A third of all adults in the UK are financially illiterate, according to a 2015 international study produced by Standard & Poor’s, Gallup, the World Bank, and George Washington University.
While the study’s results are https://www.ft.com/content/4b0f2656-8f99-11e5-8be4-3506bf20cc2b reported to show that the UK’s financial literacy is better than the global average, much is still needed to be done to tackle the growing financial illiteracy crisis in this country.
While little has been done by the government to address the problem, financial advisers can make a difference. To do so, some of the fundamental issues need to be understood.
1. Have-it-now mindset
Today’s technologies feed desire for instant gratification. Online shopping with next-day delivery and mobile phone transactions are just two examples of a lifestyle that prioritises current desires over planning for future needs. The mindset has led to a worryingly small percentage of adults having prepared for their retirement. Education on the importance of prioritising finances is crucial.
2. Blissful ignorance
Around 50% of millennials have nothing put by in the event of an emergency, and are ignorant of financial basics such as how mortgages, compounded interest and inflation work.
3. Inability to understand there is a problem
It stands to reason that a person who is financially illiterate is unlikely to approach a financial adviser for help – after all, if they don’t recognise the importance of long-term planning or the concept of spreading risk, why would they? Spreading public awareness of common financial problems in lay terms can help people recognise how they can take charge of their finances and when they need to turn to financial advice.
4. Perception of the finance industry
Ever since the financial crisis, the industry has worked hard to regain trust from the general public. Helping clients to understand the tools and resources advisers use, for instance, such as the financial adviser software from providers like https://www.intelliflo.com/ can help them understand why certain options might be better for them, rather than ‘prescribing’ a financial solution.
5. Risk to the economy
Widespread financial illiteracy inevitably leads to individuals not understanding the seriousness of their situations until it is too late and this has an undeniable impact on the economy. By tackling financial illiteracy, advisers can help their clients develop better financial skills to protect themselves, and consider more sophisticated products in the future.