Early this month, the Australian Securities and Investments Commission (ASIC) launched the new National Financial Literacy Strategy 2014-17 representing a significant milestone in its efforts to improve the financial literacy of Australian financial consumers and retail investors.
ASIC is making considerable headway working collectively with a range of partners and stakeholders including all major banks. The Interim Report of the Financial System Inquiry, published in July, notes the importance of financial literacy strategies in building confidence and trust in the financial system, while noting that alone they are not sufficient to ensure adequate consumer outcomes.
This is a theme that will resonate with anyone involved in the field of financial literacy.
Improving financial literacy is a powerful weapon for regulators
Financial literacy, including investor education, is a key part of ASIC's regulatory toolkit, something we have in common with many conduct regulators around the world.
By strengthening the demand side of the market, financial literacy enables people to be more confident and informed in the way they interact with industry participants and engage with financial products and services. It also helps them to understand their rights and responsibilities in relation to their financial decisions.
In this way, our financial literacy work complements our activities directed at the supply side of the market, such as surveillance or enforcement work.
Financial literacy is all about having the right knowledge, skills, attitudes and behaviours to make informed financial decisions. In its High Level Principles on National Strategies for Financial Education, the OECD notes that financial literacy is an important life skill for consumers and investors transacting in modern economies.
The Australian market is complex
This is certainly true here in Australia, with almost every Australian adult owning one or more financial products. Other factors, such as the increase in life expectancy (over 30 years since the 1880s) and the rapid pace of technological change (in June 2013, the number of Australians accessing the internet via their mobile phone increased 33 per cent since June 2012, and a whopping 510 per cent since June 2008), mean Australians have to make a greater number of financial decisions than ever before, with a greater impact on their lives. Such decisions range from deciding which credit card represents the best value, choosing a home loan, comparing insurance policies or planning for retirement.
Literacy as part of global regulation
The OECD also notes that financial education is an "important complement to market conduct and prudential regulation". At ASIC, our fundamental objective is to allow markets to allocate capital efficiently to fund the real economy and, in turn, economic growth. This contributes to improved standards of living for all Australians. We do this through our strategic priorities of ensuring investor and financial consumer trust and confidence and that our markets are fair, orderly and transparent.
As for the National Financial Literacy Strategy itself, this represents the culmination of about 12 months of detailed work and consultation led by ASIC. We spoke with over 200 stakeholders in the process and the feedback is reflected in the end result, as well as findings from relevant consumer research (including insights from behavioural economics) and international best practice guidelines (including those from the OECD mentioned above).
Strategic priorities to boost literacy
Under ASIC's leadership, the strategy provides a national framework for action to improve Australians' financial literacy and a roadmap for all those working in this area. It is built around the following strategic priorities:
ASIC's own financial literacy programs are key to the implementation of the Strategy. This includes ASIC's MoneySmart website. Launched in 2011, over 400,000 Australians now visit ASIC's MoneySmart each month for free and impartial guidance and online tools to help them make their financial decisions.
ASIC's MoneySmart Teaching is another flagship program. We know that most students, about 80 per cent, want to learn about money management at school. ASIC's MoneySmart Teaching program, which was recently recognised by the OECD for best practice in financial literacy education, promotes and supports financial literacy in schools through teacher professional development and quality teaching resources aligned to the Australian Curriculum.
Through these programs, and those of the many stakeholders who support the National Strategy through their own programs, we hope to continue to build and support a more financially literate community.
Peter Kell, Deputy Chairman, Australian Securities and Investments Commission.
The views and opinions expressed in this communication are those of the author and may not necessarily state or reflect those of ANZ.