Financial planners are “handicapped by the fact that you speak a second language”, according to Paul Clitheroe, executive director of ipac Securities and chairman of the Australian Government Financial Literacy Board.
Clitheroe told the 2011 Self Managed Super Fund Professionals’ Association of Australia (SPAA) national conference that “many Australians are not participating effectively in the basics of our financial system because they don’t understand the words”.
“Please be careful,” Clitheroe said.
He said that terms such as “salary sacrifice” and “negatively correlated assets” cannot be spoken flippantly to everyday Australians as “they will be lost”.
“The protection point is knowledge, and I find it really interesting that behavioural economists can explain that we have no real intuitive sense of money safety,” he said.
“We can’t regulate everything… so we’re not going to be able to protect all Australians in all issues and as a society, I don’t think we should.
“Invisible money has made it extremely difficult for this current [younger] generation of Australians.”
Clitheroe said that financial literacy has recently been accepted into the national curriculum for schools but it has yet to be signed off.
“We’re not mucking around with the school curriculum. We don’t want this as new subject matter, we’re integrating knowledge,” he said.
“So we’re still teaching compound interest but have changed it to: ‘Daddy takes out 100 bucks on the credit card at 21 per cent, how stuffed is Daddy in five years?’
“We’re not teaching anything different. It’s learning something more relevant to them.
“You might have seen that Julia Gillard gave another $10 million towards financial literacy that will allow for the training of 6000 teachers. It will still take 18 months to roll out.”
Clitheroe said that self-managed superannuation “fits the Australian psyche” as it allows people to “make investment decisions, taking into complete account all of [their] personal assets”.
“At the end of the day it allows me to write an investment strategy…that talks about [what] our super fund is doing in consideration of all the personal stuff we own out here.”
this should have been in the schooling curriculum for years now, commonsense and relate it all to everyday events that we experience in life matters.
As I am not an adviser doing SMSF’s I would really like to see some examples of the “investment strategies” that are being documented in these structures, as per Paul’s comment above.