To say that all agents – consumers and financial institutions – only have to gain from promoting the levels of financial literacy in Portugal is an idea that has already become common sense. The first international conference of the National Financial Training Plan, organized today by the National Council of Financial Supervisors (which includes the Bank of Portugal, the CMVM and the ISP) has exposed the initiatives that have been put in place to improve the level of financial knowledge of the Portuguese, but also made reflections on the work that still needs to be done in this area. And, from the words of the supervisors who attended the conference, there is still much to be done.
According to the Governor of the Bank of Portugal, Carlos Costa, it is necessary “to ensure that savers when they make an application know the risks they are running. Savers and investors have to realize that a high return corresponds to a higher level of risk. Which does not always happen. ” The governor of the Bank of Portugal also stressed the importance of investors in managing their risk because they may not have the income or assets to absorb the risk assumed.
Bet on new tools to reach more people
Carlos Costa also stressed the importance of the role of the media to the success and effectiveness of the financial literacy plan. “Communication is a vital element in getting the message across.” In this sense, and in order to get the message to consumers more effectively, the Governor of Banco de Portugal has advanced that the Todos Contam Portal will have an e-learning platform to allow greater interaction between consumers and agents who are committed in the promotion of financial literacy. The head of the Bank of Portugal said that supervisors are also analyzing the potential of other tools such as social networks and educational games as vehicles for the financial training of consumers.
This would be one of the possible ways to bring financial literacy to the younger generation – a target audience for the National Financial Training Plan. The Governor pointed out that he will continue to focus on actions for this public in schools and, ideally, in universities. And it explains why: “Even among adults with higher education the degree of ignorance of the functioning of financial products is high.”
But young people are not the only target audience for financial literacy. Carlos Costa said that “financial training for companies is necessary” and stressed that “it is necessary to intensify training among the most vulnerable social groups”. And in this field, one of the initiatives that is highlighted this year is the network of indebted consumer support. At the conference, Teresa Moreira, director general of the Consumer Directorate General, said that the purpose of this network is to support consumers in regularizing credit default situations. “It is a qualified support and it is important to emphasize this characteristic especially when we are facing people in a fragile situation”. Teresa Moreira said that the network – announced last year but regulated only earlier this year – counts on the partnership of 14 recognized entities that provide support a little throughout the country.
Giving more information is not a guarantee of effective financial training
One point that stood out from all the interventions of this first international conference of the national financial training plan is the evidence that it is not enough that clients should be provided with information leaflets on financial products to improve literacy levels. Information needs to be made more transparent and the way information disseminated is improved. Carlos Alves, of the CMVM – in addition to announcing the launch of a new simulator of costs and bond yields – recalled that in the past there was the idea that it was enough to give a lot of information to people to make the most adequate financial decisions. After all, it’s not like that. “It is not enough to give information,” he said, highlighting the three key drivers of an effective financial education plan: information, knowledge and behavior.
The same line of thought was put forward by Andre Laboul, president of the International Network on Financial Education. This person presented a picture of what is being done a little around the world in the field of financial education. “The passage of information is not enough. It needs to reach people and they understand it. ” Laboul also defended the existence of a trilogy in this sector: financial education, financial inclusion and consumer protection.