Taking action on financial literacy

The weak state of financial literacy in Canada is well documented. Climbing personal debt and declining savings levels show that Canadians spend more than they earn, and most live paycheque to paycheque. The research tells us that a majority of workers, at all income levels, lack the basic financial knowledge and confidence needed to deal with complex financial issues and make sound financial decisions.

All of this adds up to financial stress that has a direct impact on the workplace, where Canadians earn their income and are required to make important decisions related to their benefits, savings and retirement plans. And that stress is rising. According to a leading employee assistance program (EAP) provider, two-thirds of its calls in 2010 were for assistance with personal debt and credit issues. Statistics Canada estimates that older workers have been increasingly delaying retirement since the mid-1990s, and a growing number of retired Canadians are re-entering the workforce, typically in part-time jobs.

Return on your investment
Unfortunately, few organizations put resources into financial education that is not directly tied to retirement benefits. However, greater employer commitment to broader financial education programs can have a real payoff. Like group insurance benefits programs, financial education can directly help employees to mitigate and manage financial risk. Such education can help reduce the financial distractions that can undermine productivity, cut the risk of litigation by disgruntled pension plan members, encourage a culture of self-reliance and flexibility, and increase alignment with organizational values.

The greatest need is in subject areas that are unrelated to workplace benefits, such as managing credit and debt, saving and borrowing for the purchase of a home, saving for a child’s education and reducing taxes. The challenge is that such education programs are most welcomed by financially savvy workers who are already likely to be savers and least welcomed by the lower-income workers who would benefit the most.

Customized approach
Organizations have had mixed success with a range of delivery methods that includes print media, workshops and seminars, one-on-one counselling, EAP counselling, online tools and self-serve tutorials. Developing and implementing a successful financial education program requires a customized approach to suit the unique conditions in your organization.

Knowing what will work for your employees requires a thorough understanding of the needs and preferences of your target audience. An older employee segment may respond best to personal retirement counselling. Gen Xers may prefer a group discussion of their credit card experiences via a social media channel. Workers in low-skill, low-paying jobs may respond better to an education program with built-in incentives. New immigrants with low English literacy may need help understanding and trusting Canadian financial products and financial institutions.

An ongoing process
What won’t work are quick hits. One-off workshops, seminars and isolated communications will not lead to changes in behaviour. It takes an ongoing investment in learning and a commitment to making financial education a key part of your organizational culture. The active involvement of senior leadership is the key to success. Leaders can signal the importance of financial education to the line managers and supervisors whose support is critical. Leaders can also drive the recognition and rewards that build momentum.

Keep it affordable
Cost is a deterrent for many organizations. To help keep your costs low, consider leveraging the capabilities of your pension plan’s administrators or investment fund managers. Many have education specialists and financial advisors on staff who can offer educational services—without charge—to larger clients or to those with pension assets above certain thresholds.

Keep in mind, these third-party providers may be selling commissioned products or are gathering assets that will generate fee income. Before handing them direct access to your employees and plan members, you can (and should) insist that these experts provide employees with full disclosure of how they are compensated. The information and advice they provide should be objective and non-biased, and they should encourage comparison shopping for financial products and services.

Bias-free information
If managing liabilities is a primary concern, make sure you are providing access to objective, unbiased information. In this case, you may prefer to seek out independent financial education specialists, consultants and financial advisors who offer educational expertise and advisory services on a fee-only basis. They are typically paid directly by your organization, have no financial stake in the information or advice they supply, and are more likely to offer it bias-free.

Regardless of the type of support you engage, your responsibility is to protect employees and plan members from educators and advisors who might use their position to steer people into inappropriate products or investments with excessive fees.

Ensure it’s effective
The effectiveness of financial education can be measured not only by how employees are engaged and participating in your programs, but by the changes in their behaviour. To ensure your program has traction, it’s important to include elements of employee input, follow-up and measurement. Assemble an advisory group representing your target audience to help design, test and provide feedback on your program. Post financial worksheets, tools and information on a website, and track their usage. And survey your employees to identify how the program has had an impact.

The secret to a successful financial literacy program is to regularly assess what’s working and what’s not, and to try new ideas and continuously improve upon them.

Gerry Chiasson is a senior communications consultant with Eckler Ltd. gchiasson@eckler.ca