joked Edelman, though he acknowledged that lacking the marketing or name recognition of a Schwab or Fidelity or eTrade makes reaching the average American a challenge.

Until this past January, Edelman’s client minimum was $50,000—still lower than most minimums in the industry. In January, he launched Edelman Online, which allowed him to reach more of the mass market by scaling with a higher degree of efficiency. Anyone with $5,000 can now be a client, paying a 2 percent fee up to $150,000 in assets (or $100 a year for $5,000 in assets), with the fee decreasing above $150,000 in assets.

The retail wealth market in the U.S.—meaning all the money managed by professionals—is an $11 trillion business spread out across thousands of advisors and brokers and banks and mutual fund firms. RIAs are the fastest growing segment of that industry, largely because in the wake of the 2008 financial crisis many people lost trust in Wall Street and brokers. RIAs aren’t paid by commissions and typically earn a flat fee, usually one percent, on all the money they manage. They also are held by government regulations to a fiduciary standard that requires them to put their client’s interest first. (Obviously, many don’t, but the fact that the regulation exists at all has encouraged more money to pour into that sector.) There will soon be 30,000 RIAs nationwide competing for a portion of your money.

But, most of those advisors require a minimum of $500,000, some even require a client to have $1 million, before they’ll manage your money or offer financial planning advice.

Nationwide, there are just over $30 trillion in investable assets and another $13 trillion in retirement assets. Most of that money, though, is held by people with less than $500,000. The average consumer has around $8,000 in personal assets. With more advisors competing for a piece of the pie, they’re increasingly beginning to turn their attention to the rest of us.

“A big part of the market is people like you and me,” says Betterment CEO Jon Stein. Betterment, an online RIA, is part of a growing push from new internet-based financial advisors to offer a viable solution for the mass market.

Edelman argues that it’s important for the industry to reach people they’ve traditionally ignored. Often those people need more help than those who are already wealthy.

“It’s much more important to help people become wealthy,” said Edelman. And, even if you can’t make as much money serving the lower-end of the market, it may pay off as those customers go on to earn more or refer you to friends, he said.

It’s not that no one’s ever tried this before, but with a handful of exceptions (The Mutual Fund Store being one) they’ve generally failed. The reason financial advisors typically haven’t been able to crack into the mass-market space, reaching all those hundreds of thousands of us with $8,000, is that they haven’t been able to make money doing it. Charging 1 percent on assets means that even $50,000 would earn an advisor just $500/year. That’s not enough to make it worth their time to talk for too long with you about your financial problems.

At $500, an advisor has to take on a lot of $50,000 clients to pay for offices and staff and overhead. Often, that requires an unmanageable number of clients, requiring more staff and infrastructure. Those things typically haven’t scaled well. Adding a financial planner to the staff, earning $100,000, would require 200 $50,000 clients to just cover their salary—much less anything else.

“Most advisors are not interested in the mass market for exactly that reason,” said Edelman.

Traditionally, advisors have gotten around these problems a couple ways: charging more or cutting the costs, by sending clients to a call center or implementing standardized intake surveys that shuttle a new customer off to one of several recommended model portfolios based on their preferences and goals.

That’s all become a lot easier now with the help of technology. A half-dozen new “online RIAs,” many based in the bustling Silicon Valley start-up scene, are aiming to solve this problem and provide financial advice to Middle America—and make money doing it.

“It’s the future,” said Stein of using internet-based technology to cut down on costs and provide wealth management advice to wider audiences.

Among the most well-known of these offerings are Betterment, Wealthfront and LearnVest, which all offer variations on the same idea. They each use a smaller number of financial experts and a high number of engineers to create a tech-based wealth management system or offer financial planning. By cutting down on costs, these firms all are able to offer financial advice to the masses.

Any of us can log into their websites, set up an account, use the online tools they have to pinpoint our financial goals, receive investment recommendations, and allocate money to portfolios following the recommendations or changing them to suit our needs—all without talking to anyone. You then get updates, reports, and notifications of any changes via email or internet alerts. Often, you can call up the company and get an advisor on the phone if you have any problems with the system. But, most people don’t.

Your money is then managed, just as if you were wealthy. Sort of.

“We’ve built advice that’s appropriate for the wealthiest investors, but made it accessible to all,” said Stein.

Betterment charges between .15 percent and .35 percent annually depending on the amount of assets you have on the platform. They have no minimum and until recently an average client size of around $5,000. (Their average client size is closer to $10,000-$12,000 now, with $200 million on the platform.) Wealthfront charges .25% annually on assets over $10,000, with a minimum of $5,000. The average client size is closer to $80,000 and it has $170 million. Both also use ETFs (electronically traded funds), which also charge a .2 percent fee. LearnVest charges $19/month, with a start-up fee for a planning meeting. All are awash in venture capital money.

[Note: The differences between the various online RIAs are difficult to lay out or to follow. If you want a thoroughly entertaining take, read this Quora thread between the CEOs of Wealthfront and Betterment arguing over which is better.]

Even traditional RIAs, like Edelman, are using these kinds of online intake tools and cost-cutting technology to streamline the advice process and expand into the mass market. The biggest broker-dealer in the country, LPL Financial, last year also launched an arm, named NestWise, aimed at the lower-end of the market and relying heavily on similar technology.

“It allows us to serve more people without additional costs,” said Edelman.

The (probably fair) assumption inherent in all this is that the average person’s financial problems are not that complicated. Most people don’t require nuanced estate planning or corporate tax advice. Most people can have all their needs met with basic financial planning and standardized model portfolios diversified across the market, which can be provided more easily than ever.

To date, most people without lots of money have set up a Fidelity IRA, stuck it in a savings account, or tried to invest themselves using eTrade.

The one thing RIAs and the new online RIAs can agree on is that all those options aren’t giving you the best bang for your buck, because they don’t tell you what you need to do to achieve your goals or pick funds for you and rebalance the returns or offer any kind of planning advice.

“It’s a totally different kind of experience,” said Stein.

“Fidelity will recommend funds, but they won’t give advice on if you should buy life insurance or what to do with your will,” said Edelman.

The online RIAs have been popular with young, tech crowds—even those who could afford a regular financial advisor—because these people want more than what an IRA or 401(k) might offer, but they don’t want the hassle of meeting with a live advisor. Wealthfront has attracted a large number of Silicon Valley hotshots, for example, who aren’t interested in traditional advisors. The companies are now focused on using their venture capital to expand across the country.

But, not everyone’s sure they’re going to be able to.

“I question the economic viability of some of these sites,” said Edelman.

Edelman also designed Edelman Online to attract young people with very little in assets. His theory was that these people needed financial advice more than anyone. The adage goes that if you wait until you’re 40 to start saving for retirement, then it’s too late. But, instead, his average online client so far is 54 years old and has $25,000 in assets. Where are all the young people with no money?

“I worry about people in their 20s and 30s,” said Edelman.

Kelly O’Mara writes for a living, mostly for places you’ve never heard of.

Maria Bustillos on the rise of bitcoin for the New Yorker’s new tech blog, Elements, is excellent and readable: “A casual review of Nakamoto’s various blog posts and bulletin-board comments also confirms that, from the first, Bitcoin was devised as a system for removing the possibility of corruption from the issuance and exchange of currency. Or, to put it another way: rather than trusting in governments, central banks, or other third-party institutions to secure the value of the currency and guarantee transactions, Bitcoin would place its trust in mathematics.”

“The moral of this story is clear: if you want good customer service, use a small bank.”

Felix Salmon had a really difficult time requesting a simple document from Citibank and wrote a post about his experience on Medium. We all know community banks/credit unions have better customer service, but it’s good to be reminded about why sometimes.

Photo: retailmania

Bank of America Alert: You’ve Really Gone and Done It This Time Idiot

Bank of America Alert: Are You Kidding Us?

Bank of America Alert: You Already Have Three of Those

Bank of America Alert: You Could have Been a Contender

Bank of America Alert: We Feel Bad for You!!!!!!!!

Bank of America Alert: You Seriously Need to Stop Like Literally Right Now

Bank of America Alert: STOP STOP STOP

Bank of America Alert: RING RING THE REST OF YOUR LIFE IS CALLING TO BREAK UP WITH YOU LOL

Bank of America Alert: Find a New Country to Live in, Sister, Because Capitalism Ain’t for You, OBVIOUSLY

Bank of America Alert: We Saw You Walk out of Forever21 Last Weekend Without Buying Anything and We Are Wondering, Do you Think You Deserve Some Kind of Prize?

Bank of America Alert: We’ve Decided to Have You Killed

Lauren Rodrigue lives in New York.

The banking industry has never had the best reputation, and the 2008 financial crisis certainly didn’t do anything to improve it. Goldman Sachs, in particular, was vilified by the media for its contributions to the crash—Rolling Stone infamously declared that the firm was a “great vampire squid” responsible for engineering “every major market manipulation since the Great Depression.”

I graduated high school in 2008 and entered college in the midst of an economic meltdown. Students preparing to graduate from college were getting their job offers revoked, and began entering into a very challenging job market. The ubiquitous fear of unemployment subconsciously led me to the one area of my university that wasn’t struggling to place its graduates: the business school.

Even better, the business school didn’t require students to define a major or concentration, which was an enormous relief for someone as indecisive as I am. The career center was dedicated to placing its students with Big Four accounting firms, top-tier investment banks, CPG companies, or management consulting firms. For my limited efforts in recruiting, I was fortunate to receive an offer from Goldman Sachs for the Summer of 2011.

As an intern in the operations department, there were no 100-hour weeks that are common in investment banking. The internship was paid and covered my living expenses. My time was split between organized networking, informal mentoring, and managing small portions of efficiency improvement projects for the division. I unintentionally stole someone’s copy of The Wall Street Journal every morning, and saw more Broadway shows than I could reasonably afford when I had free time. I postponed being a responsible adult and made a conscious decision not to worry about my finances. It was the greatest summer of my life.

In August, I was offered a full-time position with the firm, and with the summer experience still fresh in my memory, I promptly accepted. I still had one more year of college to finish up, but already had a job lined up for me come graduation time.

When I returned as a full-time employee in 2012, the negative perceptions of the firm still hadn’t waned. My (and others’) common response to “What do you do?” was “Work for a bank”—omitting the specific name of the bank entirely out of fear of being accosted. This was under the assumption that every new connection had the same opinion of Goldman Sachs, which, of course, wasn’t necessarily the case. Before I moved to New York, my dental hygienist asked where I would be working.

“Goldman Sachs,” I replied.

“Like the department store on 5th Avenue?” she asked.

Nevertheless, I began enjoying my experience as I had during my internship. The thing the media forgot was that the company had over 30,000 employees, most of whom worked in operations or technology. Sure, I met my share of conceited bankers and traders, but those stereotypical investment bank employees weren’t really who we were. I realize that my role in the operations division was different than a role in most other divisions, but this also can show the misapplication of stereotypes against the company. In fact, the majority of my coworkers were intelligent, funny, and driven for success measured in ways other than money. The firm itself was a model of overall efficiency, and the frustratingly complicated tasks were usually being addressed and upgraded by management. An investment bank may not have all the perks of a tech company, but the culture was supportive and the benefits were more than satisfactory.

Any one of my friends reading this may question how generally positive my reflections on my time at Goldman Sachs are. The truth is, I wasn’t passionate about the work. Of course, I don’t know if anyone is passionate about clearing Listed Derivatives, but most of my coworkers were at least interested in finance and the financial sector in a way that I never was. At 22, I knew I would be paying my dues in a less than ideal job somewhere, but reasoned that it would be more productive for me to accomplish this in an industry where I saw a future career path.

A few months ago my aunt reminded me that “work is work.” Her frustration with my generation is that we seem to forget this fact and believe, perhaps too strongly, that we’re supposed to love what we do.

“You may be right,” I told her, “but I’m going to spend my twenties trying to prove you wrong.”

I was never the type to live with regrets, but was always happy to admit that if I were given the chance to redo college, I would have been a computer science major instead. In February, I was given my second chance when I was accepted to Hackbright Academy, a 10-week fellowship designed to help women become highly-skilled programmers. My coworkers were extremely supportive of my decision to leave, and management even offered to let me come back to the firm after I completed the fellowship—something I had not expected and probably did not deserve. I respectfully declined the offer because I didn’t want to restrict my career options. I wanted to find a job that truly inspired me.

One of my managers wasn’t pleased with my decision, and raised a lot of fair points. Even though my interest in pursuing software engineering wasn’t new, I hadn’t mentioned this to anyone on my team. He noted that there could have been opportunities to get me involved with the more technical aspects of projects, which were bypassed because no one knew that I cared. In different circumstances, he argued, I could have found work I felt passionate about at the firm. The conversations we had during my last two weeks at Goldman Sachs evolved into a valuable lesson about communication.

When Greg Smith tried to rally the masses into raising their pitchforks against the man, he was met with tepid reactions. For good reason: The general public (except, perhaps, my dental hygienist) is smart enough to realize that any human at any company will complain about their clients, or their coworkers, or the job itself. This is not to say that Goldman Sachs is innocent; they paid over half a billion dollars to settle with the SEC over the subprime mortgage crisis. I made my decision to work there knowing this, and perhaps this perception set a low bar for my experience.

Last week, I learned that three of my former coworkers had been laid off. Someone at the firm had to make that difficult decision, hopefully for some justifiable business reason. While I might not agree with the decision itself, I’m hopeful that these individuals will use the opportunity to move on to something they find more satisfying. I can’t pretend to have all the answers having barely lived my own life, but would rather have an optimistic outlook than move on from the firm with any kind of resentment. When I look back on my short tenure at Goldman Sachs, I won’t see a toxic and destructive environment, but a supportive and educational foundation for the rest of my career.

Kelley Robinson is now a software engineer and tweets sometimes. Photo: edenpictures

Helaine Olen spent several years as a personal finance writer and editor, beginning at The Los Angeles Times in the ’90s where she was the newspaper’s “Money Makeover” columnist. Over time, she came to the understanding that nobody in the personal finance industry really knows anything beyond very basic and common sense suggestions (i.e. live within your means). Olen says its empowering to learn how to manage our own money, but personal finance gurus like Suze Orman, Dave Ramsey, and Robert Kiyosaki, and networks like CNBC can’t tell you how the stock market or real estate will perform in the future, but are making a killing doling out conflicted advice and selling us complex financial products. This is just a small part of what’s wrong in the industry.

Olen’s book Pound Foolish: Exposing the Dark Side of the Personal Finance Industry, has been making waves since its release in January, and has received positive reviews, including praise from Jon Stewart, who had Olen on The Daily Show in February. “You guys should do an article about how Jon Stewart is the new Oprah,” Olen told me when I met up with her earlier this week. “Books really do sell. You could see the Amazon numbers after the taping—it jumped from 4,600 to number 22 in a day.” Here’s our conversation:

I thought your book was really terrific, and have been telling everyone to pick it up. I started my career covering politics in Washington D.C. and didn’t really think about personal finance until I started writing about it a few years ago. I remember picking up a few personal finance books to get myself acquainted with how it was being covered and not really being able to connect with a lot of the information. I don’t know a single person who decided to give up their coffee habit to fix their financial lives. I get a cup of coffee from Starbucks almost every day and I’m doing okay.

You know that’s part of the conclusion to the book that money advice is shrill, judgmental and absolutely oblivious. Just because David Bach can give up his lattes—which, by the way, I doubt, since he was profiled at a dinner party in 2004 ordering up food from Dean and Deluca, and I don’t need to tell you how expensive that is. It’s just oblivious.

And to be clear, you have no problem with common sense advice. Knowing how to manage and invest our own money is a good thing. But you also point out that pushing this idea that people aren’t saving enough or are spending too much money on lattes distracts us from the bigger things. For example, finding affordable housing and negotiating a bigger salary will do so much more for you than quitting your coffee habit.

What’s coming in is more important in one sense than what’s going out. We have this myth that we’re massive over spenders—and we have it for any number of reasons. I think in part because it can certainly seem that way. As I always tell people, you see me in a restaurant, but you probably won’t see me at a pharmacy getting a prescription, which is where my money is really going. It seems that way because relative to what it used to cost, things are much much cheaper. As I was pointing out to someone the other day, I don’t think in non-adjusted inflation terms that I could have gotten a T-shirt for $4.99 in 1971 down the street like I can right now. Stuff’s cheap and people buy it. And our salaries are falling—of course people aren’t saving money. There’s this whole idea that people are going to respond rationally—their salaries are going to fall and they’re going to save money. It doesn’t work that way. Certainly not in a society where your cost of health care, housing and education are skyrocketing.

Right, and the biggest reasons people get into deep financial trouble is not because they’re not saving properly, but because of these enormous costs associated with housing, education and health care, or a spiraling economy that results in job losses.

Could we all save better? We probably could. But it’s not what’s causing the problem. As I like to point out, in 1980, we had a 10 percent savings rate. I guess I find it hard to believe that in that 33-year period, we became collectively more financially ignorant and more irresponsible—that just defies reason. In fact, when you look at it, what happened was our salaries fell and our financial lives got more complicated. You hit a one, two. I was born in the mid-1960s when credit cards were less than 10 years old. Married women had no right to one, by the way, and wouldn’t for another decade. There were no retirement accounts and no ATMs. I swear, I remember when the ATM machine came to the Citibank on Nostrand Ave. in Brooklyn—it was really exciting! No gotcha mortgages—mortgages were very basic stuff. Second mortgages were not sold by the banks to people, or they were something you were supposed to be really embarrassed by because if you were desperate for money and got one, you never came out in public and said, “Hey I got this really cool thing, and look at the kitchen I redid!” It was just a different financial world.

Then there’s a turnaround where you blame people for the fact that the financial world changed on them. It strikes me as delusional at best, and outright wrong at worst. The banks had this idea that they’d invented all this stuff and gave people all these goodies, and we’re going to educate everyone on how to use them, and I actually don’t believe that. I think they know they’re not educating people on how to use their products. It’s not possible. And it became more complex, and at the same time, we needed the stuff, and by the stuff I mean yeah, people felt they needed to buy a house because they were told—well, they weren’t told not to buy a house beyond their means. Do you remember anyone saying that 10 years ago? Because I sure don’t. What I remember was, “If you don’t buy today, prices are going to go up tomorrow and you’re not going to be able to afford it, so here get this mortgage, and don’t worry, you’ll be able to refinance because housing goes up.” And this is what people were told over and over again: Housing doesn’t go down. You can go back and look at the literature. People weren’t saying, “You know, housing could go down, and it could go down by 40 percent. That nationwide crash? It can happen.” So, there’s this kind of obliviousness out there, and I think it’s in a lot of people’s interest for that obliviousness to exist.

So let’s talk about some of the financial gurus you discuss in your book. Suze Orman is one of these people who told people to run out and buy houses, and after the crash, she apologized and admitted that she was wrong. And you talk about this when it comes to people’s personal financial planners. They’re often wrong, but people will continue to listen to them. Why is that?

There’s a couple of things. These people present themselves as your friend for the most part. They’re not coming up to you and whipping you, at least, not initially. So that’s part of it—they’re going to give advice to you for your own good. Suze Orman is like the Jewish mother of personal finance. Second, we’re Americans and we want to believe! Personal finance exists in other countries, but it’s nowhere as big as it is here. And the reason is, objectively, we have some very deep income stagnation, we have huge disparities of wealth in this country, but people actually don’t know it, or don’t believe it if they’re told it. I’m sure you linked to that video last week that was on the PBS News Hour last year. And people don’t believe it. They think we’re Sweden, when in fact we’re actually Argentina or Chile. People are really sold on this idea that we are individuals in this society and that individuals can make it.

We’re not making it. So this culture of shame develops where people don’t want to admit that, “Oh I was born lower class and this is where I’m likely going to stay,” or “I’m really wealthy because I was born in Chappaqua”—to use a Bill Ackman example—and obviously he did a lot better than his parents, I feel sure about that, but he’s nonetheless, starting from a pretty high base to begin with. And we don’t like to admit to that in our country. So this industry really comes in and preys on that and the idea that we’re all individually responsible for our fate. We believe the myth of Horatio Alger in this country, but Horatio Alger wrote fiction. So it becomes this whole ideology where we’re sold on this idea that we can do it and we really believe this. We take a look at the economic situation out there, and we objectively know it’s pretty bad, but we internalize it as our own fault—and, because it’s our own fault, we’re pretty sure that there’s someone out there whose got the answer.

A number of people I interview in the book just fell for things again and again because they were so sure they could trust that somebody had the answer. I remember talking to one woman who was up in New Hampshire where she was just recounting to me these things: “Well, we were doing this, and then we went to this salesman at this free lunch and we hear that, so we put our money in that. And that didn’t work out.” And the advisor fired her after she started asking questions. And then they go to somebody they met through a church, and that doesn’t work out, and so on down the line. The reason it doesn’t work out is because if someone had the financial answer, would they come to either Mike or Helaine who could pay them maybe a couple thousand bucks, and say, “Hey, I got it!” or would they go elsewhere, say maybe Bill Gates, or even better, screw him entirely, get on a boat, hang out on the Caymans and start trading away happily because they don’t have to pay any taxes or tell anyone what they’re doing? So the idea that anybody out there is selling you the secret is absurd on its face. But we believe. And then we have things like CNBC, whose entire being is to convince you that they have answers. As I say in my chapter on CNBC, if Jim Cramer were saying, “You need to get out of the game!” they’d have no business model.

Another thing about “gurus” like Suze Orman and Dave Ramsey, as you point out, is that they’re trying to convince you that they were just like you once, and look at how they’re doing now! Suze Orman was once a waitress, and as the story goes, she really had to fight her way to success. Dave Ramsey bounced back from bankruptcy. And as you say, Orman and Ramsey did not become wildly successful because they saved better or invested smarter than everybody else—they became wildly successful because they were able to sell themselves and their products to people.

The whole genre of self-help depends on the story. It’s like almost being born again. You know: “I had my moment.” Suze has her moment with a waitress when she realizes the waitress is richer than her, and Dave Ramsey has this moment when he has to tell people that debt is bad. They’ve got the story, and people like that moment. And so we don’t ask the questions. And Suze Orman, to be fair, was a successful financial planner. She obviously had an ongoing business. Dave Ramsey was definitely in bankruptcy when he started. But we want to believe. And one of the things I find fascinating is the conflict of interest in their work. I work in a field where if I accepted coffee from a source, I have editors who could get quite angry at me. But people will say, but Suze and Dave need to make a living. First of all, do they have the right to make a living selling you conflicted advice? And second, Suze Orman’s got $30 million, doesn’t she already have enough of a living? What are you talking about? Dave Ramsey is worth lord alone knows what. It’s a conflict, and a basic conflict, and I don’t think they cop to it. Certainly Ramsey doesn’t. He still goes around telling people that you could still get 12 percent annual returns in the markets, and if you want to know how to do that, Dave has his “Endorsed Local Providers”, and you can go to them. I mean, you’ve got to be kidding. There’s no way to do that, that I’m aware of. There wasn’t a way to do that back in the ’90s during the bull market. You might have a year here, and a year there, but to plan on that is just absurd. And it’s not right. But people are scared, and they want to believe.

And to be fair to Suze and Dave, they’ve actually helped a segment of people who needed to be taught how to live within their means.

Yes, because certain people do need to be told very basic things. But that’s always true. I find it hard to believe that wasn’t true in 1980 or 1960. John D. Rockefeller’s father was a deadbeat, go look it up. So was Charles Dickens’s father. We’ve always had this issue, right? Mary Lincoln spent a lot more money on clothes than she should have when her husband was president. We’ve always had a certain percentage of people who do this. I don’t believe we have more than we used to. To the extent it’s easier—there’s credit—but that doesn’t mean that we’ve suddenly all lost it. And I think what these people are cautioning, is that that’s indeed what happened.

That we’ve somehow lost our way.

We lost our way. We used to live like the Waltons, and we had a house together. But the fact is that old people had this distressing tendency to end up in poor houses. And people who lost a parent were often placed in orphanages, and that was common basically up until Social Security. We have this false image about the past. Things like Social Security developed for a reason. They happened because we needed them. Someone didn’t wake up one day and say, let’s let people be irresponsible and not let them save for their retirement.

Let’s talk about retirement. The way we save for retirement now is a pretty modern invention in that it’s something we’ve tried doing just in my lifetime. As you mention in your book, with the 401(k) we sort of lucked out that it came into being during a time when we had a market boom in the ’90s, which generated an extraordinary amount of money. And then the crash happened, and people who were about ready to retire lost an extraordinary amount of money in their 401(k) accounts, which really shook our faith in the 401(k) system, which may not have been what it was if not for how the markets were when we started it.

It’s one of the great imponderables: Would this have happened the same way? You don’t have the answer and I don’t have the answer, but yes, it coincides with the great bull market. So you see this: “You know my little 401(k) is going to make me a millionaire, it’s the Little Engine That Could. Just keep putting your money in and—ka-ching—40 years later you’re going to be fine.” But there’s no comprehension that first, half the population didn’t have access to any of this stuff, that second, this wasn’t inevitable, and third, people believe this contradiction that market gains are inevitable and that their investing genius is responsible for their success, which of course made no sense.

And yet, this is the world I was brought into as a working adult: Hope that your 401(k) does well, and hope that your company offers you a match. What’s the alternative? Is there one?

If I knew the answer, I wouldn’t be writing this book. But there are a lot of different ideas out there. And I think, for me, this is why it was so important to talk about it. Because the conventional thinking right now is, well, we’ll go with the 401(k) because the pension system didn’t really work because a lot of people weren’t eligible for them, and companies were going bankrupt offering them anyway. Ellen Schultz actually disproved that one in her book Retirement Heist, which if you haven’t read, you should and do an interview with her.

Second, just because something didn’t work doesn’t mean the thing we have now that’s not really working should be kept, is my position. And you have to start from that premise. Most people don’t want to start from the premise that if something doesn’t work, we’ll just say we don’t have anything better. The first step to getting something better is to say it’s really not working. Suze Orman could probably tell you this. You have to have this moment when you recognize what’s going on. My moment is realizing that this is not working. We’ve had 30 plus years—if it was going to work, we’ve would have figured it out by now. And we’re starting to see things like the guaranteed pension plan, which is what California is looking into a version of now. You start to see things like in Australia where there are mandatory 9 percent contributions and employers are also responsible. England is moving in a similar direction. We’re concerned about fees, and well, England is banning commission sales, which is one way to knock out a certain percentage of conflicted advice. We need to start asking, “This isn’t working. What else is out there?” That’s the first step, and you go from there.

And that’s the thing Occupy sort of got, whatever people think of Occupy, and obviously I was a supporter to some extent, but they kind of got this idea that you have to get out there and say what’s going on. They were the first group that I know of in 30 plus years to take this instinctive leap that nobody else seems to have made. It’s astonishing to me. It was like, “Hey you have student loan debt, my house is being foreclosed on, he’s about to go bankrupt from his wife’s medical bills—maybe we’ve got a problem here.” And that was an amazing leap. And we’ve seen a change in the political discourse since that’s happened. It was extraordinary. A problem was being articulated. And of course “the 99 percent vs. the one percent” was just brilliant.

You need to begin to talk about this, and say what is right and not right. And what’s not right in my view—and I say this as someone who generally doesn’t like to judge money—is this idea of hectoring people about what they’re doing wrong. It falls into the, “if it was going to work, it would work.” It’s also offensive. There’s this disconnect where you see these people on television, where they’re wearing designer suits and they look quite wealthy, and they’re lecturing people on having smartphones. Smartphones have become the latte of our time, I’m convinced of that. Smartphones and premium cable channels are the new latte factor! It’s this bizarre combination of this Ayn Rand self-determination, “well, I made it, I’m better,” followed by this weird Victorian morality trap. There’s an oblivious factor, and it’s kind of offensive. I always think of the scene in Jane Eyre where she’s at the orphanage, and a guy comes in dressed to the nines and he’s bitching out all the little girls because all their hair are done up. It’s the same sort of thing, and yet we read Jane Eyre, and think, “Oh this is terrible, we’d never do a thing like that.” And of course we do it. We all do it, by the way, none of us are immune.

There were a lot of surprising things for me in your book, but one of the biggest surprises for me was discovering that financial literacy does not work. Let’s teach people when they’re young how to stay out of trouble! But as you say, the data shows that it’s just not working. One of the reasons why it’s not working is because financial literacy is usually supported by the financial services industry, which sounds good at first, until you realize that the financial services industry also lobbies against legislation that would make their products easier to understand by consumers.

The chapter on financial literacy broke my heart. The whole chapter started from one sentence from my book proposal: “I think in discussing some of the financial gurus—there is this explosion of information—yet the survey data shows that our financial knowledge had not moved the needle. What was going on?” I didn’t answer it in the proposal—I thought there was an answer! I start looking into it and thought, “Helaine Olen is going to discover why financial literacy doesn’t work—hah!” Well, yes, I did, and so did other people, and the answer is: There was no financial literate time, there was just less financial knowledge to be had. So by definition, a lot of people seemed a lot more financially literate in 1950 when you didn’t have to know what a gotcha mortgage was, or, to use a stupid example, you didn’t need to know how to use an ATM, so you didn’t need to know not to take out too much money from an ATM, because it didn’t exist. There’s no Golden Age of financial literacy.

So we’ve got this whole establishment saying, “Oh we’re going to teach people financial literacy.” And to be fair, hey, maybe there’s some way to do it at some point, but as of right now there hasn’t been any evidence that anybody has been able to do this. If you look at the data for other countries, the differences are marginal. There’s no country out there where you’ve got this incredibly financially literate population. That should probably tell you something right there.

Second, there’s a cluelessness factor—most people aren’t terribly interested in this stuff and are never going to be terribly interested in this stuff. It’s like going to a party and you run into a train aficionado (which I am) and they start talking and talking and your eyes begin glazing over, but they’re convinced if they keep talking to you you’re going to understand why it was really important that the Q train used to be called the D when Helaine Olen was growing up in the 1970s and the 1980s—and of course, you’re never going to give a shit. And people think because money is more important than that that it’s going to work, but guess what, it doesn’t.

And you have another problem coming in which is the most insidious of them all, which is who is supporting all of this? And the answer for the most part is not nice, general disinterested parties. This is an industry that is brought to you by the financial services sector. And you’ve got to think at some point, wait, so if this isn’t working, what’s going on here? And well, if you can say, “I can educate people to read a complex mortgage application, and maybe I won’t have to give them a plain vanilla one like they tried to get into Dodd-Frank,” which got rejected by Congress. So who is financial literacy really working for? Of course, if you want to be really cynical, financial literacy works quite well for some of the parties promoting it, but not for the reasons you think.

The final part, is that it sounds wonderful, right? How can you be against financial literacy? It’s like coming out being against teaching math, or apple pie. And the answer is on one level, if you want to teach it, whatever! We get taught all sorts of stuff in school. But that’s not what’s going on here. What they’re saying is that they’re going to teach it and it’s going to solve all this other stuff, and that’s just not true. The idea, in fact, when you think about it, that you could teach somebody about all of this stuff and assume that 20 years out they can read the prospectus for a product that might not have even existed at that time—it is absurd. And even if it did exist, it’s borderline absurd because think of all the stuff we learned in high school that we have no memory of now. The example I like to use is, “Tell me what the French and Indian War was and why it was so important to the American Revolution.” And everyone gives me these blank looks. If you’re not going to remember the Pythagorean theorem, how much will you remember of financial literacy? It just doesn’t work. I wish it did. The world would be a much better place if it did. And I feel like such a crank saying that.

Because the financial services industry has convinced us that we can only manage our money if we know how to use their products. And it starts right when we hit college.

I moved a couple of months ago and found this huge stash of files that we had to trash from the early 1990s, and we had all the checks to the supermarkets in Los Angeles. Because the supermarket didn’t take credit cards! And if you didn’t have cash, or the ATM was closed, you had to write a check. It was a different world. There’s no reason why people in college need credit cards.

But the financial services industry wants to convince them that they do, because they show up at college campuses, put out their tables, and convince you that you need to start building credit.

Why do you think they do that? That’s what I mean! And I feel like the meanest cynic in the world sometimes. So again, legislation is a huge thing. You probably also need campaign finance reform. And that’s one of the things I have in the book. You’d find these people, and they’d be fighting against quite reasonable reforms, and then you go look to see who was giving them money at Open Secrets, and you go, “Huh. How intriguing.” Of course that’s part of the problem. The financial services industry gives huge amounts of money to people in Congress.

Let’s talk about women and money. You have a chapter dedicated to the way women are specifically marketed to, and how they’re convinced they need help with their money to make their financial lives work. “Stop shopping so much!” they’re told. And again, that kind of discussion distracts from the big picture, which is a lot of the problems women have around money are because of things like pay inequality, or a lack of employer-supported maternity leave.

First of all, women are presumed incompetent and men are presumed competent. You look at the data and there’s really no difference: Both sexes are really equally financially incompetent. The kicker to this by the way is that men tend to get into more trouble because people who think they know more than they do actually are more likely to get into trouble. Women tend to ask more questions which seems to help them.

But women’s financial issues can really be explained not by the fact that they’re financially ignorant and going to the Barney’s warehouse sale. It’s because women earn less, have more responsibilities and live longer. One. Two. Three. There’s no epidemic of single dads out there. Nobody’s talking about, “Oh my god, these irresponsible single dads—how did they get themselves into this?” Women, by definition, even if they’re the most fiscally righteous person—they’re going to have a harder time pulling this off than men. If they’re earning less, have more responsibility, and living longer, this is not a point of contention. But it is. So the financial services industry has this issue about how they’re going to market to women, and so they say it: “You’ve got all these responsibilities and you work so hard, but you need to save more money, and then come to us and we’ll help you.”

The other part of this with women is there’s this weird language—it’s almost like simultaneous empowerment and infantilization. Men are presumed competent, but they’re also—just so you don’t think I’m overselling this—they’re also presumed incompetent and get sold on all the shit like The Money Show, and day trading schemes, futures trading, etc. This is a man’s world, and it’s not good stuff for the most part—understand that. Most people would be better off shoving their money into an index fund and moving on with their lives. But women are presumed incompetent, and it’s just not true. The data on women as spendthrifts is pretty nonexistent. Women do spend more money on clothes, but then on the other hand men spend more money on liquor and electronics and cars. We don’t talk about that.

And as some of the data shows in your book, it’s not that women aren’t fighting for themselves in the workplace. Women who ask for bigger salaries can be penalized by not being hired. It can be a very difficult thing to navigate.

So, after you wrote this book, did you change anything in your life?

Yes and no is the answer. I tend to get more enjoyment on what I spend now. But on the other hand, you think, oh god, you wrote this book, you either pulled all your money out of the stock market and buried it in the backyard. No. Or you’re really saving for retirement. And I am, but no more than before. It left me with this appreciation of how short life can be and how you do need to plan and be responsible—things don’t always work out. And, that had a more powerful impact on me than the fear of living in penury when I’m 90. I might not make it to 90. And I might regret that when I’m 90. And here’s the difference between me and Suze Orman: I understand this. I get the tradeoff I’m making here.

It didn’t change me as much as I might have thought. It gave me an appreciation of how uncertain things are. One of the things I really did learn that surprised me was that this whole idea of the stock market as this sort of guaranteed idea, for lack of a better phrase, which might not be true. Which makes instinctive sense. If you ever go to a geneticist, for example, about issues, they will tell you that they cannot be sure—at least this was true when I was looking at stuff when I was pregnant—if something really runs in your family for up to five generations. So why should someone be able to tell you about any certainty in the stock market? Just because you roll the die and keep getting double sixes, it doesn’t mean it’s going to happen the next time. That surprised me a lot, but it didn’t really change what I did.

I also walked away with this fundamental understanding that just because the stock market can crash tomorrow—and of course everyone thinks the stock market it going to crash tomorrow, right, it’s the recency effect, we all think history is going to repeat itself—one of the things being sold to people is—say that guy over there is a stock broker—”he’s got the secret.” Right? What he doesn’t say is that he could lose you more money that the stock market could lose you. We all assume if we’re going to buy it, we’re going to be the ones who figure out the trick that makes more money, so if the stock market loses 40 percent, we’re going to be fine when in fact, you can invest with a guru who loses you 80 percent. That doesn’t often occur to you because again, Americans are optimists. We don’t think that way. I think that way. I decided I’m going to stick with index funds.

This has been a fascinating discussion, and I really don’t want it to end. But one final thing. The last chapter of your book is about how we need to talk about our money. Occupy was one way to talk about it. Our entire site is devoted to the idea that we need to talk about money—all the good things and bad things and really ugly things. We encourage everyone to share their stories. And we post things like videos of Elizabeth Warren really going after the banking industry. And then—what comes next? What can we do in the face of these injustices? I suppose call and write to our politicians?

I say speak about it. Write about it. Talk about it. On a minor level, people ask, what can you do for you finances when you go to a financial advisor? Here’s a really easy one: Ask if they have a fiduciary duty to you. And people are like, “What are you taking about?” Ask if they have a legal duty to act in your best interest. Most people won’t do that. And people ask, “That a step?” Yes, it’s a major step because the industry is fighting really hard that they don’t need to have that for you. 401(k)s have fiduciaries. IRAs don’t always. Brokerages and broker dealers almost certainly do not. Basically, you’ve got to ask. That’s something you can do on a personal level.

On a bigger level: Be angry, be out there. When Occupy happens again, show up because it might help. People don’t know quite what to do. I guess I have a lot of faith that if you keep putting videos up like that, and I keep talking about this, and other people start talking about it, then something will eventually change. Because if enough people start talking, the status quo won’t hold up under those circumstances. I don’t know how it will happen. And I’m not a social activist in that way—I tend to be a very analytical person to a fault, and I admit that. That a lot of people realized that there is a problem after reading my book, that’s a step. People realized they had a problem, but I think they used to think it was an individual financial problem, and it’s clearly a collective one.

If you liked this discussion, you’ll love Helaine’s book, so pick up a copy, or borrow it from the library. (Find it on: Amazon | Indiebound)

There is in all of us I think a tension between sharing something wonderful and keeping it secret inside you so you can enjoy it on your own. I once hid from friends and family the fact that I was watching and enjoying Friday Night Lights, because I wanted it to be mine alone. I’ve refused to explain where exactly a restaurant is to avoid diluting the pleasure it gives me with someone else’s. But eventually, my desire to keep all joys to myself is overpowered by wanting everyone else to be happy, and I reveal the existence of the pizza place that doesn’t actually have a street address, just a random intersection where you pick it up like a drug deal.

My most recent discovery is entirely credit score related—perhaps not as exciting as pizza drug deals, but also maybe for some of you, far MORE exciting. A few Saturdays ago I was checking my credit score. You know, basic Saturday shit. I was looking to see how much it had improved in the two years since I last fucked it up.

In 2011, I made a late payment on a credit card bill. Or, if we’re being more accurate, I did NOT make a late payment, twice. The bill was for 12 dollars, then 25 or so, seeing as the only thing I was paying for was my monthly Netflix service. I’d switched Netflix over to my credit card when my debit was reported stolen—heaven forbid I not be able to watch every episode of Veronica Mars at a moment’s notice! But I didn’t use the credit card much, and didn’t realize you have to click “Confirm” like a hundred (3) times in order for a payment to go through. I wish I could say I realized my mistake, but I didn’t—I did the same thing the next month. By the time I realized what had happened, I had a 60-day-late payment and a 100 point drop in my credit score.

I called the bank and they said it was illegal for them to do anything about this. So I just sadly waited for my credit to get better, paying every other bill on time. Two years later: 60 points better, but still lower than before my mistake.

This is where the internet comes in. Googling around led to some really (REALLY) serious debt-relief forums, where people talk about how hard they work to get their credit better, and I started seeing references to “GW letters.” This, it turns out, means “Goodwill”—basically, asking the bank to be nice to you. Since banks are huge, the forum-goers recommended sending a letter every six months and hoping you get lucky. But buried deep in the bowels of a thread on how to write to Bank of America was someone suggesting actually contacting the office of the CEO of the company.

Ten minutes later, I have drafted an email to Brian Moynihan using an easily-googled email address. It seemed presumptuous—but then, also, OBVIOUSLY a bank CEO is gonna have a whole team of people who just hand-filter emails for him. Once you’re rich enough, you never have to see dick pill spam again. Which is maybe enough motivation to fix your credit.

I squeezed my eyes shut and hit send. It felt like something from a shitty sitcom, or maybe from a Medieval fable about a peasant petitioning a king. But I did it anyway. And two days later, a very nice lady for the Office of the CEO and President (Urgent Customer Relations Division) called me—on the PHONE, even!—and said she’d be researching my case.

Three days after that, she called again to tell me two things. One: That Bank of America was telling all the credit agencies that I was not delinquent, thus fixing my credit. (My silent response: A sort of whooping of delight.) And two: That she was very excited to see in my email signature that I am an animator by trade, and wanted to know if I’d worked at Disney. (My silent response: A sort of affectionate eye-rolling.) We chatted about my job, and then I hung up and pulled my credit report again. And in a week, my score went up 40 points.

So while I’d love to keep the wonderful Urgent Customer Relations Division a secret to myself, the fact is my credit isn’t even that bad—maybe yours is! Maybe you should just google Brian Moynihan’s email address and see if they can’t help you. If you do, you are allowed to look him in his eyes—but do not touch the hem of his sable cloak, or his guards will drag you away.

Christian Brown doesn’t work at Disney.

Here’s an “Um, what? No! Ugh” story I read this weekend that was published in LA Weekly last week. It’s about how Wells Fargo foreclosed on a man’s home because they had the wrong address on file:

In a series of painfully tragic events, Wells Fargo relied on its typographical error to double Delassus’ mortgage — from $1,237.69 to $2,429.13 — as its way of recouping the $13,361.90 in taxes Delassus didn’t owe. Delassus, a retiree living on a $1,655 check, couldn’t meet the mysteriously increased mortgage. He stopped paying, and soon was far behind on his mortgage.

Delassus and his attorney did not discover until May 2010 that a mis-entered number had dragged Delassus into this spiral. As court documents obtained by L.A. Weekly show, after admitting its error, Wells Fargo foreclosed on Delassus anyway and sold his condo.

Delassus had to move to a tiny apartment in an assisted-living home in Carson.

The most tragic part of this story is mentioned in the very first sentence: “On the morning of Dec. 19, 2012, in a Torrance courtroom, Larry Delassus’ heart stopped as he watched his attorney argue his negligence and discrimination case against banking behemoth Wells Fargo.” The coroner said Delassus died from heart disease, but friends say the system killed him.

Photo: Estal

Mike: Who are you?

Banker: I’m 28 and am a vice president at a large global bank where I’m currently earning about $250,000 a year. I grew up in the South, went to public school, then a private college. I got an internship on Wall Street, and then a full-time job. That was in 2005, and many rounds of layoffs later, I’m still there.

Mike: What did you study as an undergrad?

Banker: Originally, Asian Studies, but then I added on a business program as well.

Mike: What kind of careers were you considering when you were in college?

Banker: Not many! I always thought I would run my own business. I’m very opinionated, and didn’t think I would last long working for someone else. I didn’t know what kind of business—my dad was (is) an entrepreneur. I figured I would jump on the first good idea that I ran across, fail a couple of times, and then find something that worked. When the Wall Street opportunity came up, I thought it would be a good place to learn some business skills, so I jumped at it. I was right, but I overestimated my ability to quit when I came across a good idea.

Mike: What kind of upbringing did you have? I take it that since your father is an entrepreneur, it wasn’t one where you worried about money or bills?

Banker: Correct, although my dad did run a few businesses into the ground, and he had a nightmare divorce that sucked time and money away until I was 16. Money might have been tight once or twice, but it never felt like it when I was a kid.

Mike: Did your parents talk to you about money while you were growing up?

Banker: Oh, god yes.

Mike: Haha—in what ways?

Banker: I mean, I remember teaching my dad how to look up his stock quotes on Prodigy in the early days of the Internet.

Mike: How old were you then?

Banker: I must have been about seven. My dad would teach me about stocks, compound interest, and investing.

Mike: Wow. At seven years old?

Banker: It was the beginning of the Internet bubble, so that had something to do with it. I think if stocks hadn’t been going straight up at the time, I might not have had the same level of exposure. In any case, when I would work summer jobs I would save it and invest it—even if it was only a couple of hundred dollars.

Mike: What kind of summer jobs did you have?

Banker: Well, my first summer job was sewing buttons onto men’s shirts at my dad’s dry cleaning plant. I worked for $5 per hour or something. It was hot—summer in the Deep South surrounded by steam-powered machines. I also worked in restaurants, and later got unpaid (and then paid) internships at financial services firms. I was also a camp counselor, which was maybe the best job I ever had.

Mike: Sewing buttons and working in restaurants—it sounds like your family wanted you to experience good old fashioned manual labor.

Banker: Exactly. My parents always made sure that I knew not to take anything for granted, which is good, because that helped me avoid a lot of the problems that kids run into when they end up in high-paying jobs right out of college.

Mike: What kinds of problems?

Banker: I think most people get these banking or consulting jobs, and when you start out with a base salary of $60,000 or $70,000 right out of college, you probably have more disposable income than at any other point in your life. It’s a shock. All of a sudden your bank account is filling up (unless you moved into a really expensive studio/one-bedroom apartment). So I know many people, especially in 2006-2007, who were spending everything they made, and some were spending more than they made because they were betting on higher future income.

Mike: What are they spending money on? These are 22 and 23-year-olds we’re talking about?

Banker: Yeah, so, clothes, shoes, jewelry and electronics at first, and when you had the newest everything, then it was restaurants and clubs and trips to Vegas.

Mike: You managed to avoid all of that?

Banker: Of course not. =)

Mike: Haha, what does that mean?

Banker: I mean, it doesn’t matter how responsible your upbringing was, there’s still the peer pressure to live extravagantly when you’re surrounded by it. So I would eat out at nice restaurants, and occasionally I would go to a club, but I was never comfortable with the idea of spending $400 on a bottle of vodka. Mostly, I think what helped the most was that I made a decision at the very beginning that I would live on my base salary. So when there were big bonuses, that all went straight to savings.

A lot of that was reinforced during the financial crisis—there would be senior people complaining about how they couldn’t live on a $250,000 to $400,000 base salary, and I never wanted to be in that position.

Mike: Do you think it’s part of the banking culture to spend a lot of money? I imagine if it were me, I wouldn’t want to spend very much money, but I’d also imagine I’d lose out because of it—networking and such.

Banker: There is some of that, but the vast majority of professional connections (up to a certain level) can either be taken care of with $6 beers at the local bar near the office, or with an expense account. This might just be New York.

Mike: So the big spending you’d say is mostly due to having so much disposable income for the first time, and feeling like there so much more money coming your way, so why not?

Banker: Right, also (and I think that this is something that comes across on the site) a lot of people don’t grow up with strong personal finance skills, regardless of background. Did you see the article in The New York Times about vet school this week? I feel like the best evidence that there is a huge group of people who don’t have enough personal finance skills is all the people in graduate programs who are going to find themselves in financial ruin. The return on investment for so many of the programs is negative, and the worst part is that the debt follows you forever. It’s criminal that student loans are the ONLY mainstream type of debt that can’t be cleared by bankruptcy. That was a roundabout way of making the point that you can’t bet on what your income is going to be in 10 to 20 years.

Mike: Can you walk me through your career trajectory? It’d be great to get some insight into how it all works—I’m sure there’s a clear path that you see, and income levels you expect to hit at certain points.

Banker: I’m going to send you a chart.

Mike: Amazing.

Banker: So, I keep a spreadsheet with all of my income, taxes, investment returns, spending.

Mike: You mean, an Excel spreadsheet?

Banker: Yep. Use the tools you know, right? And I use Mint.com to track my spending—that website has changed my life. It’s so great (and they do not pay me to say that!).

Mike: Haha. I track everything in my head. But it works!

Banker: Impressive!

Mike: I also don’t have as much to track as you, so I bet it’s much more helpful.

Banker: The hardest part is keeping track of cash transactions. I lose track of all those and it makes me sad that that data is gone forever.

Mike: Why are the bonuses in years one and two so high?

Banker: Because I was awesome! Just kidding. The first two years were the last two “good years” on Wall Street. The third year is 2009. And in 2010-2011, Wall Street raised everyone’s base salaries to avoid bad “bonus” headlines, which was an incredibly dumb business move. The whole point of having bonuses be a large part of overall compensation is so that you can CUT compensation when times are tough. We learned from Keynesian economics that people get upset if you cut their salaries.

Mike: So, the banks raised salaries to save face?

Banker: Yes. It’s not the first time the industry acted dumb all at the same time.

Mike: What kind of banking do you do?

Banker: I work on the institutional side of an investment bank, in a client-facing role. I’m Dealbreaker’s target audience.

Mike: What’s the end goal for the typical banker?

Banker: Managing Director, or, Partner if you’re at Goldman Sachs. The typical path is: analyst (years 1-3) → associate (years 3-5) → vice president (years 5-7+) and then there are usually one or two more intermediate titles and then you’re finally a Managing Director. I think the youngest MD I’ve known is 31.

Mike: You’re getting there!

Banker: Hah. Yeah, that’s not good! Because if you don’t make MD by your late thirties, you’re usually not going to get it at all.

Mike: But usually that’s because you’re not good at what you do?

Banker: I mean, it’s difficult to make it to MD if you’re not good at what you do. But being good isn’t enough, by any stretch. These are huge bureaucratic institutions with opaque compensation and promotion practices, usually with power concentrated at one or two key individuals. So, in order to get promoted, the most important thing you have to do is not piss off the people above you. I think this is the case in most large organizations, not just banks, and not just for-profit organizations either. Any job with layers of bureaucracy is going to be mostly politics.

Mike: And if you don’t make it to managing director, you’re stuck in purgatory forever?

Banker: Not forever—just until the next round of layoffs.

Mike: Ah, of course. What’s a typical managing director salary?

Banker: $300,000 to 400,000.

Mike: And the bonus on top of that?

Banker: It varies a great deal.

Mike: Throw a range at me.

Banker: Anywhere from $100,000 to $10 million.

Mike: !!!

Banker: There are MD’s in technology and HR who won’t ever get a large bonus. Then there are the “rainmakers” in investment banking who will generate hundreds of millions in revenue for the firm with just a few large deals. They are the highest paid people at banks, outside of the senior executives. Some of the “best” (or luckiest) traders used to make that much, too, but that’s much less common these days.

Mike: So we’re talking about a lot of money here. This means early retirement?

Banker: Depends what kind of lifestyle you have to maintain.

Mike: So what’s that for you?

Banker: Lets take a look at Mint. The goal for me is to be able to be happy with a modest enough lifestyle that when it’s time for me to have kids, I won’t be a slave to the salary.

I spent about $85,000 last year, according to Mint, which doesn’t count charitable contributions.

• ~$31,000 is rent

• $15,000 food and dining

• $10,000 travel

• ~$8,000 bills/utilities

• ~$7,000 shopping (mostly gifts)

• ~$6,500 unallocated cash

Mike: And that cash could also be for anything like food or taxi rides?

Banker: Correct.

Mike: What did you put into savings and retirement last year?

Banker: Good question! I max out my 401(k) every year. Then another $65,000 on top of that—so around $82,000.

Mike: So, that was $17,000 last year in a 401(k). And then $65,000 in a savings account? Or invested in mutual funds?

Banker: Right, the $17,000 goes into a 401(k) with investment choices limited by my employer. That account has about $150,000 in it now. Then the $65,000 goes into a brokerage account. Which is mostly invested into a dozen individual stocks and mutual funds. That’s about another $350,000 total.

Mike: Is this an account you’ve had since you were a kid? Saving money and sewing buttons?

Banker: Ha. I mean, yes, but the vast majority is what I’ve saved since college. I think I had maybe $10,000 when I left college, or something like that. I’ve also invested in a small business started by some friends, which is my largest and riskiest investment.

Mike: Oh, investing in your friends is always a big risk. Putting relationships on the line!

Banker: That is true. But, for me, as long as our incentives are aligned and it’s not so much that if I lose it all, it will ruin my life, it’s ok.

Mike: Is there anything in particular you’re saving for? Do you want you buy an apartment in the city?

Banker: God no. I mean, I would if I thought it was a good investment. But housing in New York is crazy expensive, even for someone who makes a lot of money. I don’t feel secure enough in my income to be able to commit to a mortgage payment. I think a lot of people (even rich people) who lived through the housing bust feel that way. If I moved away from New York to someplace with fewer good rental options and cheaper overall housing, I would buy a place. Or if I found a place where I knew I wanted to be for the next 10 to 20 years (and could afford it even with much less income).

Mike: I’m sure that will also depend on what kind of family you’d like to have. Are you dating?

Banker: Right! I am dating someone. It’s serious. We live together with two cats. So, yes, buying a place would be a longer discussion, but my girlfriend and I have talked about my views on buying a house. And she agrees that it doesn’t make sense in New York. If we moved away, who knows.

Mike: Does your girlfriend earn as much as you do?

Banker: Nope. She earns a more “normal” living—way above the median U.S. income for a single white woman working full-time (which was about $40,000 in 2011), but normal by New York standards.

Mike: How do you navigate money in your household? Do you mostly pay for things?

Banker: I pay more—we split most of the expenses 60/40.

Mike: So when you say you spent $31,000 on rent, that was just your share?

Banker: Yes.

Mike: You must have a nice place!

Banker: Well, now I’m checking again, and that included a broker’s fee. On a straight up rent basis my share would be around $20,000 a year. But yes, we do have a nice place in a nice neighborhood, which is a great luxury. But I pay significantly less rent than most of my work peers.

Mike: What are your work hours like?

Banker: Twelve hours most days—I get in around 8:30 a.m. and am checking my Blackberry until I go to sleep.

Mike: Do you work weekends?

Banker: I usually end up working at least a couple of weekend days per month. The first three years in the job are the most brutal. That was 6:30 a.m. to 10-11 p.m. Monday through Thursday and working pretty much every weekend. I still end up pulling a couple of all-nighters every year.

Mike: What’s your social life like?

Banker: I think its pretty normal—drinks with work people some Thursday or Friday nights, and I go out with non-work friends on the weekends, and I have normal hobbies. It’s not like I’m sitting in a dark room counting my money like Scrooge McDuck.

Mike: You do consider yourself “rich” though, yes? Especially if you continue on and become a managing director.

Banker: Yes, I do consider myself rich, even if I don’t make it to managing director. Mostly that’s not about my income, but about the nest egg I’ve been able to save. So, some stats:

• Only 5% of white males age 25-29 earned more than $100,000 in 2011

• The median net worth of a head of household under 35 years old is $12,000

Mike: Well, I’m glad you have some perspective.

Banker: There was a great article I read: “Straight White Male: The Lowest Difficulty Setting There Is”

I was very lucky growing up—financially and emotionally stable parents. Being lucky can’t be the answer though. It’s not helpful. That’s why it’s sooooo important to have as even a playing field as is possible.

Mike: And how do you think we can even the playing field?

Banker: Good public schools help. If people believe the system is fair, and you give them the tools and opportunity to learn a skill, the rest will usually work itself out. But having a fair system is crucial. There’s a book called Animal Spirits by George Akerlof and Robert Shiller that provides a great overview of the financial crisis and how it created more unfairness in our economic system.

Mike: Does this mean you’re happy to pay your taxes?

Banker: Well, no. I don’t think anyone is happy to pay their taxes. But yes, I do believe in a progressive wealth redistribution system. I think consumption taxes would work better than income taxes, and I think we need an aggressive carbon tax. So: I’m not a Republican!

Mike: So, when you first got in touch with me, you told me you were going to inherit some money.

Banker: Right, so to me, inheriting money is the most unfair way to “win” the little game we call capitalism. The idea that money (and therefore power) can be freely given to someone undeserving is the opposite of fair. I mean, winning the lottery is so much more fair, because at least that’s random. And the best way to avoid an aristocratic layer of society is to have a high (close to 100%) inheritance tax. So you can imagine my dismay when my parents recently told me that I’m probably going to inherit some money. I’m grateful that they didn’t ever tell me when I was younger. Anyway, more rich people problems, right?

Mike: It seems like your parents did a good job of trying to let you see the value of hard work, and provide you with some perspective. Can you say how much you’ll be inheriting?

Banker: I don’t know!

Mike: But you think it’s quite a bit.

Banker: Not enough to retire on. But probably a couple of years of living expenses, if I ever need it. It’s amazing what kind of breathing room having a cushion like that can bring. Putting aside the issue of inheritance—just knowing that you’ll be ok for a year or two if you lose a job…now that I have that peace of mind, I can’t imagine living paycheck to paycheck. And I know that the vast majority of people who do get laid off every year don’t have that flexibility.

Mike: That’s one less thing to worry about, for sure.

Banker: When it comes to money, I have less to worry about than 99% of the people out there, but that doesn’t mean I don’t worry about the future. If I didn’t have anything to worry about, would I work 12 hour days? Probably not. Being so close to the financial markets when everything was going to hell, I don’t think I’ll ever feel truly “safe.”

Mike: The Queen of Versailles.

Banker: Right. Another reason to live more modestly than you need to!

Mike: Is there anything we haven’t talked about that you think we should cover?

Banker: Probably. I could spend another two and half hours talking about investing.

Mike: Haha. Let’s save that conversation for another time.

Previously: A Friendly Chat With a Rich Person (Household Income: $360,000)

Questions? Interested in talking to us about your money? Send an email.

“Money always looks like a lot more when you actually see it physically,” said Kreil. “If I had a disappointing bonus, I’d withdraw it all and give it to my wife for her to count.”

Also:

“Come in with tears in your eyes and look like you’re about to faint,” he said. “She’ll immediately know and you won’t have to explain too much.”

This advice column about how to break the news to your spouse that you’re receiving a bad bonus this year is hilarious and sad and oh-so-dumb. [via]

Photo: roberthuffstutter