The industry can play a signifcant part in helping raise standards of financial literacy. Paul Clitheroe says it will pay off for everyone in the long run.
One common characteristic that all professional financial planners have is a genuine enthusiasm for better financial literacy across our community. In my role as chairman of the Australian Government Financial Literacy Board I am asked by planners on a regular basis, “how can I best help?”.
This is a really good question, and the answer is simple in parts, complex in others.
Firstly, let me summarise where we are. At a national policy level, we have made significant progress. The benefits of financial literacy are supported by both sides of politics. This can be seen in the reappointment of the Financial Literacy Board – which was established by the Howard Government – by the Labor Government, when it came to power. In 2010, several new positions were announced and my role as chairman, with the existing board, was extended by a further three years.
The major change was a shift of the executive team from Federal Treasury to the Australian Securities and Investments Commissions (ASIC). This had some pluses and minuses. Treasury is at the heart of economic policy in Canberra, but ASIC is responsible for the actual “hands on” implementation of investor education and consumer financial literacy.
A huge plus will be seen later in 2010 when the two powerful consumer/investor websites Understanding Money and ASIC’s FIDO are combined to give consumers not only the best of both sites, but a significantly enhanced site with information, tools and functionality that will greatly benefit the million-plus Australians who have visited and used these two sites.
A major focus of the National Strategy has been to get effective implementation of financial literacy in the school system.
For decades I, and many others, have been pushing for money skills to be taught as a separate subject area; and to be blunt, while our cause was worthy, we were hopelessly misguided. The school curriculum is packed, resources are short and teachers stressed. So it was a major break-through in the “Melbourne Declaration” to get financial literacy recognised as a key statement of learning.
Since then, curriculum development, teacher training and financial literacy resource development have proceeded at a pace and it is a key priority to transfer this into the national curriculum. In core subjects this is as follows:
• Mathematics: Financial and consumer literacy is a natural application of mathematics and is included in content descriptions and in the content elaborations.
• Science: Financial and consumer literacy is highly relevant to the contemporary application of science, including in technological innovation and engineering; for evaluating scientific claims in media and advertising; and for making informed decisions in relation to a range of contemporary social issues, such as sustainability. These authentic contexts for financial and consumer literacy as it relates to science are incorporated as content in the science curriculum, particularly within two strands – Science Inquiry Skills and Science as a Human Endeavour.
• English: The English curriculum, and the critical thinking capability that runs through it, provides students with opportunities to engage with consumer and financial literacy concepts in personal and broader social contexts. Students listen to, read and view a range of texts, including everyday and media texts, and are taught to understand the language, analyse advertising messages and social issues, use and question research and data, challenge points of view, and express opinions about actions that impact on their own and others’ lives.
Another important focus of the National Strategy is technical training. Some 1.6 million generally young Australians undertake such training. It is agreed that financial literacy, and in particular business financial literacy, is an essential skill, but implementation has some way to go.
Australia has a nationally recognised education and training system made up of 11 National Skills Councils funded by the Department of Education, Employment and Workplace Relations. These councils provide formal training and qualifications across more than 70 industry groups. Financial Literacy units of competencies form part of the Financial Services Training Package and sit within the Innovation and Business Skills Council (IBSA). Currently ASIC encourages and facilitates the uptake of these across trade and industry areas. ASIC’s current initiative in Vocational Education and Training is to lead financial literacy reform by linking and developing government policy. ASIC has been piloting the inclusion of financial literacy competencies into the training of apprentices across various trades in partnership with industry.
Universities are also increasingly introducing financial literacy as subject matter and individual courses. The University of Western Sydney has taken a strong leadership role in this area.
So how do planners help? Well, the first point is that they already are in their day-to-day work with clients and pro-bono work in the community. Financial Planning Week is another example of bringing financial literacy into the community. The reality is that the implementation of financial literacy policy will, like drink driving initiatives and skin cancer awareness, take decades, and planners should not underestimate the importance of their ambassadorial role in the
move from increased awareness of the need for financial literacy to actual behavioural change.
In time to come, there will be increased demand for experienced planners as lecturers and mentors to groups of teachers in local communities. But I would ask planners to recognise that research shows that while we can all add to awareness, that the biggest factor in actual behavioural change is a face-to-face meeting. Planners wanting to use pro-bono time to get into the nitty gritty of improving peoples’ lives should look at financial counselling and programs, such as those run by the Smith Family, which are using mentors to assist families to break out of the poverty cycle.
Please remember, financial literacy is not about investing in a sophisticated manner; this is a higher-level skill. It is about spending less than you earn, planning for regular bills, having a budget, not getting into debt traps and not falling for scams. Australians who get better with money will undoubtedly become financial planning clients of the future, but right now they need help with the basics.
Paul Clitheroe AM is chairman of the Australian Government Financial Literacy Board and a founding director of financial planning firm ipac Securities.
