Boosting canadians’ financial knowledge is good for the economy, the financial system and the financial services sector itself – even if better informed clients are able to drive harder bargains with their financial services firms and financial advisors.
“If [greater financial literacy] means [Canadians] are making the best decisions for themselves, then, ultimately, that’s the best for all parties in the long run,” says Terry Campbell, president and CEO of the Canadian Bankers Association (CBA) in Toronto.
The Canadian government, working with the financial services sector and other stakeholders, has made raising the level of financial literacy among Canadians a top policy objective. To achieve that goal, the Financial Consumer Agency of Canada (FCAC) is developing a national strategy for financial literacy, scheduled for full implementation next year, that focuses on providing financial education programs and services tailored to the specific needs of three broad groups of people: seniors; priority groups, such as new immigrants, low-income Canadians and First Nations peoples; youth and adults.
The CBA and the FCAC recently announced that they are working together on a program of free educational seminars for the seniors portion of the national strategy.
“Part of our strategy is to help people and guide them through the myriad financial information that’s out there – all the products and services,” says Jane Rooney, financial literacy leader, a new position created by Ottawa under the direction of the FCAC to co-ordinate financial literacy strategies among stakeholders across Canada.
A need to be proactive
The strategy’s developers will have their work cut out for them. According to the results of the 2014 Canadian Financial Capability Survey (sponsored by the FCAC and released by Statistics Canada in November), slightly more than one-third of Canadians aren’t saving for retirement – on their own or via a workplace pension plan – and almost three in five Canadians don’t know how much money they would need to maintain their standard of living in retirement.
With Canadians living longer, the need to be proactive in saving and investing for retirement, as well as in managing cash flow and debt, will only increase. But Canadians need help to make sense of the barrage of financial information that comes their way, particularly in an era of new regulations around disclosure – which is where advisors can play a pivotal role in getting their clients up to speed.
“[Advisors] have a great opportunity to help Canadians understand those different products and what might best suit their needs,” Rooney says.
Bridging the gap
Advisors also can help bridge the gap between financial literacy and financial action, helping clients who may be having trouble getting started or staying on track.
“While people might feel knowledgeable, are they actually putting that knowledge into practice?” asks Kelly Harper, director of customer experience learning with Bank of Montreal in Toronto. Advisors can help clients build financial plans, identify goals and the strategies to achieve them, she says: “What we really want to do is grow our investors’ confidence in their financial knowledge.”
At the same time, it’s critical that encouraging financial literacy does not turn into an exercise in hectoring instead of an opportunity to start a conversation. “Financial literacy initiatives aren’t meant to turn customers into experts,” Campbell says. “It’s really more to give them more tools and to help them understand the questions that they need to ask.”
The realization also exists that stakeholders need to co-ordinate their efforts in order to see tangible results in the move toward increasing financial literacy. That’s why organizations such as the CBA, the Financial Planning Standards Council, the Canadian Life and Health Insurance Association Inc. and the Chartered Professional Accountants of Canada (all based in Toronto), among others, are partnering with the FCAC to develop financial literacy initiatives and strategies.
The free seminars from the FCAC and the CBA will focus on three topics: protecting against financial abuse; spotting signs of financial fraud; and making the most of money in retirement. The seminars, based on an existing CBA program for youth in schools, will be taught by volunteers from the banking industry, and will be strictly non-commercial.
“We’re not talking about individual products or services,” Campbell says. “It will be about financial literacy and the financial basics.”
The FCAC also has released its consultation papers on priority groups and young Canadians and adults, in concert with announcing a variety of initiatives for these groups, and launched an online financial literacy resource database that lists financial literacy materials, resources and seminars offered across Canada.
The FCAC will be assessing the success of the national strategy by measuring the awareness of the financial services tools and resources it’s offering, evaluating the programs and conducting the Canadian Financial Capability Survey again in five years.
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