The increasing complexity of the financial services industry is killing off any improvement in Australia’s financial literacy, money commentator Paul Clitheroe has warned regulators.
Speaking at ASIC’s annual conference yesterday, the millionaire businessman said many Australians still did not understand their finances; a situation not helped by the complicated jargon used by the financial services industry.
“We have created a second language called money. They do not understand the words we are using.”
Clitheroe, the head of dealer group ipac Securities, said complicated contracts were a problem, as were the ‘scamsters’ who were getting better at slipping under the net of the regulators.
“Australians are improving year on year in financial literacy yet the bar of complexity increases at a faster rate. We are making no net gain,” he said.
Because of consumer ignorance, too many financial products and services were designed for and driven by the product manufacturers, advisers and distributors, Australian Consumers’ Association chief executive Peter Kell told ASIC delegates.
“They are not designed or priced for consumers. It will take a lot to change this, but a more financially literate Australia would help tip the balance back to a more consumer-driven market,” Kell said.
He said financial literacy was not a magic answer to what he claimed was a problem of overly complex products with inbuilt conflicts of interest and multiple layers of fees and charges.
“It would be hypocritical for financial firms to promote financial literacy while at the same time offering complex products with distribution structures that are riddled with conflicts of interest,” he said.
Both commentators were involved in a $13 million tax-payer funded campaign to improve financial literacy last year.
