CANADIANS ARE, AT BEST, average students when it comes to money matters, as some recent studies have found. In turn, that worrisome state of affairs has prompted the Financial Consumer Agency of Canada (FCAC) to launch its comprehensive Your Financial Toolkit program, which includes tips on how to choose a financial advisor.
The free resource, which can be accessed online (www.fcac-acfc. gc.ca) or obtained in hard copy, is made up of 11 modules covering subjects ranging from banking and budgeting to saving and debt management to fraud protection and retirement planning.
The FCAC worked with the Investor Education Fund (IEF) and the Autorité des marchés financiers to develop the toolkit over the past two years. The toolkit came out of the realization that Canadians still have a lot to learn when it comes to financial matters, particularly given the increasingly complex economic environment they are facing today.
“If there is a place that makes it easy for people to get up to speed and contribute to the conversation,” says Tom Hamza, president of the IEF, “it makes it better for advisors, it makes it better for investors.”
The toolkit builds on many of the topics covered by the IEF’s financial literacy website (www. getsmarteraboutmoney.ca). Says Hamza: “At the very least, people have to know the basics, whether it is taxes, insurance, investing, financial planning. If the investor is coming in and speaking with his or her advisor with more knowledge, it is just going to make a more forceful conversation.”
One of the toolkit’s modules deals specifically with financial advisors. It offers advice on how to choose an advisor; questions to ask an advisor; and typical fees and costs. Those questions include: What is your education and professional experience? How long has your firm been in business? Are you and your firm registered with a securities regulator? What products and services do you offer?
There is plenty of evidence that Canadians are coming up short when it comes to financial literacy, Hamza notes, pointing to record-high household debt and the all but lost habit of household savings. (In fact, he says, savings have declined to 3¢ on the dollar earned vs 12¢-14¢ on the dollar a few decades ago.)
Taking financial terms and concepts out of the bank branch or advisor’s office and breathing life into them is the idea behind the FCAC toolkit, Hamza explains: “Canadians actually aren’t that fluent in financial matters. It is a matter of taking these esoteric financial ideas and actually applying them to people’s personal situations. That is really the only way to get them interested in it. ‘How is this information going to help me make better decisions?’ – that is what this is all about.”
A Statistics Canada survey on financial literacy, which was released in 2011, based on a multiple-choice quiz of 14 questions found Canadians got just twothirds of questions correct, for a grade of 67%. The quiz included questions on inflation and interest rates, credit reports and credit ratings, stocks and risk, insurance, taxation, debts and loans, and banking fees.
And a 2011 study for the federal Task Force on Financial Literacy looked at five key areas of financial capability and found that only about one-quarter of Canadians surveyed were competent in all five areas.
The FCAC’s new toolkit is intended to be flexible enough that it will prove to be a valuable source of information for Canadians young and old, rich or poor. The 11 modules offer worksheets, quizzes, questionnaires, tools, calculators, educational videos and case studies. Users can choose to complete an entire program or pick the topics they are most interested in. A self-assessment tool also helps users select modules and tools suited to their particular needs.
“Often, people will just be looking for a specific piece of information at a specific time,” says Julie Hauser, a media relations officer with the FCAC, “because your needs change at different stages in your life.”
The resource also includes a “trainer’s toolkit” that a teacher or someone in a workplace or community organization could use to provide financial literacy training to others, with tips on how to present the information.
© 2012 Investment Executive. All rights reserved.