Communication key to financial literacy

One of the best things the savings industry could do to improve the public's understanding financial products was to improve their communication.

Monday, July 6th 2009, 8:05AM

by Paul McBeth

A number of ideas to improve literacy were thrown up at a recent summit in Wellington, but a common theme among the groups was the need for organisations offering financial products to up their game and ensure their customers understand exactly what they are buying.

This underpinned a key point in Retirement Commissioner Diana Crossan's update that more work was required to improve the level of communication through using "clear and transparent language".

Sean Carroll, Managing Director at Asteron, told the workshop it was in the industry's best interests to lift its game and help improve financial literacy.

By taking a "long-term view", the sector can better prepare future clients for the sector, but it may require some short-term pain for shareholders, he said.

In the summit's opening speech, Finance Minister Bill English stated his pleasure at the work the Retirement Commission had done in helping lift the public's basic understanding of finance, and its ability to attract private sector partners and secure buy-in from the Ministry of Education.

"Private sector participation is absolutely vital," English said. "This is an area where government isn't that well-qualified" because it functions without a sense of risk and is unable to credibly demonstrate good financial literacy, he said.

English also reiterated Crossan's goal of taking advantage of the current economic climate.

"There isn't a better time than now when the public's fully-attuned to the consequences of bad decisions," he said.

In Crossan's speech, she pitched for a private sector partner for the new Financial Literacy Office. The office was created to avoid having the Retirement Commission sponsor school programmes.

Paul is a staff writer for Good Returns based in Wellington.

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