The American dream and the need for financial literacy
Theodore Hicks is the CEO and Chief Investment Officer of Hicks & Associates Wealth Management. He is a Certified Financial Planner practitioner, a Certified Kingdom Advisor and a Chartered Market Technician. He has owned his wealth management practice since 1999. He lives and works in Cary, NC and serves on the board of the John Locke Foundation in Raleigh, NC. Hicks has a passion for flying and became a private pilot in 2014. He recently spoke with American Habits editor Ray Nothstine
The American dream means different things to different people but given your line of work, what do you see as the biggest financial obstacles for individuals and families trying to achieve their piece of the American dream?
Unfortunately, there’s not a lot of financial literacy in our society today. This is one of the dynamics I talk about in my forthcoming book Evidence Based Investing. The American economy is full of very educated people, but not every state requires a financial literacy course to graduate high school. North Carolina has made some strides in that regard, but there’s not enough basic financial literacy that focuses on long-term success, such as delaying gratification.
A proverb comes to mind that is essential wisdom: “Dishonest money dwindles away, but whoever gathers money little by little makes it grow.” (Proverbs 13:11)
To make matters worse, basic economics is rarely taught with any consistency. It’s shocking how little the average American understands about fundamental supply and demand principles—especially how these immutable laws still apply when the government attempts to ‘fix’ something.
For me, that’s arguably one of the biggest obstacles that many young people have: they don’t understand basic financial and economic principles.
You can certainly make the case that we live in a consumer-driven world where we are constantly being sold something and too often people are clicking that “buy now” button on Amazon or wherever they’re at. Unfortunately, starting adulthood by violating basic economic and financial principles can make it difficult to undo the damage caused by early poor decisions.
Many perceive issues like wealth inequality have made the American dream harder to attain. What do you think about this issue, particularly given your position as a board member at a pro free market policy organization?
I would disagree with that. I’m not an expert on wealth inequality, but on the topic, and you’re likely aware of this, if you study the issue, and the poverty line, the typical impoverished American today has a big screen TV and an iPhone. Go do the research, go study the 1930s — that’s not what an impoverished American looks like. The impoverished American today is incredibly well off when you compare them to global standards. That’s not to minimize those that are struggling financially but I do think a more holistic perspective on poverty is important.
I believe the statistics tell us that if you make $65,000 per year, you are in the top 1 percent of income earners in the world. Every once in a while, we hear politicians talking about the minimum wage. They talk as if there is a whole swath of society trying to make ends meet on this minimum wage. The reality is that only about 1 percent of Americans earn this basic wage. This is why we constantly see so many people trying to migrate to this country. Even if an immigrant remains on the lower rungs of the American economic ladder, living here often means they are still likely to enjoy a significantly higher standard of living compared to their home country.
I agree that the American dream may be harder to attain today due to the many roadblocks the government has added over the years. However, it remains achievable. The key issue is that individuals now face more hurdles, particularly from a regulatory and compliance standpoint. This is why regulatory reform is so important. Some regulations have become little more than obstacles, and if they no longer serve a meaningful purpose, they should be removed to make the American dream more accessible.
It feels like if we don’t collectively have our financial house in order, we won’t demand the same from our representatives. We have a huge government debt crisis but also a consumer debt crisis. What do we need to do to collectively improve as a society?
I would argue the consumer debt crisis has improved or there is at least room for optimism. Again, I talk about that in a recent YouTube video. I talk about the national debt in my book, too. Because last I looked, our debt to GDP is around 121 percent. That’s insane.
What I say about the federal debt is that our surplus or deficit chart comes from FRED. FRED is the Federal Reserve Economic Database. We’ve run deficits for a long time. If you look at that chart, it hovers close to the zero line. It’s only since the 1980s that it’s become massively out of hand. I would argue that this is the main problem that needs to be rectified, and what we’ve done here in North Carolina with reigning in government spending and controlling the size of the government, the federal government needs to do the same.
There’s a book sitting here on my desk by Todd Petzel and one of the points he makes is the fact that the U.S. stock market has been operating continuously for 200-plus years. There are very few countries that can say that. If you take that to its logical conclusion, are we naive enough to believe that the financial calamity that has happened in other nations across the world is not going to happen to us? Our federal debt is a massive problem that needs to be addressed. A few years ago, Ray Dalio wrote a book on this topic. He looks through history at the rise and fall of many nations, and in particular looks at those countries that had their currency as the world’s reserve currency. Ultimately, Dalio talks about how many of these nations lost their status as a global powerhouse because of their excessive debt.
Are you generally encouraged about markets, and more specifically the stock market? The stock market is a huge vehicle for wealth creation. Are there any policies or things the government can do you’d like to see to improve market access and wealth creation?
I’d like to see the government get out of the way. Overall, I’m generally encouraged. At the beginning of the year, lots of experts in my industry like to issue their forecasts for the stock market for the year ahead. I think that is ridiculous. I have no idea what’s going to happen in the short term.
Do I think that there’s more of a bias towards growth now that we’ve elected a new president? President Trump seems to be far more pro-business than the last administration. Undoubtedly there will be challenges but the American economy is resilient and historically has produced tremendous growth and stability.
That said, I’m no Trump apologist and always call it like I see it. Currently, my biggest concern about the new administration is the talk about increasing our reliance on tariffs. Michael Munger, a professor at Duke University, gave a great talk on this topic at a recent event here in town. To sum up his point, many are against the use of high fructose corn syrup as it has been shown to be bad for our bodies. But why is it so prevalent in our country whereas it is not as prevalent in other countries? Because we have a tariff on sugar that dates back nearly a century. Sugar prices here in the U.S. are the highest in the world so companies use an alternative—high fructose corn syrup, which is worse for our bodies. So, while I have optimism, I’m also a realist. The potential increase in tariffs is a legitimate concern.
Are there policies or things the government can do that you’d like to see improve market access and wealth creation?
One of the things I’ve said many times over the years, even to clients, is that the vast majority, if not all regulations are couched in some degree of logic. However, the reality is the more regulations that you put on my industry makes the cost of running my business higher, which makes me, and my team talk about increasing the “minimum” that a client or a prospective client must have to work with us. We don’t quite have a firm hard minimum. Generally, if we like a client and they’re going to be easy to work with, we’ll work with them, but we must be conscious of the cost. What’s it going to cost us to work with that client? Then what are the fees that we would have to charge that client for us to, at a minimum, break even? The more the government adds regulations that companies have no choice but to comply with, the higher the costs of running that business and that cost gets passed to consumers. Again, basic economics.
We have some clients in my practice that we’re technically losing money on, but for various reasons, we keep working with them. My argument here is for reducing regulations and making it easier to work with somebody like me.
You got the Department of Labor trying to add a fiduciary mandate. I’m a fiduciary. I would argue the fiduciary standard is a biblical standard. So, I’m all for the concept of a fiduciary, but I’m 100 percent against a fiduciary mandate simply because of the word “mandate.” I don’t think that’s how a free market functions. Eliminating some of the more burdensome regulations would promote wealth creation and make it easier to do business. My industry, in particular, is excessively overregulated, and I don’t believe these regulations provide much benefit.
What is your attraction or fidelity to the free market? Why is it so essential to human freedom and for the American dream to continue?
Free markets foster innovation, opportunity, and personal responsibility—all of which are essential for the American dream. A competitive marketplace rewards hard work and ingenuity, it creates solutions to problems and meets the needs of communities and the world through entrepreneurship—allowing individuals and families to build wealth and achieve their goals.
While free markets are messy, an accurate and unbiased study of history will show that there is no other economic system that does a better job of allowing opportunity for all. That does not mean that a free market guarantees economic success for every individual, but it does mean that every individual has the opportunity. You cannot say that about other economic systems.
What are you most optimistic about when it comes to America and where are you most pessimistic?
Again, I’m a realist so I try to take a nuanced look at many of the issues we face today. Where am I most pessimistic? I believe it is absolutely 100 percent our federal spending and our debt. If we as a nation, and more specifically our Congress can’t seize this moment to make some significant reforms to the size and scope of our government, that’s cause for serious alarm.
The biggest driver of inflation is government spending and money printing.
This is another topic that I talk about briefly in my upcoming book: It is frequently said that bankruptcy happens slowly … then all at once. Our nation’s debt is not catastrophic yet, but it’s becoming a very serious issue. Go read Dalio’s book, and you’ll see that debt is the top cause of a fall of a nation. The reality is that debt is sustainable, until it isn’t and then the bubble burst all at once.
It doesn’t have to just be pessimism though on that issue. We can take the opposite tone. I’m optimistic that we could be living in a moment where we might very well witness a significant reform to the federal government and how the federal government operates.The biggest driver of inflation is government spending and money printing. We all know how that harms those on a fixed income and severely diminishes their purchasing power and the standard of living.
Certainly, I have some cautious optimism that we might have an administration and enough momentum in Congress with DOGE and the DOGE caucus where there can be space for some significant reforms. It’s desperately needed.
