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.

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“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.”