Brokers are in a unique position to educate those making significant financial decisions. Most of them aim to demystify financial jargon and ensure their clients understand their financial situations.
According to NAB research, younger Australians are reporting lower levels of financial education along with a higher risk of financial hardship, especially compared to their older counterparts. This underscores the importance of brokers helping clients improve their financial literacy.
According to NAB’s financial hardship survey, men between the ages of 50 and 64 (82%) and women over 65 (81%) had the highest levels of self-reported financial literacy, while women aged 18 to 29 (31%) had the lowest.
Suvidh Arora, the Chairman and Chief Options Officer at Cinch Loans, stated that he has observed that the “overall level of financial education is lower than ideal” and that brokers play a “very important role” in addressing this issue.
Mr. Arora mentioned that his company aims to “simplify the language” and educate their clients about the fundamentals of finance to be part of the solution.
“We take a comprehensive approach to educating and nurturing them right from their initial contact with us through negotiation and beyond, often discussing not only products and features but also strategies related to investment efficiency, wealth, etc.,” he said.
Mr. Arora noted that Cinch Loans uses videos, technology, and social media to provide content that resonates with the younger generation in an effort to engage with them. The company also aims to “start them early” by launching a campaign called “Cinch Savers,” encouraging young children to begin saving early.
The CEO mentioned the Cinch Academy, which he claimed would be the company’s “online learning management system aimed at enhancing levels of financial education by making all of this content easily accessible to anyone using the Cognizant client app, set to launch soon.” He also mentioned that the organization had previously conducted various educational sessions and webinars for clients and was looking to expand its offerings.
Danny Blair, a broker and multi-franchise professional at Aussie, stated on The Adviser Elite Broker radio that he and his teams actively engage with students in schools to enhance their financial education, which they have found to be lacking.
“I think one of the biggest issues I’ve found, perhaps starting early as a broker, is just the general lack of financial awareness among many people,” Mr. Blair said.
We learn the basics of math, English, and other subjects in school, but many people lack the skills needed to effectively manage their finances.
Mr. Blair gave the example of how his Mount Ommaney team visited a local high school and delivered a lecture to year 11 and 12 students on various credit options, as well as “real interest rates and their significance.”
According to seasoned finance broker Ben Robinson at Innovayt Finance, younger investors and first-time homebuyers, in particular, lack financial literacy.
Mr. Robinson mentioned that he always schedules a “strategy session” to ensure clients understand their current situation and discuss their current and future goals to ensure their “strategy is robust in the medium to long term.”
He emphasized the importance of brokers educating their clients because it provides them with a better understanding of “what we’re doing and why,” which makes them feel more in control of their financial situation.
Mr. Robinson continued to suggest that high schools should offer a financial education course. From ages 12 to 18, there should be a curriculum covering topics such as budgeting, living within one’s means, real estate investment, and understanding how and why credit reports are affected.
“I see too many young Australians with poor credit histories due to minor, insignificant issues that could have been avoided by understanding the basic indicators of credit reporting.”