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True Potential PUFin's finance education mission

The financial crisis of 2007-2008 had seismic ramifications on both the domestic and the global economy and also resulted in significant regulatory and financial services industry activity to restore confidence, financial stability, protect consumers and prevent such carnage happening again. These changes have made significant improvements for consumers in many areas although certain groups of consumers have suffered from unintended consequences in some product areas. Examples of the latter range from ‘mortgage prisoners’ (middle aged borrowers with existing interest only mortgages that are unable to re-mortgage) to savers who have been getting paltry returns as a result of the double whammy of historically low interest rates coupled with the effects of the government’s Funding for Lending scheme which greatly reduced the banks’ appetite for attracting retail deposits.

The aim of the regulators is to ensure that providers treat customers fairly and that consumers can have trust and confidence in a stable financial services industry.

There is, however, one additional area of concern that needs attention is financial education. There is insufficient consumer understanding about debts, assets, risks to make appropriate and confident financial decisions. Many people don’t have a ‘maths brain’ and even more have never had any financial education.

Bearing in mind that some financial products are one-off decisions with very long term consequences - for example the choice of an annuity - it is of great concern that so many consumers lack confidence about their financial decision making. There’s also an ‘advice gap’, which in part was exacerbated by the regulatory abolition of trail commission and platform rebates, which sees the less affluent either unable, or reluctant, to pay for professional advice.

Personal finance education is now part of the secondary school curriculum and this will undoubtedly help those of tender years and future generations. But where does this leave many of today’s adults who have never had any formal financial education?

Citizens Advice say that 8 million people have problem debt and that 40% of adults have less than £300 in savings. This backdrop makes it even more alarming that anyone who has become a first time property buyer in the last two decades has never experienced the effects on variable rate mortgage repayments of a material increase in interest rates. 

Schools, universities, employers, trusted intermediaries and financial providers can all have a part to play in improving financial education and understanding. But even if employers play their part, where would this leave the ever growing numbers of the self-employed?

There are a series of life events when consumers need to engage with financial providers - first bank account, first credit card, first mortgage – and these provide a real opportunity for providers to offer advice and education at the point of considering the products. Similarly pension auto-enrolment is an ideal touchpoint for employers to get involved.

There are some very complicated products available and some expert commentators have suggested that there should be an industry wide suite of simplified financial products that would be encouraged to compete on price and service. Another suggestion is that the government could further endorse the importance of financial education by appointing a Minister for Personal Finance.

I’m very pleased that we at the True Potential Centre for the Public Understanding of Finance (True Potential PUFin) are heavily engaged in catering for the consumer need for personal finance education. Our free online courses - ‘Managing My Money’ and ‘Managing My Investments’,‘Managing My Financial Journey’ and Managing My Money for Young adults' - have attracted over 375,000 registrations and substantial positive feedback. Education is central to improving financial capability and True Potential PUFin is in the vanguard delivering this to the public.

Martin Upton

Director of the True Potential Centre for the Public Understanding of Finance (True Potential PUFin)

13th May 2018

True Potential PUFin is based at the Open University Business School in Milton Keynes, UK

True Potential PUFin is the first and only personal finance research centre in the UK that has an active teaching programme freely available to the public. Supported by the University’s excellence in delivering distance learning, the Centre is uniquely positioned to develop the public’s financial capability and to research the impact and effectiveness of its education programme.

True Potential PUFin is supported by a five-year programme of financial support provided by True Potential LLP.

The views of True Potential PUFin academics do not necessarily reflect the views of True Potential LLP

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