Every five years, the Financial Consumer Agency of Canada (FCAC) publishes its Canadian Financial Capability Survey. The latest one — the 2019 edition — offered up an all too familiar collection of data. Fewer than half (44%) of respondents had sought financial education during the five years leading up to the study. About the same percentage (49%) said they lived on a budget.
Clearly, large percentages of Canadians continue to avoid the subject of financial literacy, to their detriment. FCAC’s Financial Literacy Month theme this year — Money on your mind. Talk about it! — suggests as much.
FCAC, formed in 2001 by the Liberal government of the day, has a mandate that includes protecting consumer rights and making sure federally regulated organizations comply with consumer protections.
The agency is three years and change into a five-year plan to make financial services “more accessible, inclusive and effective for all Canadians.” The plan lays out six priorities: plain-language communication, diversity, digital literacy, access to financial help, consumer protection and the use of behavioural design to help Canadians make good decisions.
We share FCAC’s concern about the levels of financial literacy among Canadians. The materials the agency has published to help consumers with debt, fraud protection and the like provide a valuable service. And embracing behavioural design is one strategy that can help make Canadians more financially fit.
In fact, FCAC should ramp up its emphasis on behavioural design in the next five-year plan. Traditionally, financial literacy programs have been built on the premise that people are inclined to learn the basics of household finances. That assumption runs contrary to a fundamental insight of adult learning theory: people are task-oriented. They’re more likely to learn the difference between a stock and a bond if they need to. And they’ll probably forget what they learn soon after.
Behavioural design accepts people for what they are: in this case, uninformed, stressed out and intimidated. It tailors client touchpoints to provide the information clients need, when they need it, and accommodates a client’s lack of financial literacy rather than trying to correct it.
Financial institutions need to invest more heavily in financial literacy too. Those that get this wrong are doing their customers a great disservice.
We’re optimistic about the potential of behavioural design to achieve improved financial outcomes across the industry — more than we are about additional efforts to teach Canadians the finer points of money management.
This article appears in the November issue of Investment Executive. Subscribe to the print edition, read the digital edition or read the articles online.
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