Financial firms need to build their customers’ financial literacy

Financial illiteracy is by no means a new problem. But the Covid-19 pandemic has exacerbated and exposed vulnerabilities and inequalities within our society, including the wide divide between those who know how to manage their finances and those who struggle.

If collective action is not taken by the public and private sectors to close these gaps, we will see even more widespread systemic inequalities in Britain and elsewhere.

The pandemic has revealed a hard truth for many; that, around the world, access to financial education and the security it offers has been precarious for many years.

In February 2020 – before the pandemic took hold in the UK – the country’s Financial Conduct Authority found that 57% of adults surveyed felt nervous, overwhelmed or stressed when talking to providers financial services, or had difficulty finding appropriate financial services. products or services. Some 37% found it difficult to evaluate financial products or found it difficult to shop.

June Felix, Global Managing Director of IG Group: “People need the right tools to be able to understand the opportunities and risks to manage their money and make their money work for them”

Several factors have contributed to this worrying trend. They include changes in pension funding, following the shift from defined benefit (DB) pension plans to defined contribution (DC) plans.

These are compounded by changes in consumer habits, with people moving away from using cash in favor of short-term and long-term credit products. Meanwhile, the number of savings and investment choices continues to grow, with options ranging from simple to complex.

Simply put, while demands on the individual to make critical financial decisions have increased (and show no signs of stopping), supportive financial education to inform decision-making has not kept pace. rhythm.

As a leader in the financial services industry, I have seen these changes occur as the global financial environment transforms at breakneck speed, supported by the rapidly accelerating use of technology.

For Millennials and Generation Z, retirement will seem like a distant prospect, but the truth is that many are unprepared for this reality. Retirement planning has shifted entirely from the responsibility of employers and governments to that of the individual.

According to the Pensions Policy Institute, a leading retirement research organization, the closures of defined benefit plans have reduced the number of private sector employees covered by defined benefit plans. The number of active members covered by DB schemes has increased from 3.5 million in 2006 to approximately 1 million in 2020.

The closure of these defined benefit plans in favor of defined contribution plans places the responsibility for long-term investment planning on people who are not currently prepared to manage these long-term risks.

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As the way we work evolves, people are increasingly exposed to “retirement savings opportunity gaps”, with jobs in the gig economy and zero-hour contracts no longer available. generally offering no retirement benefits. Similarly, most people now change jobs several times in their lifetime, a trend that does not create natural opportunities to save regularly for retirement.

While the responsibility for retirement planning has been largely shifted to individuals, a prolonged low interest rate environment has simultaneously eroded people’s savings. This prompted them to take a more active look at their finances in general.

As investors today have more choices than ever, fueled in large part by globalization and technological advancements, people need the right tools to be able to understand the opportunities and risks to manage their money and make grow their money.

Private and public sector organizations must act.

The Chinese have an old proverb for crisis: be aware of the danger but recognize the opportunity. As I contemplate the world we live in today, this truth makes sense to me when I consider my upbringing and the responsibility I have as a leader in financial services. Although statistics demonstrate the widespread lack of financial literacy, there is a great opportunity for the public and private sectors to help raise levels of collective financial literacy.

Support for improving financial literacy requires a two-pronged approach. First, companies that offer financial products must also provide transparent educational materials to help customers make more informed financial decisions.

The journey to proficient financial literacy should be promoted as an essential part of customer service and embedded in the corporate culture. Regardless of the products or services offered, companies need to think about how these offers will be received in the market and who will use them.

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Additionally, organizations should integrate financial literacy into their ESG (environment, social and governance) strategy. Resources should be allocated to independent programs that support financial literacy at all stages of life, from youth to adulthood.

My passion for education, influenced by my childhood as a Chinese-American, was a catalyst for me to personally become a founding donor of the Financial Times Financial Literacy Inclusion Campaign.

Working at a publicly traded company, my colleagues and I looked at how to evolve our ESG strategy to address social issues, with the goal of increasing resources for independent education-focused programs.

For example, IG Group has an existing partnership with Teach For All, an international non-profit organization that seeks to improve basic education. Here in the UK, we also partner with Teach First, providing the organization with funds and access to our people and their knowledge of the financial markets. These programs are just the beginning, as we evolve to directly support more financial literacy programs in the coming months.

At the same time, we have created a variety of online educational resources for our clientele, ranging from technical education to macro market analysis for people at different stages of their investment knowledge.

We also take steps to ensure they have a level of understanding of financial products before they use the more sophisticated products on our platform. It should be recognized that some products carry more risk than others. The critical issue is to ensure that potential investors are properly informed before they begin their foray into online trading.


We recognize the need to be collaborative. The private sector needs to work together and reinforce the efforts of public sector organizations in support of financial literacy.

Not all products on the market will suit everyone. However, allowing people to make choices based on a solid foundation of education will make a huge difference in improving the overall financial health, not just of individuals but of society as a whole.

Technological innovation and the investment landscape will continue to evolve apace. Giving people the knowledge they need to take advantage of these changes has the potential to be transformational.

June Felix is ​​Global Managing Director of IG Group

Sarah J. Greer