Theory to Practice — An Editor’s Perspective
For the ever-increasing number of
family financial practitioners involved in AFCPE, the idea of incorporating
research into their practices may be attractive but unfamiliar. It may
be useful to consider the situation of physicians and other medical professionals
in evaluating the role of research for practitioners. Research can make
ideas learned in medical school obsolete. Good professionals try to keep
up with some research. One important goal of Financial Counseling and
Planning is to provide a forum for research that can be used both by
new students and by experienced practitioners. This goal may seem simple,
but is complicated by the fact that the overwhelming majority of those
who are motivated to write for free are university faculty who must publish
in rigorous journals. Providing understandable reports of research is also
complicated by the variety of theoretical and methodological approaches
used by researchers. Even current Ph.D. students are unlikely to have a
solid background in all areas covered by this journal.
The state of research in financial
counseling and planning is uneven. Most of the intellectual firepower has
been concentrated on “diseases of the rich” such as portfolio theory. The
existing research related to financial management practices is basically
non-theoretical descriptive analysis. Most of the existing research provides
the practitioner with some idea of consumer patterns of financial management,
but very little insight into what advice to give the consumer. Education
for the financial management practitioner may provide tools for calculating
the consequences of particular courses of action, but little beyond common
sense in the way of evaluating different actions.
I have discussed elsewhere (Hanna,
1992) the idea of developing optimization models as a basis for prescriptive
consumer economics. What is needed is use of some of the tools used to
help rich people stay rich for the purpose of helping the rest of the population
with financial management. Descriptive analysis of financial management
patterns is necessary but not sufficient for this task. Even when sociological
theories are used to help structure the interpretation of consumer patterns,
the practitioner is still left without much research-based advice to give.
Research in the psychological tradition is needed to improve our insights
into why some consumers behave irrationally. A fully developed management
systems approach (e.g., Heck, Winter & Stafford, 1992) might lead to
better insights into the process of financial management decision-making.
Economic theory, however, probably is the only available basis for developing
research-based prescriptions for family financial management.
This journal will continue to publish
a wide variety of research. Consider the contents of this issue. Five of
the articles describe behavior and relate statistical patterns to some
theoretical framework. These articles can provide useful insights for practitioners.
The Davis and Carr article carefully relates the normative literature on
personal finance to actual practices of households, and attempts to explain
why some of the common practices by households in different life cycle
stages may be reasonable. For instance, households may rationally balance
the time needed to prepare a formal budget against the expected benefits
from preparation of a formal budget.
Davis and Carr also give an agenda
for future research on their topic. The lack of finality to most journal
articles may be frustrating from some practitioners, while providing a
source of inspiration for graduate students.
As editor, I try to encourage contributions
that will stimulate both researchers and practitioners. I welcome comments
on the articles that have appeared in this journal, as well as original
manuscripts that fit the purposes of Financial Counseling and Planning.
Hanna, S. (1992). Optimization models
as a basis for prescriptive consumer economics. Proceedings of the American
Council on Consumer Interests, 287-88.
Heck, R., Winter, M. & Stafford,
K. (1992). Managing work and family in home-based employment. Journal
of Family and Economic Issues,
Hanna, S. (1992). From theory to practice — An editor’s perspective,
Financial Counseling and Planning, 3, 1-2.