I’ve not blogged before about subjects that bother me, but now I want to share a critique about a practice that is unhelpful to instilling financial literacy. I’m talking about flimsy and superficial research.

Don’t get me wrong; there is a place for casual research on financial literacy. We have used “pulse polls” to capture the mood of Canadians on financial matters and channel their perceptions to the media. Topical snapshot reflections of what is on people’s minds can stimulate interest in starting the real learning process.

In our view, however, too much research is done via “drive-by” omnibus studies that can’t produce meaningful findings on three to five questions. They merely scratch the surface or indirectly promote financial products and services. What Canadians need are real insights – not marketing that is masquerading as research. They need more in-depth studies to absorb knowledge and change behaviours.

Unfortunately, financial institutions don’t do or perhaps can’t release studies that might undermine their competitive advantage. As businesses, they must gain measurable financial benefit from their investments. Profit considerations affect the orientation of their research and how their findings are positioned. Unless it develops a market or drives business, etc., research isn’t done or doesn’t enter the public domain.

Investor Education Fund (IEF) does undertake background research to support its engagement efforts, which may not have news potential; however, we are committed to transparency and sharing all research that keeps financial literacy visible. We commission and post at least one major study to this website annually.For example:

• “Investor behaviour and beliefs: Advisor relationships and investor decision-making”(2012)
  –Advisors are key to investor decision-making

• “Investor knowledge: A study of financial literacy” (2011)
  – Financial literacy in Ontario is low

• “Advisors top source of information for older Canadians” (2010)
  – Most Canadians 34 and older use advisors to learn how to achieve financial security in retirement

Other reputable organizations that have been unaffected by revenue pressures have also sought a deeper understanding. Some notable examples:

• The Financial Consumer Agency of Canada (FCAC) – “The Future of Financial Education: Report on the 2011 FCAC–OECD Conference on Financial Literacy”

• Statistics Canada – “Canadian Financial Capability Survey”

• Research from FAIR (Canadian Foundation for Advancement of Investor Rights), IEF’s article “Money Market Funds: the zero-return dilemma” and the Canadian Securities Administrators report “2010 CSA Survey on Retirement and Investing.” All of these are posted to GetSmarterAboutMoney.ca.

Future financial literacy initiatives must be research based to be effective and credible. Quality studies by IEF and other trustworthy sources identify knowledge gaps, present themes in personal financial management and comprehensively investigate challenges and potential solutions. We need to know what needs to be done to do it right.

IEF will continue along this path: we urge other financial sector organizations to follow suit.

That’s my take. What’s yours?

Tom Hamza
President of IEF