Literally, It's All About Literacy.
April is financial literacy month in the US so we thought we’d share some data and thoughts.
By Josh Book
The wealth management industry has mobilized significantly the past years. We’ve seen upstart firms develop new types of products and services, incumbents are investing in newer and more modern ways to provide products and services to consumers and none-traditional financial services firms bump into consumer facing banking arenas. In short, it’s never been a better time for absolutely anyone to start putting money to work for them and their future selves! And while we’ve seen increases in both awareness and consumer participation in digitally led saving and investing services there hasn’t been the rush to digital once anticipated and which many business cases were built on. Why?
Perceptions are complex creations of “data” points and experiences developed over time. They are powerful. They are also shape-able. The data shows that North American consumers identify perception led barriers to digital wealth advice - with some surprising findings.
It is alarming that nearly half of all digital wealth non-users in Canada (47.1%) and the US (49.8%) report not having “enough money to contribute to investing.” Though it’s not surprising to find this expressed by those in the lowest income (<$50K) bracket, when we unpack the data further we see that the feeling persists even among those with $100K+ annual income, which is both surprising and worrisome. People simply haven’t learned the value of time and the correct behaviors to establish a stable and long-term financial wellness regimen.
Behavioral finance study has resulted in much writing about consumer choice variables. Bottom line is, humans find it difficult to delay gratification today for comfort tomorrow. We also are very skilled at perceiving a “more optimal” future scenario that will trigger the time to start saving/investing. In other words, we can justify procrastination incredibly well. Nothing new here. Our empirical and on-going study of the evolving wealth management space helps us understand that while all this work is being done to create greater access, reduce consumer costs, and influence behaviors is aimed at a vast majority of people who have never been meaningfully engaged by the wealth management business before. This points to a vast opportunity for those firms that can bridge the knowledge chasm with consumers.
We need meaningful and INNOVATIVE financial literacy efforts that go beyond the usual espousing of saving/investing merits or “salesy” and jargon heavy product and service campaigns. Instead, countries and firms that find ways to connect deep within peoples’ emotions and belief systems will gain an edge. It’s never before been better for people of all income levels to start improving their future financial lives - they all just need a lot more help to shift perceptions and behaviors.
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