Financial Literacy Education

This section of the book will introduce the reader to the problem of consumer financial illiteracy. It will, first, provide a brief survey of national, regional and international debates on the growing phenomenon of financial illiteracy. It will then explain why financial illiteracy is closely linked to various social, economic, political and cultural disasters such as financial poverty, economic exploitation, social and financial exclusion, and, even, the global financial crisis. Finally, it will describe how financial education has come to be articulated as a vital, global measure against consumer financial illiteracy. The aim of the Introduction is to map out key assumptions that underpin the global movement of consumer financial education. In doing so, it will set parameters for the book’s core analysis, which is to complicate and challenge the regulatory rationale for using financial education as a measure of consumer protection in financial services markets.

“Consumer financial education as a novel edu-regulatory technique” maps out academic literature on sociology of indicators, social studies of finance and legal scholarship on financial literacy education. Borrowing insights and observations from this literature, the chapter introduces two novel, conceptual frameworks that are used throughout the book to examine the financial education project. The concept of “edu-regulation” is developed to analyse and consider a distinct, legal regime designed in the UK to govern consumer behaviour and consumer markets through the use of information, education and advice. The concept of edu-regulation emerged as a result of careful and detailed scrutiny of different financial education programmes rolled out in the UK. It helps to theorise various financial education programmes adopted by the UK’s policy makers and financial regulators with an aim to police and regulate household financial decision-making. The chapter’s key argument is that these edu-regulatory policies and programmes are used to expand consumer access to financial information, financial education and financial advice. Naming this process “the democratisation of financial knowledge”, the chapter introduces another conceptual framework. The democratisation of financial knowledge as a concept is used in the book to theorise ever greater broadening, deepening, and expansion of consumer access to financial knowledge. This conclusion is of particular importance since the key aim of this concept is to shift the academic debate on and analysis of financial literacy education from access to finance to one on access to financial knowledge. This concept provides analytical space to interrogate and question the neutrality, universality and objectivity of financial knowledge. It provides a means to question the ways in which financial knowledge participates in governance of consumer financial markets.It is suggested in this chapter that the project on consumer financial education aims to democratise consumer access to highly restrictive and problematic financial knowledge. Various financial education programmes and policies do not develop and facilitate access to all kinds of financial knowledge. Instead, the financial education project builds access to financial information, financial education and financial advice largely oriented towards consumer activation and integration in financial markets.

“Pension privatisation and the emergence of the financial education project in the UK” provides an introduction to pension privatisation and pension financialisation in the UK. The chapter situates edu-regulatory programmes and policies within a broader historical, political and economic context. It describes how the Conservative government and, later, New Labour promoted private pensions and encouraged people’s direct and indirect participation in financial services markets. The chapter identifies and examines two major failures: pension mis-selling scandals of the late 1980s and the early 1990s, and the pension gap. It shows how the consumer was re-imagined and re-conceptualised into a responsibilised subject, who lacks information and knowledge to participate effectively and safely in the financial services market. The chapter’s principal argument is that consumer financial education was introduced by New Labour to respond to the failures of pension privatisation. Besides tax-favoured reforms in the pensions market, financial literacy education was used by New Labour to strengthen the processes and practices of financialisation. The democratisation of consumer access to financial information, financial education and financial advice was articulated by the UK government and the FCA as a necessary project for consumer protection as well as for the smooth and stable functioning of the social welfare system.

“A financial literacy indicator—measuring consumer financial knowledge, skills, and attitudes to money” presents the financial literacy measurement project. This project is one of the core edu-regulatory programmes in the UK. The chapter describes and explains the ways in which consumer financial knowledge, financial information and financial skills came to be measured, compared, assessed and ranked by the financial capability measure. It shows how the construction of the financial capability measure has created a new phenomenon—levels of consumer financial capability. It further demonstrates that this measurement exercise has divided people’s day-to-day financial decisions and financial practices into two groups: financially literate and financially illiterate. The chapter suggests that this categorisation grossly simplifies people’s experiences with finance and financial markets. Consumer financial literacy levels are mainly and exclusively defined through consumer ability to actively and safely participate in the financial services market. The argument is put forward that this conceptualisation strips the socio-economic, political and cultural contexts away from the financial literacy standard and fails to acknowledge its relational dimension.

“Personal finance education at English schools” analyses another edu-regulatory programme—personal finance education at school. To do so, it looks at the Personal Finance Education Group (Pfeg). The Pfeg leads the national campaign to educate children across England in finance. Its campaigns and programmes are endorsed and financially supported by the UK government and the Financial Conduct Authority. The chapter examines the structure, organization and activities of the Pfeg, to demonstrate the government’s and the Financial Conduct Authority’s complex and challenging task to bring personal financial education to English schools. It argues that the project of school financial education as run and operated by the Pfeg celebrates the interests of the finance industry. The chapter exposes a deep tension within this project, where the interests of the financial sector are not easily and comfortably aligned with the interests of the schools, children and their parents. This tension is further examined through the analysis of educational programmes and materials produced by the Pfeg. The principal contention of the chapter is that the Pfeg’s educational programmes and projects fail to deliver well-balanced and fair finance education to English schools. Instead, these educational materials are used by large financial firms to market and sell their financial products and services to existing and prospective consumers: teachers, children and their parents.

“Edu-regulating consumers through access to financial advice” introduces the third edu-regulatory programme on consumer financial education. It examines the development of a regulatory framework for the provision of financial advice. The chapter shows how legal reforms and changes to the regulatory framework for the provision of financial advice facilitated the democratisation of financial knowledge. Specifically, it describes how the UK government and the FCA have created two distinct legal regimes for the provision of financial advice. Reforms of the regime for regulated financial advice were largely inspired by many mis-selling scandals that caused significant consumer detriment. Therefore, to protect consumers from the provision of poor or low-quality financial advice, the FCA has imposed certain restrictions on and requirements for financial advisors. This reformed market for regulated financial advice was later used by the financial regulator as an important measure of consumer protection. Identifying certain financial markets as complex and particularly risky to consumers, the FCA has made the provision of regulated financial advice to consumers compulsory.In addition to that, concerns over consumer financial exclusion have galvanised and inspired the creation of a different legal regime for the provision of generic financial advice which was not regulated. To respond to problems of lack of or inadequate engagement with financial markets as well as people’s financial poverty, the UK government and the FCA created the Money Advice Service (MAS). As a part of the new regulatory framework for the provision of generic financial advice, the MAS was expected to integrate more consumers into the financial services market. Free of charge and easily available access to financial advice was seen to shape consumer need for financial products and nudge them towards certain financial decisions. The development of both regulatory regimes on the provision of financial advice, it is argued, is legitimised by discourses concerning consumer financial illiteracy. In other words, the democratisation of regulated as well as generic financial advice is by and large supported and justified by the need to influence and perhaps change the ways in which consumers interact with financial markets. The chapter suggests that both regulated and deregulated models represent a decontextualised understanding of people’s financial decision-making. These regimes embody an assumption that consumer access to expert advice or greater integration into financial markets would empower consumers and help them enjoy the advantages of financialisation. This regulatory approach is exclusively designed to address consumer informational vulnerability. However, this perspective on consumer decision-making ignores and fails to properly account for factors other than financial information and financial knowledge that often determine people’s choices. As such, this mis-conception of consumer financial decision-making used by both regimes exposes serious limitations to effective consumer protection via democratised access to financial advice.

“Financial crisis and the Money Guidance Service: building consumer financial resilience” continues to explore the third edu-regulatory programme. Specifically, it pays particular attention to the activities and operations of the MAS. The chapter examines various forms and the content of financial advice materials provided to consumers by the MAS The suggestion is made that the MAS aims to build and strengthen consumer financial stability and ability to keep up with financial commitments. Drawing from social studies of finance, the chapter argues that the conceptualisation of household financial instability as embraced by the MAS is highly decontextualised and problematic. As such, its services are not targeted at all consumers but rather at those who are most likely to experience financial instabilities in their lives, and therefore, pose greater risks to effective and safe functioning of the global financial system. The chapter concludes by stating that the democratisation of financial knowledge through the provision of money guidance seeks not only to recruit people into financial markets (as demonstrated in previous chapters of the book) but to stabilise and discipline their financial behaviour once they have entered the market.

The Conclusion does more than synthesise the key arguments presented in the book. It explains the importance of my research findings to our day-to-day lives. Here I argue that the project on financial education ignores the complexity of consumer day-to-day financial decision-making. The financial education project assumes that greater consumer access to information and education on money matters will help us to better navigate financial markets and make appropriate and prudent financial choices. However, this approach simplifies our financial decision-making and ignores the socio-economic, cultural and political environment within which we make our choices. As such, consumers who, for instance, fail to save money for their retirement might do so not through lack of financial education but rather because of lack of stable income, which prevents them from effective retirement planning. This finding is of particular importance to all of us since the current focus on financial education as a tool for consumer protection shifts regulatory and policy focus from structural problems present in financialised, political economies to individual responsibility. More importantly, these financial education initiatives and programmes mis-attribute various socio-economic problems to people’s lack of understanding or inability to successfully navigate the financialised world. Contrary to what has been suggested in the conventional literature, financial education largely fails to strengthen consumer protection or reduce consumer exposure to financial risks. In fact, financial education contributes to further marginalisation of consumers who are the least capable of managing their financial and economic lives through mere information, education and advice.