As the federal government moves forward with its national financial literacy strategy, financial advisors have an important role to play in helping to equip Canadians with the knowledge they need to make educated financial decisions, according to Lucie Tedesco, commissioner of the Financial Consumer Agency of Canada (FCAC).

Speaking at the Independent Financial Brokers of Canada (IFB) fall summit in Toronto on Tuesday, Tedesco said Canada has a long way to go in terms of improving the level of financial knowledge in the general public.

“Many Canadians lack even the most basic financial necessary knowledge to make appropriate decisions about their money,” she said. “That situation needs to change if we’re going to continue to prosper as individuals and as a nation.”

As financial products become increasingly complicated, Tedesco said it’s becoming even more difficult for Canadians to understand their options. “We are living in a time when financial products and services are growing in complexity,” she said. “New technologies and financial innovations are moving faster than ever.”

Given that reality, Tedesco said it’s critical for clients to have access to as much information as possible when making purchasing decisions.

“Consumers, when shopping around for financial products, need to clearly understand the options that are available to them, the features and benefits, and any associated limitations or risks, and the costs – both up-front and ongoing,” she said. “When comparing products and services, they need to be able to compare these elements, and they need to be able to recognize any sales-oriented bias in materials they encounter while seeking to make their decision.”

Tedesco said she is encouraged by the national efforts underway to improve financial literacy, including the recent appointment of Jane Rooney as Financial Literacy Leader. It’s important for all stakeholders – including the financial services industry – to collaborate in their financial literacy efforts in order for the national strategy to be effective, Tedesco said.

Advisors, in particular, have a vital role to play in this process, she said. “Millions of Canadians see you as the face of the financial industry,” she said. “You have firsthand knowledge about the challenges they face.”

Advisors should take the time to assess the level of financial knowledge of each client they meet with, Tedesco said. When appropriate, she said it can be helpful to take a step back and provide basic financial suggestions – such as establishing a budget – even if such concepts may seem obvious to you.

“Having a good idea of where people are in terms of their financial and technical knowledge levels is a good start point to help [clients] expand their horizons even further,” Tedesco said. “Small, incremental changes often lead to significant results.”

Tedesco highlighted five conversations that advisors should be having with their clients:

1. Live within your means.
For clients who are in a habit of spending more than they earn, Tedesco said advisors can make helpful suggestions for saving money and can remind them of the importance of paying down debt.

2. Budget wisely.
Advisors should explain the money-saving benefits of careful budgeting, and provide clients with the tools to budget effectively, Tedesco said.

3. Plan ahead.
Many Canadians need help to understand employer pension plans, as well as how to best use RRSPs, TFSAs and other savings vehicles to meet their long-term needs, Tedesco said.

4. Choose products carefully.
Advisors should help clients identify products that have appropriate costs and benefits for their lifestyles and income levels, Tedesco said.

5. Stay informed.
Tedesco said advisors should encourage clients to explore additional sources of information to further improve their financial literacy, such as the FCAC website.