When clients visit an adviser, how many of them have any idea as to what product is best for them?
Is there a general ignorance on the part of the general public or is our industry just too complex for the average borrower to understand what we deem to be basic information?
It could be argued that this problem is to do with basic financial education, and that there is a need for personal finance to be taught in schools in an official capacity.
According to a recent Ofsted report, the teaching of personal finance is important in preparing students for the future – as long as it is taught in an official capacity.
At present it is generally taught as part of maths or citizenship lessons, and according to the government this approach will result in a ‘lack of coherence in the provision and fragmented experiences for students’.
Ofsted found that three-quarters of schools did not have systems in place to monitor students’ progress in developing financial capability.
Despite government statements that financial education is now being delivered in schools, Ofsted has highlighted that there is still no statutory requirement for schools to teach financial education.
The report stated that ‘there were shortcomings in developing personal finance education through mathematics lessons. The focus was mainly on using personal finance education as a context for applying mathematical skills, rather than on developing students’ financial skills and understanding’.
Improving understanding?
So is this an opportunity for teachers to improve the understanding of pupils’ knowledge in the future, and create a generation of financially aware people who will manage their money efficiently and know how to control personal debt?
Arguably yes, but the report was rather critical of the ability of teachers to provide the lessons efficiently. It stated: ‘Teachers often lacked the skills needed to hold class discussions about aspects of personal finance education where there were no right answers.’
The report claimed that there was a need for understanding on all sides, but in order to further develop minds the quality of teaching would need to be enhanced. The report further stated: ‘The numerical skills of addition, subtraction, multiplication, division and calculating percentages are often practised and applied in a financial context.
'Financial capability, however, is about more than numerical competence. It is also about developing an understanding of financial services and key ideas, the skills to apply this understanding to managing money, and acquiring particular attitudes towards personal finance.’
Backing the report was the ifs School of Finance, which welcomed the call for the government to support the professional development and training of teachers. The ifs called for an element of personal finance to be included in all teacher training programmes.
Anne Kiem, director of external affairs at the ifs School of Finance, said: “This Ofsted report backs the views we have been expressing for years, that spreading personal finance thinly across the curriculum is far less effective than a standalone course, that maths is not the right place for personal finance to be taught and that a great deal more needs to be done to equip teachers with the skills and confidence to teach personal finance.
“The report clearly identifies the fact that a standalone, nationally recognised qualification is more effective in producing financially capable young people. As a result, we very much hope that the government properly considers the findings of this report and looks again at adding a standalone qualification in personal finance to the core school curriculum.”
A place for accredited courses
According to a poll of 14 to 18-year-olds last year held by the Personal Finance Education Group (PFEG), over 50 per cent of Britain’s teenagers have been in debt by the time they are 17.
Wendy Van den Hende, chief executive officer of PFEG, said: “There is certainly a place for accredited courses resulting in a formal qualification. However examinations are not, by themselves, the answer to ensuring that all young people leave school financially capable. Most students will not choose this option.
"What is most important is that personal finance becomes part of our young people’s education as early as possible and that they are engaged with practical, real-life experiences and examples relevant to the choices they will make as adults.”
The report by Ofsted shows that there is a determination to ensure that pupils are educated and that teachers are trained to do this properly. It is also positive for the existence of the adviser too. If people are more aware of their financial expenditure there will be much less risk for the future.
So could this be the catalyst to ensure that personal finance has a future, and to give some kind of encouragement to the market, at least for the moment?
The answer is a tentative yes, as more effort could be made to save for house deposits early on. But the ball needs to begin rolling sooner rather than later.
