The subject of educating consumers about personal finance has been raised again with a call from a lender to encourage others to provide advice and education.
The announcement came from Paul Chafer, sales and marketing director at Stroud & Swindon, following research that stated the cost of living is the top financial concern for people living in the UK. With 55 per cent of respondents claiming that the rising cost of living in the UK is a worry, Chafer called on providers to educate customers further about money matters.
Chafer says that Stroud & Swindon is currently working alongside the Financial Services Authority (FSA) to train employees to offer useful financial advice, but adds that more instruction and education is needed.
He explains: “It is important that providers are also involved in educating Britons further about money matters. We call for more providers to follow suit and actively work to improve their customers understanding of financial matters.
“Financial advice is not appreciated by the general population who don’t understand it. If your car breaks down you take it into a garage but in finance there is not the people to sort these problems out. We now have every incentive with ‘Treating Customers Fairly’, but it should be a curriculum subject and taking it into schools has been a goal of mine for some time. People should also be educated on student debt and schools should be encouraged to teach on what it means.
“The recent government announcement that personal finances will form a greater part of the education syllabus is therefore very welcome and will help with the UK’s financial literacy problems. People need to be educated and if it is not on the curriculum then it should be an option. You cannot underestimate how complicated it has got in the last 15-20 years and if people were educated you would reduce the number of complaints significantly.”
A need for instruction?
So is there a need for lenders to instruct better on financial advice in general? After all, the existence of the mortgage adviser in the estate agent is for someone to give advice on the best deal, while the entire role of IFA and broker is to guide and educate. But what about for those members of the public for whom the first port of call is the high street lenders? Are they indirectly missing out on advice?
Neville Richardson, group chief executive of Britannia, agrees with the opinions of Chafer, claiming that there is a need for the basics to be taught in school, with a firm financial knowledge before heading into the world a realistic goal.
Richardson says: “Ensuring school leavers have basic numeracy skills, with an understanding of interest rates and how savings, mortgages, insurance and pensions work, will help them plan for their needs and be less reliant on state support.
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“Financial services companies have a duty to ensure transparency of product terms and conditions and regulators must ensure a level playing field, but active, informed consumers are the best way to ensure a fair market. Compulsory financial education is one way to ensure our future customers can make informed choices.”
A foot in education
Britannia is another with a foot in the field of education, with a commitment to being socially responsible and a clear focus on education, centring on young people, numeracy, financial literacy and money advice.
Richardson says: “Following a successful pilot in 2006, Britannia this year introduced a new financial education programme. Our activity is aligned with the FSA’s national strategy for financial capability and with the Personal Finance Education Group’s approach.
“By the end of the 2006/7 school year, 1,700 students in 13 schools had taken part in the programme. 70 Britannia volunteers have been trained to deliver a range of workshops designed and developed with teachers and students. Topics covered include how to open an account, interest, budgeting, financial jargon and credit and debt. Analysis of feedback so far shows a 40 per cent increase in knowledge among participants.
“Over the Summer another 30 volunteers from our Bristol offices will be trained to deliver the modules in local schools and we are looking to roll out the programme in London and Plymouth, where we have other offices, in due course.”
Richardson concludes: “If Britannia has been able to make such a positive impact on the savers and borrowers of the future, the government and the future economy should reap huge rewards by introducing finance into the national curriculum sooner rather than later.”
So, with two lenders actively educating about personal finance, is this a matter for other providers to consider? Neil Johnson, head of PR and policy at the Building Societies Association, says: “The question comes down to advice and education and understanding the differences between the two. Do people know what they’re buying and can they make a choice? Do they understand what it means for them? This a key area as most lenders will try to help them understand what it means, but there is only so much they can do.”
With the level of advice provided determined by the lender it is difficult to conclude how much lenders should or should not explain, but to ensure that borrowers can afford the loan and make the repayments should be the primary concern in any application.
