Deeper in debt than ever before, Canadians need to do a better job of handling their money.
The Investor Education Fund has taken on the daunting task of teaching people how to do just that. The independent organization, which draws its funding from penalties and fines imposed on financial institutions and individuals by the Ontario Securities Commission, spends about $3-million a year on innovative in-school programs, videos, an interactive website, and an expanding presence in social media.
IEF president Tom Hamza recently scored a big success: getting the Ontario government to include financial literacy on the province’s school curriculum from Grades 4 though 12, starting this fall.
What is the key demographic you’re aiming at?
Typical users [of our material are]intermediate investors – people 35 to 50 who are already in the markets, and who want to know more about how to find a new adviser, how to assess their current one, or what they need to know about X, Y or Z product.
[But]in the last couple of years, we’ve really made a strong effort to go beyond that. [We are]taking advantage of some things that weren’t available before, specifically social media, to try to reach a younger demographic as they are facing certain financial issues. They have decisions relating to student debt, or getting married, or finding a place [to live] and are probably taking out a mortgage, and possibly have an RRSP.
How has social media changed what you do?
It allows us to be a lot more direct and one-to-one [with users] We can find out their interests and we can suddenly start to develop a relationship. If we, for instance, place ads on certain websites that talk about student debt, the take-up rate on them is remarkable.
How do you get people’s attention for what can be a dry subject?
You have to make it is as sensational as the other things that are on that [Web]page. If you are on Amazon news and your [link]says: “Make sure you plan your finances for your retirement,” it is a non-starter. But if you do something like a quiz [which says:]“Figure out whether these quotes are from Gordon Gekko or from Warren Buffett,” that has huge take-up. We can [then]bring in the other material and sort of hook them. [The Web]has definitely changed our tactics.
What is the No. 1 personal finance issue for Canadians?
From an aggregate perspective, debt is the biggest issue. There is no question we are at historically high levels. We’ve seen the implications of this in other societies that have had major financial crises … in Ireland and in the U.S.
[For individuals] if you look over your lifetime, what costs the most is a mortgage. If I were to rank the thing that can make [the most]difference in your pocket, shopping around your mortgage and shopping around your renewal [is No. 1.]Something like 85 per cent of Canadians renew with their original lender.
Is there a need for more education on retirement savings?
Absolutely. That is where we started. The intention was to get investment information out to people who were planning for retirement. Retirement is being severely affected by debt levels, [and some]people who are getting close to retirement still have mortgages. It is happening with disturbing frequency.
More importantly, people aren’t putting enough money aside. Not only is the amount short, but the options are wider and the opportunity to make mistakes are bigger, because there are a lot more products, and many of them require more sophisticated understanding.
Are people putting too much faith in advisers, in the face of those complex products?
As we have more structured products that have more fees that are less transparent, there is more of a blind reliance [on advisers] But a reliance on advice without having the knowledge yourself isn’t always a good thing.
Are people generally well-served by their financial advisers?
A high percentage of advisers are competent, have a really strong understanding of what they are doing, and really care about their clients. On the other hand, one of the challenges is that they have to sell certain products, and they have to make a living. They are expected to have a lot of clients to sustain enough revenue for their institution and for themselves. They have tremendous pressure. Just as we second guess our doctors, we should have a critical eye on our relationships with our financial advisers.