Brokers must step up to improve financial literacy

by Julia Corderoy03 Dec 2015
Brokers have an considerable opportunity to improve Australia’s financial literacy after a recent survey revealed some worrying results about mortgage literacy.

According to a survey released by Gateway Credit Union in partnership with McCrindle, more than six in 10 mortgage holders surveyed (61%) said that they did not completely understand what a ‘split’ home loan was. Similarly, almost two thirds (65%) admitted that they did not fully understand the difference between ‘interest rate’ and a ‘comparison rate’.

Paul Thomas, the chief executive of Gateway Credit Union told Australian Broker that he wasn’t surprised by these statistics. 

“I am absolutely not surprised. The reality is that on the one hand we say that today’s consumers are financially literate and savvy and I understand that, but this survey clearly shows there is a critical mass of the populous that really need help and guidance when it comes to selecting a credit provider for a home loan.”

According to Thomas, mortgage brokers are in a prime position to help fill the education gap.

“I truly do believe that brokers have a fabulous opportunity in this area to help educate Australians and help them make informed decisions. It actually cements their role in this whole value chain.”

A broker’s role in financial literacy education, says Thomas, is to take the emotion out of financial decisions.

“We define financial literacy [at Gateway] as the ability to make informed judgements and effective decisions about the use and management of money,” Thomas told Australian Broker.

“The fundamental problem is that we have a head and we have a heart. Sometimes our head rules the decision that we make and sometimes our heart rules. I believe that a broker’s role is to ensure at all times that borrowers make decisions about financial transactions with their head – that they have the knowledge and the skills and the tools to make those decisions. 

“That is where brokers can assist customers to make rationally driven decisions.”