As a quick recap, in my previous three articles, I simply went through the Consultation Report provided by the task force on Financial Literacy and talked about six of the nine topics outlined in the report. These topics include the financial literacy landscape, the learning foundation (financial education in schools), financial behavior, borrowing and debt, savings and investing and planning for retirement.
In this final article, I will give my thoughts on two of the last three topics:
Protecting against Financial Fraud
The consultation paper poses the question “Is financial fraud linked to a lack of financial literacy? If so, how?”
I think it’s pretty easy to create a link between financial literacy and fraud. The consultation paper talks about how “certain groups seem to be more vulnerable, such as: those with high levels of debt; seniors; young people; and individuals with low income”. It is not coincidental that these groups are probably those with the least amount of exposure to financial education. That being said, there are people outside of these groups that are well educated or affluent that get scammed too. The problem is universal.
Although financial literacy will help, it will not solve the problem of fraud and scams. Today, there are many opportunities to find information on ponzi schemes, identity theft, investment scams, etc; Many bloggers have written on the topic including this recent one on types of investment scams; There are government organizations and websites designed to help people be more aware; And even the media plays its part in doing features on investment scams. Despite the information, scams and fraud still exist.
Although I think more financial literacy can be helpful to creating awareness of fraud and scams, I think the root of the problem is the scammers are allowed to get away with it with little to no punishment. These scammers have taken not only people’s monies but also their dreams, security, confidence and destroyed lives. The bottom line is if you want fraud and scams to stop, you need to make the punishment more severe. Give them an outcome that will deter them from scamming in the first place. It’s awful to see people who have made off with millions and millions of dollars spend a year or two in jail.
Communication and technology
This section of the consultation paper looks at the important role that communications and technology can play in improving financial literacy. Communications and technology go hand in hand, since they both relate to how information is presented and delivered.
The paper poses one very interesting question “What organizations would you trust to deliver credible and objective information over the Internet and using other new technologies?”
One of the biggest challenges of the financial industry is one of the primary sources of education comes from those that sell financial products – banks, financial advisors, and financial institutions. Although I applaud these organizations for their efforts on financial education, there is a potential conflict of interest can create significant bias to education.
I am a little biased on this topic because it is my business but I would like to see more people who do not sell financial products like mutual funds, investments, insurance, etc. provide more financial education across the country. In other countries like the US, UK and Australia, there are organizations that are only in the business of providing financial education without selling products.
Education must come from many different sources including the government, media, financial industry, employers, and schools. We must create more mediums for learning including the internet, television, books, seminars and workshops. I am so happy to see that the government has at least created some awareness through the efforts of the task force. We have a long way to go so I urge everyone to do their part by voicing your thoughts and concerns.
Thanks to Tom and CanadianFinanceBlog.com for helping me to create awareness on financial education and literacy in Canada and thanks to those of you that have contributed your opinions and thoughts.