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Bombarded With Marketing, Not Advice

Poll QuestionBanks are spending an obscene amount of money on financial marketing, which is making it difficult for anyone to find objective and unbiased information about financial products.

A new study from the Consumer Financial Protection Bureau found that the financial services industry spends $17 billion a year, or $54 a person, on financial marketing. In comparison, only $670 million, or $2 a person, goes toward financial education.

Just so we’re clear, financial education is meant to educate consumers. Financial marketing is designed to influence them.

There’s a big difference between the two.

Think sheep, and wolf in sheep’s clothing.

“When consumers receive the vast majority of their financial information from companies that are trying to promote an image or sell products, consumers have very little unbiased information,” says Richard Cordray, director of the Consumer Financial Protection Bureau, on the study’s release.

Nonprofits and the U.S. government are the two largest financial educators, spending $472 million and $130 million respectively. Financial institutions put dollars toward education as well, but only to the tune of $31 million.

The study pointed out that the $17 billion for financial marketing is split between awareness advertising and direct marketing.

At $5.5 billion, awareness advertising generates promotional messages on credit- and loan-related products (56%), banking services (24%) and other services (19%), like ATMs, credit counseling and check-cashing.

Direct marketing accounts for the remaining $12 billion, and its goal is “getting a consumer to make an immediate purchase,” according to the study.

See the danger?

Especially when you consider financial institutions spend their direct marketing budgets for Internet marketing (44%), direct mail (22%), TV advertising (16%) and other advertising (18%), like newspaper and magazine ads and emails.

We can’t argue that financial institutions have some slick marketing and promotional methods. And we know why they spend what they do – they want to persuade savers to buy their products.

That alone is why you should do your research elsewhere and support financial education initiatives in this country.

And the next time you make a financial decision, make sure it’s an educated, not an influenced, one.

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