|
Key points |
|
"Good Advice for Peace of Mind": relies on both financial literacy and the right mix of regulation to promote confident consumer participation in the financial services sector. |
|
Professionalism: Importance of professionalism, both for individual financial planners and industry as a whole. |
|
FPA advertising campaign: Research shows that consumers are getting the message to seek professional financial planning advice. |
|
Financial Literacy Foundation (FLF): gearing up to deliver national information campaign; work of FPA and FLF complement each other. Equipping consumers and investors with essential skills is as fundamental to their confident participation in the marketplace as targeted laws that protect them if things go wrong. |
|
Overseas financial literacy initiatives: OECD study found that more research needs to be undertaken on effectiveness of financial education programmes. However where programmes have been evaluated, they have been found to be effective. |
15 May 2006
Good afternoon. I'm delighted to be here and to officially launch Financial Planning Week.
Financial Planning Week is an annual event that I believe is a key means of encouraging more Australians to seek professional and quality financial planning advice.
I know how much hard work and effort the FPA dedicates to Financial Planning Week and its own awareness-raising campaign featuring Dazza.
Australians are increasingly focused on saving for their retirement; saving for their children's education; paying off the mortgage; investing in their futures.
So it's fitting that the theme for this year's Financial Planning Week is — "Good Advice for Peace of Mind".
As a Treasury Minister, I know the value of good advice. I can sleep at night when I know advice given to me — by my department, advisers, colleagues — is sound, reliable, tailored to my needs, and considers the best interests of the Government and Australia.
It's not an incidental analogy — good financial advice is what Australians need to ensure their financial future is secure and safe.
Indeed, good financial advice is critical to helping Australians sort through the often complex maze of financial products and services.
There are two things that I see as essential to increasing consumers' peace of mind.
The first is financial literacy, which I'll talk about shortly.
The second is that the Government provide the right level of regulation to promote confident consumer participation in the financial services sector.
Confident investors understand the importance of planning, to create a comfortable future for themselves and their families.
They know they are protected by the law, and have avenues for redress if things go wrong.
And increasingly, those same Australians want professional, objective advice to achieve their goals now and into the future.
I'm pleased to see the financial advice industry responding to this new level of demand.
Problems in any industry will almost inevitably bring calls for yet more regulation. Yet industry criticises excessive regulation for increasing compliance costs.
The key is to find the right balance. And finding it is something I am very committed to. For example, I have examined and refined financial services regulation; and I continue to look for simpler regulations for corporations and financial services.
While regulation plays an important role in protecting consumers, in some areas, it is true that industry itself is better placed to regulate its own activities — either by working alone, or by complementing existing regulation. Doing things like providing guidance and setting performance standards.
On this point, I'd like to congratulate the FPA on its work to ensure that the regulatory requirements in the financial services legislation are implemented by it as effectively as possible.
Another move forward is the FPA's work in developing its "Principles for Managing Conflicts of Interest". I understand that all FPA members will adopt these from 1 July 2006.
As ASIC has commented:
"These principles are a real step in the right direction, and represent an understanding of where the financial planning industry needs to go if the Financial Services Reforms are to deliver the intended outcomes for consumers and the industry itself." I strongly support industry self-regulation. These Principles are important in ensuring that the industry is — and is seen to be — active in setting standards for the conduct of financial planners.
I'd also like to make mention of the FPA initiatives outlined in its new publication, Improving the Quality of Advice. This report details the FPA's work over the past two years that is aimed at raising its own professional standards.
Clearly, your Association understands the immense value of professionalism, and maintaining a good reputation in the marketplace.
As a Parliamentarian, I'm keenly aware that a few bad apples can blemish an entire profession. Henry Kissinger once said about people in my profession:
"Ninety per cent of the politicians give the other ten per cent a bad reputation!"
Of course, I don't endorse those exaggerated statistics — but I believe the point is salient.
I know that the FPA is doing a good job and that its members are not wishing to be called bad apples!.
Professionals have to work hard at maintaining their professionalism in the eyes of the community's interests they serve. I would urge you all to keep working hard, and to strengthen your good working relationship with the regulator, and with Government. Together, we can find the right balance.
FPA advertising campaign
Australians are getting the message that their financial security is too valuable to entrust to someone like Dazza — that is, a person who doesn't understand them or their needs.
Recent research shows that 37 per cent of investors who had not seen the TV and print advertisements featuring Dazza intended to see a financial planner.
But among those who had seen the ads, the number of people saying they would see a planner jumped to 52 per cent.
I'm also heartened by the fact that the majority of hits on the FPA's goodadvice.com.au website have been on the "Find a Financial Planner" page.
The FPA's awareness-raising activities complement the work of the Government's Financial Literacy Foundation. Like the FPA, the Foundation also aims to give Australian consumers financial peace of mind by providing them with accessible information and resources.
And that's what we mean when we refer to enhancing the well-being of all Australians - part of this means providing Australians with the skills and protections they need to participate as fully as possible in the marketplace.
Financial Literacy Foundation
No matter how well-off you may be, there is no substitute for sound financial decision-making and planning.
Learning about how to become, and stay, financially healthy, is a lifelong pursuit.
It's never too early — or too late — to learn how to make more informed decisions, and develop the skills we need to make our hard-earned dollars go further.
That's why the Australian Government established the Financial Literacy Foundation last year — to help all Australians to increase their financial knowledge. To help them better understand their options, and the choices they can make in using and managing their money.
The Foundation has a broad work programme which includes education, training and research.
FLF Information campaign
Although most Australians see the value of better managing their money, they often don't know where to start. Or who they can trust.
The Foundation's research tells us that many people think managing money is "too hard" or "too boring", not relevant to them or not important enough, or that they're too young or too old.
To overcome these barriers, the Foundation will provide consumers with easy-to-understand information and resources. It will also connect service providers, teachers and trainers with each other, for mutual benefit.
It is gearing up to deliver a national information campaign this year, which will kick off with television, radio and print advertisements.
A website and handbook will provide consumers with information on a range of financial literacy issues.
This website will point them in the right direction if they want to know more. The website will also provide consumers with information about seminars they can attend, and provide educators and trainers with information and resources particular to their needs.
Of course, these resources will cover financial advice and when it may be a good idea to seek help from a professional financial planner. They will also link consumers to various government, industry and community sector organisations, including the FPA.
In turn, this will give them more choice and control over their lives.
The Government has generously supported the Foundation.
This all adds up to peace of mind.
School programmes
I mentioned before that it's never too early to become an informed consumer. That's why the Foundation has worked collaboratively with the education and consumer affairs sectors to develop the National Consumer and Financial Literacy Framework for schools.
The Framework will provide all Australian schoolchildren with access to financial literacy education during the compulsory years of schooling.
I have a young son, and it makes me feel a sense of security knowing that his school curriculum is likely to include financial knowledge.
The Framework will ensure that, starting in kindergarten, children will be exposed to basic concepts relating to money... the difference between needs and wants... an understanding of goods and services... and some simple consumer issues.
By the time they leave school, these children — who are Australia's future — will understand consumer laws and contracts... savings, credit and interest... how to use technology to become a financially literate consumer... an awareness of scams... and where to find accurate and impartial financial advice.
And most importantly, they will leave school valuing the need for financial goals, and knowing how to spend and use credit wisely.
The National Consumer and Financial Literacy Framework will equip the next generation of Australians to make the financial decisions they will face in adult life. Knowing that Australians will all be better able to look out for themselves is a great boost to peace of mind.
Overseas financial literacy initiatives
Consumer education and financial literacy is on the policy agenda in many countries.
While overseas governments and organisations have approached this area in different ways, there are several recurring themes.
I think it's important to speak on them briefly, for the insights they offer to Australian planners and policy makers alike.
There has been a shift from general to more targeted programmes aimed at different groups in society.
There has been an increasing focus on young people, particularly school students.
And many countries have adopted nationally-coordinated approaches to developing and delivering programmes.
In 2003, the OECD established a Financial Education Project on consumer and financial education programmes in OECD member countries and some non‑member countries.
The project was designed to provide policymakers with information on effective financial literacy programmes, and suggest how they may improve financial education and awareness.
The recent report from the project, Improving Financial Literacy, is the first major study of financial education at the international level.
The study found that far more research needs to be undertaken on the effectiveness of financial education programmes.
However, where programmes have been evaluated, they have been found to be effective.
For example, research in the US shows that workers are more likely to contribute to superannuation plans when their employer offers financial education.
Mortgage counselling has been found to be effective in reducing the risk of people defaulting on their mortgage payments. And consumers who attend one-on-one credit counselling have lower debt, and are less likely to become bankrupt.
US programmes
The United States has addressed consumer and financial literacy extensively through legislation.
The Financial Literacy and Education Commission develops national policy on financial literacy, while the US Treasury coordinates research and programme delivery.
The Jump$tart Coalition for Personal Financial Literacy is perhaps the most widely-recognised American initiative for young people. This not-for-profit network acts as a clearinghouse and central hub, providing a broad range of resources and materials across sectors.
It was convened in 1995 when research revealed that the average American student graduated from high school lacking basic financial skills.
Many were unable to balance a chequebook. And most simply had no insight into the basic survival strategies of earning, spending, saving and investing. Two years later, the Coalition started surveying high school students every two years.
The most recent survey showed that students' financial literacy levels are increasing, albeit slowly.
Clearly, investment in financial literacy requires commitment and resources not just today, but for the long haul.
UK programmes
Across the Atlantic, the United Kingdom has also been very active in promoting financial literacy and education among consumers.
When I visited the UK last year, I met with the Financial Services Authority, the UK regulator. I learnt about its programs to promote public understanding of the financial system.
The Authority runs the National Strategy for Financial Capability which brings together interested parties from industry, the consumer sector, voluntary organisations, government and the media to find ways to improve British consumers' knowledge and understanding of personal finance.
Perhaps the most widely recognised player in the UK financial literacy field is pfeg, or the Personal Finance Education Group.
Pfeg is an education charity whose mission is for all young people to leave school with the financial confidence, skills and knowledge to participate fully in society.
Pfeg receives cross-sector support from education, business and government and is a leading force in the delivery of personal finance education within schools.
One of pfeg's success stories is setting up the pfeg Forum — a cross-sector network of over 70 organisations with an interest in personal finance education in schools.
Conclusion
In conclusion, I am proud of what our Government has done to focus attention on the skills required of Australians who are, these days, entering into more sophisticated, complex and challenging financial markets.
I am proud to see that the Government's investment includes the children of tomorrow, as well as the investors of today.
Clearly, the international and Australian experience shows that equipping consumers with the financial knowledge, skills and confidence they need to thrive in our increasingly complex world is a complex task.
It is one that needs a coordinated and collaborative response from a wide spectrum of agencies across society. But my Government welcomes this challenge.
And can I give you the peace of mind of stating that we are in for this challenge, both now and for the long-term.
This takes a sustained effort from all parties.
And so, in this spirit, I acknowledge the important role that the Financial Planning Association is playing in helping Australians to take control of their financial future. I welcome the launch of Financial Planning Week, and wish you every success in it.
Thank you.