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BLOG: Why adults need financial education too…

Andrew Townsley
Written By:
Andrew Townsley
Posted:
Updated:
10/12/2014

Personal finance will soon be part of the national curriculum but what about educating the adult population?

The Financial Services Authority’s Retail Distribution Review (RDR), which came into effect at the end of December 2012, aimed to ensure that consumers receive unbiased financial advice. Whereas previously some financial advisers would have received payment in the form of commission for the advice they provided, under RDR guidelines this is no longer allowed. So in a nutshell consumers now have to pay for professional financial advice.

While in many ways RDR is a logical step towards protecting the interests of consumers, less than a year after its introduction concerns are being raised about what its long term impact may be.

Yes transparency is vital; consumers need to know that their IFA is recommending a product because it suits their needs, not because they receive more in the way of commission from that particular provider.

However, consumers have become used to not paying an actual fee in exchange for advice. They understand what has changed and why, but they perhaps do not see why they should now have to pay IFA fees, or in many cases people cannot afford them. While over time consumers may start to accept this new situation, RDR might in fact result in many simply going it alone.

Our concern is that all consumers have the products that are best suited to their individual needs and understand what they are signing up to. Some people are more aware than others, or have more time to go through the small print with a fine toothed comb. Others though do benefit from talking through a product’s pros and cons with an expert.

Campaigners have achieved much in terms of promoting the importance of providing financial education within schools. It is important that children learn not just about managing a household budget, the implications of using credit and how to build up their savings, but also about the different types of financial products available and their advantages and drawbacks.

The introduction of RDR and the implications it may have in terms of fewer consumers seeking expert financial advice highlights the fact that financial education is something that would benefit adults too. But is this something that should be addressed by adult education providers, the Government or even banking and financial institutions?

We have recently launched a ‘Grow Your Own Savings‘ initiative – aimed at helping consumers to identify what kind of saving or investment product is best for them. We would like to see more providers launching similar schemes and feel that this could be a great help to consumers alongside a more structured, perhaps Government run national scheme.

For now it remains to be seen what the true impact of the RDR on consumers will be. If people cannot or will not pay a fee in exchange for advice however and financial education for all is not taken seriously, we may see more consumers taking out products that leave them worse off then they were before.

Andrew Townsley is chief executive of Kingston Unity Friendly Society