Plum challenges age-old wisdom on financial education at CMSF

2 April 2007

The Conference of Major Superannuation Funds (CMSF) held last week saw Plum's Senior Education Development Consultant Michelle Brown tackle the question of the importance of education versus financial literacy… outlining Plum's industry-leading approach to education. According to Plum's Managing Director Mike Fitzsimons, Plum's innovative approach to financial literacy and education for its members has had proven results, with member feedback and Plum's annual Super Fitness Survey showing its effectiveness.

'At Plum, we believe, through education, we can encourage our members to take control of their finances and therefore they will be more likely to be comfortable in retirement. The challenge has been, how do we communicate and get through to all of our different members?' Mr Fitzsimons said.

'For years people have talked about educating members and making them financially literate in terms of the demographics of their members. With our approach we've applied the latest behavioural finance principles that tells us member's learning needs vary according to their behaviours and values, not because of how old or how educated they are.

'As a result our education program caters to these differing money 'attitudes'. Those members who want to learn more are easy to cater to. However our research tells us that no matter what you offer members in terms of educational materials, a stubborn 40% of members won't plan for retirement. Rather than rail against this, or worse just speak to the 60% that do listen, we have come up with a program that caters to these individuals as well to help them save.'

Plum's Escalator Program, which has an 'opt out' element is one example of how Plum can work with a member's inertia to help them save. Providing a range of investment options, that take account of member investor profiles, is another.

'Increasingly the financial industry will need to rethink its approach to member education to target that 40% of members that are falling under the radar,' Mr Fitzsimons said.

'In fact, the Association of Superannuation Funds of Australia (ASFA)*recent pre-budget submission calling on the Federal Government to make it compulsory for employers to implement programs similar to Plum's Escalator Program, shows the increasing recognition in the super industry that we need to do more to help prepare our members for retirement.'

At the CMSF conference Michelle Brown was asked to address the following proposition: 'Do members need to be financially literate to appreciate the education they receive, or does that education start them on the journey to financial literacy?'

Ms Brown explained that behaviour and values – attitudes to money matters – are the key factors influencing the way members received financial education, challenging the accepted wisdom that says education material need only take into account a person's age, family situation, level of financial knowledge or exposure to education campaigns.

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