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Results of consumer research for FINSIA

by Lewis Panther SA FIN | 07 May 2019

Consumer research for FINSIA shows overconfident bank customers have a misunderstanding of basic financial concepts.

The imbalance in financial knowledge is leading to a high level of vulnerability which the industry must tackle to have any hope of restoring trust. 
 
More than three quarters of consumers failed to grasp basic financial concepts like tax and inflation, yet almost two thirds are over confident in managing their own money. 
 
Chris Whitehead, FINSIA CEO, F FIN, said: “It’s alarming that 94% of those consumers surveyed who said they were confident in their finances had poor financial habits or a misunderstanding of basic financial concepts."
 
“It is clear consumers overestimate their ability to understand their finances, which means it is imperative for financial practitioners to be professional and ethical, demonstrating the highest standards of behaviour."
 
“FINSIA’s forensic examination of the financial landscape after the Royal Commission has revealed an alarming lack of financial understanding and a lack of trust between consumers and banks."
 
“Now more than ever, it is crucial that bankers have the ability to make competent ethical decisions when helping to manage a customer’s financial security, especially as one third of those surveyed rely on banks for sound financial advice. The fact that only 19% of consumers surveyed trust their banks proves there is a widening trust gap that needs to be filled now."
 
“It really does show that customers are caught between a rock and a hard place – the fact that they don’t trust their banks or have the financial capability to manage their own money puts them in a vulnerable and susceptible position.” 
 
The FINSIA Consumer Trust Survey showed that the already low level of trust dropped significantly by more than 50% (from 46% to 19%) in the last 12 months, coinciding with the Royal Commission.   
 
Whitehead added: “It is worrying to see the levels of consumer trust continuing to drop with more than half of them telling us they don’t believe the positive changes brought by the Royal Commission will last. Most believe banks will revert back to their old ways."
 
“That’s why FINSIA believes industry-wide professional standards of conduct is paramount in the effort to drive good behaviour and reverse the consumer trust deficit.” 
 
The survey revealed consumers are more likely to trust a bank with high professional standards, with this particularly prominent among young consumers. Three quarters of those new customers aged under 24 say they want their bank to have professional standards for all staff.   
 
The percentage of millennials that would swap banks to deal with more professionally qualified staff has risen from 19% to 24% in the past 12 months.
 
The same sentiment is felt by the majority of customers up to the age of 44 whose spending and investing is at its peak.  The number of consumers who said they would swap (30%) was an even more significant increase from last year. 
 
To ensure these standards are being adhered to and maintained, 81% of survey respondents believe it is important to have a professional body overseeing industry standards. 
 
“The FINSIA Consumer Trust survey is yet more evidence for banks that they will win customers with better behaved and professionally qualified staff,” adds Whitehead. 
 
FINSIA Consumer Trust Survey page 3

FINANCIAL LITERACY IN NUMBERS

1. An alarming 94% of those consumers confident with their finances show bad habits or a misunderstanding of basic financial concepts. 

2. Only 4% of all consumers are justifiably confident in their financial literacy.

3. Less than a fifth (19%) of those making the household spending decisions got all the questions correct in a basic financial literacy. 

4. Incredibly, 40% those who took part in the survey didn’t realise savings stuffed under the mattress would lose value over time because of inflation. More than half thought they would earn less overall if they had a pay rise putting them into a higher tax bracket.

5. Already low levels of trust have dropped even more significantly during the Royal Commission… by more than 50% - from 46% to 19%.

6. While trust in banks, bankers and financial services has dwindled further during the past 12 months, it’s not all bad news. Only accountants and doctors have greater levels of trust. Bank staff rank above lawyers, estate agents and car sales people.

7. Consumers have more trust in staff in junior, customer-facing roles, with 37% having a high level trust. 

8. At the other end of the trust index, the survey showed 39% of consumers had no confidence in head office and C-suite staff.

9. Almost a third (32%) of those surveyed felt they had received ‘bad’ advice from a financial services provider. Their belief that they got bad advice was that it was dictated by the employer and of benefit to the advisor.

10. More than half those surveyed don’t believe positive changes brought about as a result of the RC will last - with the majority saying banks will revert to their old ways.

11. The number of millennials who would swap banks to deal with more professionally qualified staff rose from 19% to 24% over the past year. 

Summary customer trust survey

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