3 The information provider

3.1 Information provision — the people and organisations that assist consumers to make better decisions

The previous chapter showed the complex factors that lead to our consumer decision-making including our preferences for different types of information.

The other component in looking at consumer and financial literacy is the level and effectiveness of information provision by organisations and individuals to consumers.

This chapter provides an overview of the current landscape for consumer education and financial literacy programs provided in Australia. It also looks at how this compares with various overseas countries.

3.2 Australia

The Taskforce has identified over 100 organisations in Australia delivering over 700 Australian consumer and financial literacy initiatives directed at a wide range of audiences. This is a preliminary investigation and the Taskforce recognises that many more programs may be in existence. The full stocktake forms Appendix 1.

Figure 3.1 shows these initiatives in terms of target audiences and providers.

Figure 3.1: Consumer and Financial Information Stocktake

Target Audience	Initiatives
General public	373
Investors	149
Youth (including school students)	62
Seniors (including retirees and pensioners)	68
Indigenous	18
Women	7
Other	34
Total	711

Provider	Initiatives
Commonwealth Government	152
State/Territory Government	86
Private sector	161
Community sector	51
Education sector	18
Independent (including consumer/financial magazines, publications and regular newspaper columns)	243
Total	711

The Taskforce has refrained from making judgements about the effectiveness or efficiency of individual programs and initiatives. Instead, the Taskforce believes there is a need to determine how well these programs, collectively, meet the needs of Australian consumers using the Consumer Behaviour Model as a framework for assessment. It is only through a national review using a consistent framework (such as the Model) that a proper assessment can be made.

However, it is clear that many good initiatives exist and that organisations are actively engaged in delivering consumer information. However, it is also clear that the spread of information is uneven across different topics and target audiences. For example, there appears to be more information available to consumers on credit and loan products and how to manage borrowing (including information provided by each state and territory), and less on insurance and superannuation.

This may actually be appropriate. Until proper research can be undertaken to determine priority issues and the factors that underpin them (as outlined through the Model in the previous chapter), it is difficult for the Taskforce to make judgements on whether consumer needs are being met and whether the information messages are appropriate.

Instead, the Taskforce has chosen to look at the landscape for information provision in Australia and the current structures that support effective and efficient delivery.

Information providers

In Australia today, there exists a wide range of information providers involved in developing and delivering consumer education programs. As outlined in the previous chapter, these can be categorised as formal, informal and intermediary.

The formal sources include:

Commonwealth, state and territory and local government bodies
industry and professional bodies (for example, finance and telecommunications industry associations)
consumer and community groups
private sector organisations (for example, banks, insurance companies, retailers).

The informal sources include:

the media (from news reportage to high-profile commentators to issues covered in television drama)
family members (often with certain knowledge or professional qualifications)
friends or work acquaintances (often with certain knowledge or professional qualifications).

Information intermediaries include:

financial advisors (for example, financial planners, accountants, stock brokers, mortgage brokers)
real estate intermediaries (who act as an agent to negotiate the best deal from a real estate agent, often through real estate auctions)
retail intermediaries (for example, tourist agents, ‘discount’ shopping tour operators).

These different providers each have different objectives in delivering consumer education, which is reflected in the types of programs offered. For example:

government bodies aim to inform consumers about their rights, responsibilities and opportunities under certain government laws
industry associations aim to increase consumer understanding about the benefits and protections of their industry
consumer groups seek to empower consumers and help consumers successfully deal with product and service providers
individual businesses often try to encourage understanding for take-up of particular products or services
family and friends often seek to project their own experiences and preferences.

Consumer segments

Many providers have developed programs for specific groups of consumers, such as Indigenous consumers, youth and seniors. Some examples are as follows:

Indigenous people: In an encouraging move, state, territory and Commonwealth consumer agencies have agreed to develop a five year National Indigenous Consumer Strategy to respond to the particular issues facing Indigenous consumers in Australia. The strategy will consider education, policy, legislation and enforcement in the areas of financial literacy, financial and banking services, motor vehicles, trading practices in remote communities, tenancy issues and consumer issues associated with intellectual property and the Arts.
Generation Y: There are many good programs being developed to enhance financial responsibility among Generation Y consumers.
Non-English speakers: Commonwealth, state and territory governments provide consumer education information in a range of community languages for people from non-English speaking backgrounds.

Education sector

As mentioned previously, the Taskforce considers school and vocational education to be a priority area for future work.

The issues associated with consumer and financial education are discussed in detail in Appendix 4 which includes a report commissioned by the Taskforce. However, the issues can be best summarised as:

Lack of consistency — there are no agreed standards for consumer and financial education in schools as it does not exist as a dedicated subject.
Curriculum overcrowding — teachers are currently struggling to teach the Key Learning Outcomes of the current curriculum and often do not find time to teach consumer and financial education.
Teacher capacity and engagement — teachers often do not know where to find resources. Teachers also mistrust resources that are branded or are not specifically designed to meet curriculum outcomes. Teachers also require professional development to develop their own knowledge of consumer and financial concepts.
Resource overcrowding — school principals currently receive a multitude of resources from industry and government on a range of topics. In most cases, these resources are sent to the library or discarded as the principal is unable to make a decision about the worth of the resource. This is particularly the case where several good resources already exist (for example, the 62 resources the Taskforce found that target young Australians).

Despite these problems there have been successful consumer and financial education programs run in many schools. In addition, there has been a rise in the take-up of enterprise education which seeks to foster an entrepreneurial approach to finance with students developing the skills necessary to run a business. A good example of this is the long-running Australian Business Week Enterprise Education program where students spend a week running a simulated company with the help of a business mentor.

Information delivery

Excluding programs in schools, most of the consumer programs identified thus far in the stocktake deliver information via web-based or hardcopy publications such as booklets and fact sheets. A few programs provide information and advice on a one-to-one basis, and these programs are mostly helplines (for example, National Information Centre on Retirement Investments, Australian Securities and Investments Commission, Australian Competition and Consumer Commission, state and territory fair trading and consumer affairs departments) and seminars that are run on an ad hoc basis.

Two exceptions are Centrelink’s free Financial Information Service and the Australian Stock Exchange’s investment seminar program. Both of these programs deliver information face-to-face, which is generally acknowledged as being a more effective way of learning.

As can be seen, there is a plethora of information available in Australia on consumer and financial education. However, the extent to which this reaches the intended audience is variable. For example, people with higher levels of consumer and financial literacy (and less need for consumer education) tend to be the larger users of consumer education programs.

A preliminary examination of the programs identified to date shows that for each topic area a number of organisations provide consumer education programs. This is a positive finding as it demonstrates that many organisations are committed to helping Australian consumers learn how to use and manage money effectively.

However, we don’t really know how effective these organisations have been in improving knowledge and changing behaviour. This is because there is no national or ongoing evaluation of initiatives from the consumer’s perspective.

No one is measuring consumer competencies, no one is measuring broad effectiveness against key problems (for example, how are public, private, community and education organisations addressing scam awareness rather than an evaluation of one scams campaign) and no one is measuring consumer decision-making changes over time.

Because of this, the Taskforce finds that information delivery can be generally characterised as ad hoc in nature and splintered in delivery. However, having different initiatives delivered by different providers in different ways does not necessarily mean that there is duplication and wastage. Different programs may address different issues, be aimed at different target audiences, and so on. Nevertheless, a great degree of duplication does exist and causes wastage of resources and confusion to consumers.

Given that there is no centralised or coordinated approach to consumer and financial education in Australia, the possibility for even further duplication certainly exists.

As can be seen later in this chapter, other countries have coordinating bodies which try and shape information delivery in ways that are effective to the consumer and efficient to the provider. This can include the provision of services such as clearinghouse websites which collect all available consumer information resources in a central location. Such sites can often be instrumental in reducing duplication and fostering best practice as they allow information providers, consumer intermediaries and consumers to see the range and quality of resources on offer against certain topics.

In Australia, successful clearinghouses exist in other sectors. These include:

Australian Clearinghouse for Youth Studies (ACYS) — provides access to information products and services, such as books on contemporary youth issues and other resources, for those working in the youth field and for anyone interested in youth. Users can search for topical resources, produced by ACYS or other providers, as well as access databases which contain summaries of published information and article abstracts. ACYS also provides links to youth peak bodies across Australia. ACYS is funded by the Department of Family and Community Services.
Australian Disability Clearinghouse on Education and Training (ADCET) — provides access to post-secondary education and training for people with disabilities by:
- Gathering, evaluating and disseminating research and other information for disability practitioners and students with disabilities, relating to teaching, assessment and learning strategies and support services etc
- Facilitating and promoting professional development, information sharing and research
- Promoting partnerships with other organisations
  - ADCET is hosted by the University of Tasmania and funded by the Commonwealth Department of Education, Science and Training (DEST).
Clearinghouse for National Literacy and Numeracy Research — provides public access to research projects funded by DEST Grants for National Literacy and Numeracy Strategies and Projects Program. Most reports can be accessed online from the website, and reports are also available in hardcopy on a cost recovery basis. The clearinghouse is managed by Griffith University.

Why is Australian consumer and financial literacy not as good as it could be?

It is clear that if we are to be more effective in promoting and achieving higher levels of consumer and financial literacy, we need a coordinated response, with government leading the way.

This means getting public, private and community sectors to work together towards common goals that are informed by proper research. It also means having a central repository for knowledge and expertise which can be developed over time to ensure programs are more strategic and consistent with best practice principles.

At the same time, it is clear that information providers need to look beyond their own particular information to the consumer’s broader experience in relation to that information. Consumers are increasingly time-poor and are frustrated to receive different pieces of information from government and businesses on a single issue. Also, as time-poor consumers increasingly rely on professional intermediaries to act on their behalf, it is essential that the quality of advice and service provided by these professionals is reliable, trustworthy, current and accurate.

Finally, consumer education programs often need to be targeted in a more meaningful way that resonates with the consumer and ‘speaks their language’. Much of the challenge facing information providers is getting the consumer to engage at all with the topic.

The next section looks at how other countries have addressed these problems. A number of proposed solutions to these problems are then framed in Chapter 4.

Feedback

The extent to which Australians’ needs are met by the currently available consumer and financial education programs needs to take account of a number of factors including the following:

The availability of information — Are there some topic areas where there is insufficient information?
Awareness of the available information and information sources — Do consumers (or teachers and other intermediaries) know what is available?
Access to the available information — Do consumers know how to access information? Are all consumers able to access information?
The quality of the information provided — Is the available information clear and consistent?
Efficient allocation of resources — Is consumer education delivered efficiently?

3.3 Overseas experience

Consumer education and financial literacy is on the policy agenda in many countries.

This has been driven by many factors, most of which have parallels with the Australian experience.

Like Australia, many countries have seen an increase in the complexity of markets and market regulation which has seen consumers left behind in their knowledge and capacity to derive benefits from the changes.

Most developed countries are experiencing, to some degree, an ageing population and governments are faced with the challenges of funding citizens’ retirement. While in the developing world, the priorities remain the need for economic growth and development.

While overseas governments and organisations have approached consumer education and financial literacy in numerous ways, there are a number of recurring themes:

a shift from general programs to more targeted programs
a focus on young people, particularly those of school age
the emergence of nationally-coordinated approaches to developing and delivering programs, often through a coordinating body.

Some overseas strategies and programs that might inform future developments in Australia are discussed below.

3.4 The Organisation for Economic Co-operation and Development

The Organisation for Economic Co-operation and Development (OECD) has identified a number of changing economic conditions in member countries and an associated need for increased consumer and financial literacy. For example, with the scaling back of benefits of state-supported social security programs, increasing numbers of workers will have to rely on personal savings and private pensions to fund their retirement. A large number of people in these countries will need to develop the skills necessary to plan and support their retirement.

This led the OECD to recently establish a Financial Education Project on consumer and financial education programs in OECD member countries and some non-member countries.

The overall objective of the OECD project is to develop a framework that will be used across countries to determine the levels of financial literacy and to ascertain what resources will be needed to educate consumers to base competency levels. This will then be used to appraise the effectiveness of existing and future programs in this area.

The first phase of the project will include a stocktake of existing programs and the development of a methodology for policymakers to compare strategies and (private and public sector) programs. The second phase will be a survey of the financial literacy of consumers in selected countries.

Preliminary results from the first phase of the project suggest that key areas where consumer information and education will be required would probably include the following:

pensions and how to invest savings for retirement
new financial products and services
risk and return and how to deal with credit and debt
the need for, and importance of, insurance and the rights of insurance policyholders.

Likely obstacles to the provision of financial education include:

financial or budgetary obstacles
lack of consumer awareness of the benefits of financial education
difficulties associated with information provision
ability to target appropriate population groups.

3.5 The United States of America

The United States (US) has addressed consumer and financial literacy extensively via legislation, with a national policy on financial literacy and the establishment of a central peak body that coordinates research and program delivery.

Consumer and financial literacy programs are delivered via the education system, Government bodies, the Federal Reserve of America and private sector organisations. Details of selected key programs and providers are outlined below.

Legislation

The rise in abusive lending practices, a lack of personal finance skills among youth and declining confidence in corporate pension and retirement funds have driven a number of legislative changes in the US including the following:

The No Child Left Behind Act of 2001 authorises the use of funds by educational agencies to teach basic personal finance to school-age children. The sum of US$385 million was allocated to educational bodies for this purpose.
The TANF Financial Education Promotion Act of 2003 which requires states to promote financial education under the Temporary Assistance to Needy Families program and to allow financial education to count as a qualifying work activity.
The Education for Retirement Security Act of 2003 created a US$100 million competitive grant program to provide resources for state agencies and non-government organisations to provide financial education to individuals of 45 years and older.
Some states have legislation requiring personal finance to be taught in public schools.
The Community Reinvestment Act of 1977 which focuses on the credit needs of low and moderate income individuals and community development programs.
Other legislation is aimed at providing financial education to mid-life and older Americans.

Policy and peak body

The Financial Literacy and Education Commission was established by the US Government to develop a national strategy to improve consumer education and financial literacy. The Commission encourages and coordinates government and private sector consumer and financial literacy programs and provides a toll-free telephone helpline and website for consumers who are seeking information.

Other Government bodies

A number of other US Government bodies, at both the federal and state level, are involved in consumer education and financial literacy. For example, the Office of Financial Education, under the Department of the Treasury, is responsible for guiding and coordinating the Department’s financial education policymaking.

Federal Reserve of America

Financial education has traditionally been part of the mandate of the US Federal Reserve. This is underpinned by the view that financial literacy results in more stable communities, a stronger and safer banking system and a higher standard of living. Examples of programs undertaken by the Federal Reserve include:

The Federal Reserve Bank of Chicago, Consumer and Economic Development Research and Information Center, which researches and disseminates consumer information in areas such as access to credit, affordable housing and reinvestment. It also provides online resources including a research repository of studies related to financial education and a listing of major financial education programs throughout the US.
The Federal Reserve Bank of San Francisco has developed a model of consumer education and financial literacy that looks at financial literacy in four areas (early intervention, basic literacy, credit rehabilitation and long term planning or asset building). Programs are then developed for different population segments, using tailored information approaches developed with appropriate partners.
The Federal Reserve Bank of New York conducts various educational outreach programs that focus on everyday issues such as compound interest, investment strategies, risk assessment, insurance and other basics of money management.

The Federal Reserve reports that most Americans acquire their financial knowledge haphazardly by trial and error. Numerous surveys reveal that most people growing up do not learn any principles of personal finance systematically from their parents. Instead they pick up bits and pieces in school, from the media and through their business dealings with financial service providers. Often the information they acquire is misleading or fraught with errors.

US private sector providers

Examples of private sector initiatives in the US include:

Campusbank Card by US Bank, Minneapolis: This key card product allows students on campus to pay for point-of-sale purchases on campus and to access their US Bank account. Like a debit card, charges to the Campusbank Card are drawn out of an account maintained by the student and/or the student’s parents. The program aims to teach students how to use credit cards without running up debt.
Financial Wellness Program by US Bank: This program consists of student seminars on the essentials of good money and credit management.
Various state bank programs include public awareness campaigns on financial literacy, statewide literacy programs and lobbying policymakers for the integration of personal finance in public schools.
The Don’t Swim with the Sharks campaign by the Oklahoma Bankers Association, on predatory lenders. Other campaigns and ‘toolkits’ target consumer privacy rights and identity theft.

Partnerships

The US has several independent bodies which promote financial literacy, including the National Institute for Consumer Education (est. 1973), which acts as a clearinghouse for consumer education initiatives across the US, the National Consumer Education Foundation (est. 1995), the Jump$tart Coalition and the National Council on Economic Education.

All of these bodies act as clearinghouses and central hubs for the provision of a broad range of resources and materials across sectors.

3.6 The United Kingdom

The United Kingdom (UK) has also been very active in promoting financial literacy and education among consumers.

The Financial Services Authority (FSA), the UK financial regulator, is responsible for promoting public understanding of the financial system. The FSA has two policy objectives in this regard:

Financial capability, which involves providing individuals with the knowledge, aptitude and skills base necessary to become questioning and informed consumers and to manage their finances effectively.
Consumer information and advice, which involves providing impartial and generic advice to help enable consumers to plan their finances and make informed choices.

The FSA view is that meeting these objectives will promote competition and thus lead to innovation, better quality products and services and value for money.

A recently established UK initiative is Consumer Direct, a consumer telephone and online service that will give consumers access to advice and information related to shopping, scams and consumer rights. This program was created after research showed that half of all consumers do not pursue complaints, half do not know where to look for advice and information and two-thirds lack confidence in dealing with consumer issues. There has been an allocation of £30 million to fund the program to the 2005-06 financial year.

The Personal Finance Education Group (pfeg) is another organisation active in promoting financial literacy in the UK. Pfeg is an education charity whose mission is for all young people to leave school with the confidence, skills and knowledge they need in financial matters so that they can participate fully in society. This is primarily done through a clearinghouse website which includes details of where to obtain resources, their cost and the financial topics addressed.

Pfeg is funded and supported by education, business and government. Pfeg provides and accredits a range of teaching resources for school use.

Pfeg’s flagship project, Excellence and Access, aims to raise the confidence and competence of teachers involved in teaching personal finance education. The project has developed good practice guides, case studies, support material, seminars and events.

3.7 Canada

Canada too has a wide range of consumer and financial education programs. Most of these programs are focussed on consumer education in the broadest sense with a drive to build a national, consistent consumer framework.

The Financial Consumer Agency of Canada (FCAC) was established in 2001 as an independent federal regulatory agency formed to strengthen oversight of consumer issues and expand consumer education in the financial sector. It is currently working with stakeholder groups to develop a cross-sectoral framework for consumer protection and consumer education.

The Canadian Consumer Information Gateway is a government online initiative that includes over 35 federal government departments and agencies and over 250 provincial and territorial partners. The goal of the partnership is to coordinate consumer assistance services through a central portal for consumers.

The Canadian Bankers Association is also very active in improving financial literacy. In 1998 Canada’s banks launched a comprehensive information program called Building a Better Understanding, aimed at individual Canadians. The program was based on the results of intensive consumer research which was conducted, called Survey of Canadians’ Economic and Financial Understanding, which revealed that people wanted more information from their banks and on the changes occurring in the broader economy, to help them make more informed decisions.

Since the program began, the Canadian Bankers Association has undertaken a series of initiatives, most notably, the There’s Something About Money youth website and teacher resources. The Canadian Bankers Association is also active in providing staff to attend high school classes to present seminars based on these resources.

3.8 New Zealand

The New Zealand Financial Literacy Programme has been developed by the Enterprise New Zealand Trust in cooperation with schools and businesses. This program aims to instil a ‘can do’ attitude or philosophy in young New Zealanders. Rather than focusing on skills acquisition or information provision, the program is designed to foster an enterprise mentality that will foster an entrepreneurial approach to financial issues.

The program focuses on the consumer’s individual circumstances, acceptance of personal responsibility, establishing, monitoring and re-adjusting financial goals, financial decision-making and consequences, building up personal equity and personal financial security.

3.9 Other countries and organisations

Various other overseas countries and organisations are tackling consumer and financial literacy. Some of those reviewed in developing this paper include:

Hong Kong
Singapore
the Council of Securities Regulators of the Americas
the International Organisation of Securities Commissions
the World Bank.

Common consumer and financial literacy issues around the world

In summary, the common issues associated with consumer and financial literacy around the world include:

the increasing need for integrated, coordinated and joint program delivery from the government, private sector and community provider sectors
the need to target and tailor solutions for disadvantaged groups
the need to address inadequate savings and investment plans by consumers, particularly to encourage personal responsibility for retirement funding
the importance of equipping young people (the future adult generation) with good consumer and finance skills
low use of available information (associated with the belief that the information is not needed or will not improve outcomes)
poorly regulated and non-transparent markets in some countries which has deterred consumers from engaging in some financial activities that might otherwise meet their requirements (for example, information about risk and return and information included in prospectuses).

At the same time, the common elements of countries which are progressively and successfully addressing consumer and financial literacy include:

the development of a national policy on consumer and financial literacy
the establishment of a peak body that appraises consumer needs and behaviour, coordinates service provision and acts as a central point of information
legislation in key consumer education and financial areas
the use of tailored education programs for different consumer segments (skill building and motivation as well as information provision)
cooperative activities by government, private sector and community-based organisations.