If Not Wal-Mart, Then Who?

27May07

Lately I’ve been turned on to David Bach’s The Automatic Millionaire. It’s not as gimmicky as it sounds, basically arguing that everyone should invest a small portion of their income automatically so people don’t have the option of losing our willpower and spending it. The implications for a young twenty-one year old like myself are pretty inspiring, but the thought that really got me thinking was if/how the lowest income bracket could use this idea to their advantage. The barriers to understanding the logistics are obvious for me, since I’ve never been in those circumstances. How would a latte factor of a dollar a day affect people at the $30,000 income level and below? It’s an area I hope to look into further both in literature and through talking to people I meet.

That said, it seems that Wal-Mart has made an interesting move in that direction by partnering up with Sharebuilder in order to offer brokerage services at the store itself. The comments beneath the article as well as BusinessPundit’s take on the scene are pretty negative on the whole. The arguments range from fighting against the super store’s intrinsic evil to pointing out that the partnership offers no real benefit to either party.

I, on the other hand, see this as a good move for the potential that it creates. For one, Wal-Mart will be making investment options available to a greater number of people in a greater number of situations. As the CNN post points out, when Sears tried this years ago, one of the great advantages was the increased hours of operation. To people who have long working days that they can’t afford to miss, hours beyond the standard banking day would be a great help. Additionally, the presence of another retirement plan alternative is likely to help out employees who have, according to the critics, sorely under-diversified portfolios in their 401(k)’s. Lastly, as you can see at the bottom of the site, there will be options available for automatic transfers, which is why I mentioned Bach’s book to begin with, and which I also believe is an essential part of getting those that don’t invest now into the game of accruing wealth.

Of course, I mentioned that the CNN article referenced Sears’ attempt at this same idea, and we can see today that it didn’t work for them very well. In my opinion, Sears’ downfall and the greatest hurdle that Wal-Mart and Sharebuilder face today is the problem of education. I have faith that the offerings from Wal-Mart will be very simple, low-overhead accounts of the type that people in those income brackets will want (IRA’s, college-savings accounts, and maybe some simple mutual funds along with a few indexes), but I don’t trust that their mere presence in-store will draw the class of people they’re aiming for to the table. In undertaking this partnership, Wal-Mart has undertaken the challenge of convincing an entire class of people that regardless of what they thought, they do have enough money to save for college and retirement. While, statistics aren’t in Wal-Mart’s favor, with a National Savings rate of nearly zero (if not below zero, meaning people actually spend more than they earn), I think a strong marketing campaign could push it past the tipping point. For a starter idea, why not partner with David Bach? Wal-Mart could have a new line based around trimming people’s latte factor with products that are right on hand. The potential for synergy is there, but I believe they’ll have to work hard for it.

So, if Wal-Mart is prepared to try and change the minds of the American public then I think this joint experiment has the potential to do a lot of good. However, without a high level of dedication to marketing and creating a culture of savings in America, I think that the partnership will crash and burn pretty hard. I for one hope they pull it off, because if Wal-Mart, the king of low prices and savings, can’t convince the public that they can save, then who else can?

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