Consumers left vulnerable over lack of financial literacy
Consumer research released by the Financial Services Institute of Australasia (FINSIA) has uncovered an imbalance of financial knowledge and a high level of vulnerability among consumers.
Only a fifth of consumers surveyed had a basic grasp of financial literacy and more than three quarters failed to grasp basic financial concepts like tax and inflation.
Despite this, over two thirds said they would be confident in managing their own money, but only four per cent were justifiably confident in their financial literacy.
It also found the Royal Commission had resulted in over a 50 per cent drop in consumer trust levels to 19 per cent and a majority believed positive changes from the commission would be short lived.
Chris Whitehead, FINSIA chief executive officer, said the results had been alarming and that it’s crucial for bankers to make competent ethical decisions.
“It is clear consumers overestimate their ability to understand their finances, which means it is imperative for financial practitioners to be professional and ethical, demonstrating the highest standards of behaviour,” Whitehead said.
“The fact that only 19 per cent of consumers surveyed trust their banks proves there is a widening trust gap that needs to be filled now.
“It really does show that customers are caught between a rock and a hard place – the fact that they don’t trust their banks or have the financial capability to manage their own money puts them in a vulnerable and susceptible position.”
AUTHOR
Chris Dastoor
Recommended for you
ASIC has released the results of its first adviser exam to be held in 2025, with 241 candidates attempting the test.
Quarterly Wealth Data analysis has uncovered positive improvements in financial adviser numbers compared with losses in the prior corresponding period.
Holding portfolios that are too complex or personalised can be a detractor for acquirers of financial advice firms as they require too much effort to maintain post-acquisition.
As the financial advice profession continues to wait on further DBFO legislation, industry commentators have encouraged advisers to act now in driving practice efficiency.
