Financial Literacy and Behavioural Change

REPORT 230
Financial literacy and

behavioural change
March 2011
About this report

This report, which was compiled in 2008 and updated in 2010, takes stock of
what ASIC and others have learned about financial literacy to date. In
particular, it covers available research findings about:
what people know and dont know
what people do, dont do and why, and
how to change behaviour.
REPORT 230: Financial literacy and behavioural change
About ASIC regulatory documents

In administering legislation ASIC issues the following types of regulatory
documents.
Consultation papers: seek feedback from stakeholders on matters ASIC
is considering, such as proposed relief or proposed regulatory guidance.
Regulatory guides: give guidance to regulated entities by:
explaining when and how ASIC will exercise specific powers under
legislation (primarily the Corporations Act)
explaining how ASIC interprets the law
describing the principles underlying ASICs approach
giving practical guidance (e.g. describing the steps of a process such

as applying for a licence or giving practical examples of how
regulated entities may decide to meet their obligations).
Information sheets: provide concise guidance on a specific process or

compliance issue or an overview of detailed guidance.
Reports: describe ASIC compliance or relief activity or the results of a
research project.
Disclaimer
This document is a research report and does not contain ASIC policy.
Australian Securities and Investments Commission March 2011
Page 2
Contents
Key findings ...................................................................................................4
A
Background to the report ......................................................................6

Purpose....................................................................................................6
Method .....................................................................................................7
What is financial literacy? ........................................................................7
What Australians know .......................................................................10

Assessing financial knowledge ..............................................................10
Overall level of financial knowledge ......................................................12
Knowledge by product/activity ...............................................................18
What people do ....................................................................................32

Common barriers ...................................................................................32
How to change behaviour ...................................................................48

Evaluation to date ..................................................................................48
Campaigns (key social marketing principles) ........................................53
Programs ...............................................................................................62
Conclusion .............................................................................................69
Appendix 1: Detailed tables .......................................................................70

Appendix 2: Statistics on access to advice ............................................106
What percentage of Australians use a financial planner? ...................107
What percentage of investors use a financial planner? .......................110
Who does and doesnt use a financial planner? ..................................114
Why dont people use financial planners? ...........................................120
Key terms ...................................................................................................124
References .................................................................................................126
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Key findings
What Australians know
Australians have differing attitudes to financial matters and varying

levels of financial knowledge.
Overall, people seem to be more knowledgeable and confident about

simple, familiar finance topics (e.g. budgeting, credit, savings and debt)
and less knowledgeable and confident about more complex, unfamiliar
topics (e.g. investing, superannuation and saving for retirement).
While they differ in terms of scope, most of the local studies seeking to
measure financial literacy collect information via surveys. Some rely on
subjective tests, some on objective tests and others on both.
Recently there has been growing recognition of the value of using both
objective and subjective tests because they help us identify gaps
between what people believe they know and what they actually know.
What people do
At a time when consumers are being asked to make more financial

decisions than ever before, the environment in which they are making
those decisions is becoming increasingly complex.
Knowledge alone is not enough. People dont always act in their own
best interests (e.g. by not engaging at all or by making bad decisions).
Behavioural studies and ASICs own research identifies a range of related

barriers that prevent people from making good financial decisions. These
include information and choice overload, complexity and uncertainty, time
effects and pressures, over (and under) confidence, self-control and
framing (i.e. how information is presented).
Research in this area, particularly applied research in real financial

settings, is still developing. More (and better) research is necessary to
understand the drivers of action/inaction.
How to change behaviour
Although the financial literacy movement has gained momentum, there

remains little reliable, conclusive research about whether financial
literacy campaigns and programs work (i.e. whether they result in
sustained changes in behaviour and improved financial outcomes).
Best-practice principles for program and evaluation techniques are still

developing, and it is widely recognised that both are inherently difficult.
In the interim, the established principles of social marketing, frequently

used in health and environmental fields, provide a practical big picture
framework for financial literacy-based behavioural change initiatives.
Page 4
Figure 1: The financial literacy environment
Less confident/
knowledgeable
Investing
Superannuation
Saving for retirement
More confident/
knowledgeable
Budgeting
Credit
Savings
Debt
Key social marketing

principles that can
help change behaviour
Take advantage of
existing campaigns
Target the people most

ready for action
Promote single, doable

behaviours
Identify and remove

barriers
Common barriers
to making good
financial decisions
Bring real benefits into

the present
Highlight costs of
People are normal
competing behaviours
not rational
Promote a tangible
Information and
object or service
choice overload
Consider non-monetary
Complexity and
incentives
uncertainty
Have fun with messages
Time factors and

pressures
Use media channels at

the point of decision
making
Over (and under)

confidence
Get commitments and
Self-control
pledges
Framing (how
information is
presented)
What people
think they know
Use prompts for

sustainability
is greater than
What people
actually know
Page 5
Background to the report
Key points
The primary aim of this report is to take stock of what ASIC has learned
about financial literacy to date to inform the national financial literacy
strategy.
Most of the information in this report was collected in 2008 from Australian
and international sources, including public websites, journal articles and
unpublished research reports. The report was then updated in 2010.
Financial literacy means different things to different people.
Purpose
On 1 July 2008, the functions of the Financial Literacy Foundation moved to
ASIC.
The primary aim of this report is to take stock of what we have learned about
financial literacy to date to inform the national financial literacy strategy. In
particular, we seek to understand:
what people know and dont know (see Section B)
what people do, dont do and why (see Section C)
how to change behaviour (see Section D).
We then want to use this information to help guide our financial literacy
priorities and program design.
We believe that improving knowledge alone, however, will not be enough to
achieve better financial outcomes for all Australian financial consumers and
retail investors.
As one response in the strategy, we are looking to develop a generic
advice/guidance service for the mass market, which would give Australians
access to free, quality independent financial guidance and back-up aids to
help them implement and stick to the plan.
In assessing the need for such a service, this report also covers:
who does and doesnt use a financial planner
why more people dont use financial planners.
For a summary of available research about the use of financial planners, see
Appendix 2.
Page 6
Method
Two ASIC researchers compiled this report in 2008. The information
collected was sourced from public websites, journal articles and unpublished
research reports. A third ASIC researcher updated the report in mid-2010.
The scope of the information presented is contained in the following ways:
The researchers mostly limited their information search to research

conducted in the last five years, extending it in special cases (e.g. where
there were gaps in more recent sources or the research was groundbreaking).
Section B was mainly limited to Australian sources while Sections C and D

included international sources, particularly where there were gaps locally.
For reasons of brevity, Section C focuses on a few core pieces of

research. However, the background reading for this section
encompassed a more comprehensive body of research.
Section D primarily focuses on finance-based and generic behavioural

change references (although limited reference is also made to examples
from the health and environmental fields, where considerable social
marketing work has occurred).
What is financial literacy?

Financial literacy means different things to different people, and this is
reflected most clearly in the many definitions used in the literature. For
some it is quite a broad concept, encompassing an understanding of
economics and how household decisions are affected by economic
conditions and circumstances. For others, it focuses quite narrowly on basic
money management: budgeting, saving, investing and insuring
(Worthington, 2006, p. 4).
Those who use the various terms financial literacy, financial education and
financial capability do not always define what they mean by these terms.
Financial education is the terminology used by most jurisdictions when
framing initiatives as solutions to low financial literacy (exceptions include
the United Kingdom, which focuses on financial capability). The
Organisation for Economic Co-operation and Development (OECD) (2005)
broadly defines financial education as follows:
Financial education is the process by which financial consumers/investors
improve their understanding of financial products and concepts and,
through information, instruction and/or objective advice, develop the skills
and confidence to become more aware of financial risks and opportunities,
to make informed choices, to know where to go for help, and to take other
effective actions to improve their financial wellbeing. Where:
information involves providing consumers with facts, data, and
specific knowledge to make them aware of financial opportunities,
choices, and consequences;
Page 7
instruction involves ensuring that individuals acquire the skills and

ability to understand financial terms and concepts, through the
provision of training and guidance; and
advice involves providing consumers with counsel about generic
financial issues and products so that they can make the best use of the
financial information and instruction they have received (pp. 1314).
In an Australian context, Fear (2008) has described a three-fold definition of

financial literacy derived from the work of the United States Federal
Reserve:
(1) being knowledgeable, educated, and informed about managing
money and assets, banking, investments, credit, insurance and taxes;
(2) understanding the basic concepts underlying the management of
money and assets, such as the time value of money in investments and
the pooling of risks in insurance; and
(3) using that knowledge and understanding to plan and implement
financial decisions (Hogarth, 2002, cited in Fear, 2008, p. 12).
Fear highlighted the importance of (3) in particular, because it refers to the

need to translate knowledge into action. Fear argues that this transition has
an emotional, psychological dimension, as well as a rational, cognitive one:
How well they are able to do this depends on both the cognitive elements
of financial literacy (e.g. do they understand the relevant financial
concepts?) and the psychological elements (e.g. do they enjoy making
financial decisions or find it unpleasant?) (Fear, 2005, p. 12).
In Australia, the survey of adult financial literacy by the Australia and New
Zealand Banking Group Limited (ANZ)1 has been the first and largest
national survey used to find out the financial literacy levels of all
Australians. The ANZ survey defines financial literacy as the ability to
make informed judgements and to take effective decisions regarding the use
and management of money (2008, p. 6). The study argues that high levels of
financial literacy enable people to:
Make informed and confident decisions on all aspects of their budgeting,
spending, saving and planning for the future as well as on their use of
financial products and services such as everyday banking, borrowing and
investing (ibid.).
Other observations about financial literacy have focused less on the

practicalities of dealing with money and more on making better choices and
setting appropriate goals:
Financial literacy is not just about the mechanics of checking bank
accounts, or even budgeting for future savings. The definition can be
expanded to include learning about selecting between a multiplicity of
choices, setting personal financial goals, and reflecting on values about
money (Criddle, 2006, p. 4).
ANZ (2008), ANZ (2005), ANZ (2003).
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The definition used for the purposes of the National Consumer and Financial
Literacy Framework, which guides the teaching of financial literacy in
Australias schools, is:
Consumer and financial literacy is the application of knowledge,
understandings, skills and values in consumer and financial contexts and
the related decisions that impact on self, others, the community and the
environment (MCEECDYA, 2009, p. 1).
Finally, some have noted the dual responsibility of governments, industry

and others to both enhance peoples capacity to understand information but
also to ensure that their information matches peoples capacity to
understand it (Fear, 2008, p. 56).
Page 9
What Australians know
Key points
Australians have differing attitudes to financial matters and varying levels of
financial knowledge.
Overall, people seem to be more knowledgeable and confident about
simple, familiar finance topics such as budgeting, credit, savings and debt,
and less knowledgeable and confident about more complex, unfamiliar
topics such as investing, superannuation and saving for retirement.
While they differ in terms of scope, most of the local studies seeking to
measure financial literacy collect information via surveys. Some rely on
subjective tests, some on objective tests and others on both.
Recently there has been growing recognition of the value of using both
objective and subjective tests because, among other things, they help us
identify gaps between what people believe they know and what they
actually know.
In the Australian population aged 14+:

96.8%
67.4%
63.3%
37.8%
have a deposit account

invest in superannuation or annuities
have a major card (credit, debit or charge)
have a loan (e.g. home loan, mortgage on investment property,
bridging loan, home equity loan, personal loan, lease, etc)
21.1% directly own shares
10.0% have invested (managed investment/superannuation) through a
financial planner/adviser
4.7% invest in managed investments
(Roy Morgan Research, 2010a, 12 months to March 2010, people aged 14
and over).
Assessing financial knowledge

What is knowledge?
When describing peoples knowledge of financial products and services,
researchers use terms such as ability, understanding, attitudes,
awareness and skills interchangeably.
The word know, in the Australian Oxford Dictionary (2006) is defined as:
1have in ones mind or memory as a result of experience, learning, or
information. 2Feel certain. 3Recognise (a person); have had social
contact with; be familiar with (a place). 4Recognise with certainty. 5
Understand and be able to use (a subject, language or skill). 6
Experience; be subject to (p. 460).
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How is knowledge assessed?

Research assessing peoples level of financial knowledge ranges from largescale financial literacy surveys to smaller-scale industry studies focusing on
specific financial products or services. Similarly, while some studies
examine the general population,2 other studies examine specific target
groups.3
The available studies have used various methods to measure peoples level
of financial knowledge, most commonly via survey instruments such as
phone questionnaires.4 Within these surveys, literacy levels are measured via
subjective, objective and combination tests.
Subjective tests rely on peoples perceptions, attitudes and self-assessed
level of financial knowledge or capability. For example, the Financial
Literacy Foundation (FLF, 2007a) commissioned a survey of 7500
Australians aged 12 to 75. The survey asked people to self-assess their
ability and understanding of financial topics such as budgeting, saving,
investing, credit and debt, planning for retirement, protecting money, and
information and advice. For example, one question was Using a scale of
agree and disagree, to what extent would you say that you have the ability
and understanding to budget day-to-day finances?
Objective tests rely on more neutral methods to measure peoples
knowledge, such as using quiz-like or true/false questions to test peoples
understanding of financial terms and/or their ability to apply financial
concepts to particular situations. For example, the Commonwealth Bank
Foundation (CBF, 2004) commissioned a survey of 5000 Australians aged
16 to 65. The survey used 20 multiple-choice items to assess each
respondents ability to make financial decisions, rather than testing
knowledge of financial information (p. 2).
Combination tests use both subjective and objective measures. For
example, the ANZ conducted surveys in 2008 (ANZ, 2008), 2005 (ANZ,
2005) and 2003 (ANZ, 2003) to measure peoples numeracy, financial
understanding, financial competence, and financial responsibility. The 2008
survey asked questions to test both financial knowledge (e.g. Which one of
the following is most likely to give someone a bad credit rating?) as well as
respondents perceptions and opinions (e.g. Do you find understanding an
annual statement for a superannuation fund easy, very easy, difficult or very
difficult?).
In 2005, in a report about how to improve financial literacy, the OECD
found that combining both subjective and objective measures helps reveal
For example, ANZ (2008); FLF (2007a); CBF (2004); Mercer Wealth Solutions (MWS) (2006).
For example, Womens Information and Referral Exchange Inc. (WIRE) (2007, 2010).
4
Other methods include focus groups and depth interviews.
3
Page 11
the gaps between what people believe they know and what they actually
know:
Objective tests of financial concepts are a better way of measuring financial
literacy than are surveys which ask respondents to provide a selfassessment of their understanding of financial issues. However, a
comparison of consumers self-assessment with their response to objective
questions that test their financial understanding could indicate to
policymakers where the largest discrepancies are between what consumers
believe they know and what they actually know (OECD, 2005, pp. 4445).
Regardless of the method used, financial literacy findings sometimes

conflict, both within and across individual studies. Readers should bear this
in mind when reading this report.
Overall level of financial knowledge

Given the diverse methods used to measure financial knowledge, the
different groups being studied, the shifting economic environment in which
people participate in such research, and the diversity and complexity of
individuals more generally, it is difficult to draw neat conclusions about
what Australians know and dont know.
However, overall, the research suggests the following:
Most people have reasonable levels of financial literacy and people

generally feel confident about their knowledge of financial issues (see
Table 1).
People tend to know and understand simple day-to-day money

management concepts like budgeting, credit, savings and debt, but
struggle with more complex concepts like investments, superannuation
and saving for retirement (see Table 1 and Table 2).
Generally people seem to be open to the idea of learning more about

financial issues (see Table 1).
While some people dont rely on any information sources, most people
rely on a wide range of information and advice services when
researching financial decisions and/or trying to gain financial
knowledge, including informal sources (e.g. family and friends,
newspapers) and formal sources (e.g. financial advisers/accountants and
product providers).
A number of factors appear to influence peoples knowledge and

understanding of financial matters, including their attitudes and beliefs
about money, their confidence levels, their interest and engagement
levels and their socio-demographic characteristics (e.g. age, gender,
education, income).
People dont always know what they dont know.
Page 12
Table 1:
Peoples reported ability and understanding of key financial

topics, and recognition of the importance of learning more
(FLF, 2007a)
Financial topic
Peoples self-reported
ability and
understanding
Peoples self-reported
recognition
of the importance of
learning more
Budgeting
90%
57%
Managing debt
89%
61%
Saving
88%
65%
Recognising a scam
88%
69%
Getting information about

money
85%
68%
Understanding rights and

responsibilities
85%
Dealing with credit cards
83%
49%
Choosing appropriate
insurance
82%
64%
Dealing with financial

service providers
81%
66%
Planning for the financial

future
81%
Investing
69%
70%
Understanding financial
language
64%
68%
Ensuring enough money

for retirement
63%
74%
77%
71%
Source: Adapted extract from FLF, 2007a, p. 36.
Page 13
Table 2:
Peoples tested understanding of key financial topics

(CBF, 2004)
Questions
Percent who
answered
correctly
Choosing the best way to minimise credit card interest
94%
Choosing the cheapest way to borrow (unsecured loan)
93%
Understanding the importance of net returns from investment
89%
Choosing the best investment given a certain objective
88%
Choosing the cheapest way to draw money
88%
Understanding the liquidity of different investments
84%
Choosing the most liquid investment
82%
Understanding the need for voluntary super
82%
Choosing the best long-term investment
79%
Understanding the power of compound interest
78%
Understanding how personal credit ratings work
62%
Choosing the best option when you cannot pay a bill
55%
Choosing the best way to minimise tax
52%
Choosing the cheapest way to borrow (secured loan)
51%
Understanding how to deal with spiralling debt
48%
Understanding if life insurance is necessary
44%
Understanding the benefits of donating money from pre-tax pay
41%
Understanding the benefits of a savings account
34%
Understanding how to control mobile phone bills
18%
Understanding what is important to investment decisions
17%
Source: Adapted from CBF, 2004, p. 6.
Page 14
ANZ financial literacy survey

Australias most comprehensive financial literacy study, the ANZ survey of
adult financial literacy, is generally relied upon as Australias core baseline
measure of financial knowledge.5
The 2008 survey found that, overall, the lowest levels of financial literacy
are associated with the following groups:
those aged 18 to 24 years and people aged 70 years and over
females, particularly females aged 70 years and over
people with lower levels of education (Year 10 or less)
people not working (for a range of reasons) or in unskilled work
people with lower incomes (household incomes under $25,000)
people who speak a language other than English at home
people of Aboriginal and Torres Strait Islander descent.6
Importantly, while the ANZ survey results suggest a strong association

between financial literacy and demographic/socio-economic characteristics,
this does not mean that all members of a particular group have low (or high)
levels of financial literacy.
The ANZ survey classifies people into five financial literacy quintiles based
on their answers to particular questions by giving them an average (mean)
Financial Literacy Score (FLS).7 Quintile 1 respondents were those
recording the lowest levels of financial literacy and Quintile 5 respondents
were those recording the highest levels of financial literacy.
Table 3 summarises the mean FLSs for demographic/geographic and socioeconomic subgroups from the 2008 survey. Table 4 summarises the
demographic characteristics of those in Quintiles 1 and 5 from the 2005
survey.
ANZ (2008), ANZ (2005), ANZ (2003).

Aboriginal and Torres Strait Islander results should be treated with caution due to small sample size, n=54 (ANZ, 2008,
pp. 12).
7
The mean FLS for the whole sample is 83.1 and the mean FLSs for Quintiles 15 ranged from 40.5 for Quintile 1 through to
116.5 for Quintile 5.
6
Page 15
Table 3:
Demographic, geographic and socio-economic characteristics of FLSs (ANZ, 2008)
Group
Mean
FLS
Total
83.1
Gender:
Group
Mean
FLS
ATSI* background:
Group
Mean
FLS
Language
spoken at home:
Group
Mean
FLS
Geographic place
of residence:
Males
85.9
Yes
63.9
English
84.0
Capital city
83.4
Females
80.5
No
83.4
Other language
77.9
Non-capital city
82.5
Age group:
Gross annual
household income:
Current main
activity:
Current
occupation type:
1824 years
71.5
Less than $25,000
68.1
Paid work
89.8
Upper white-collar
94.5
2534 years
86.0
$25,000$57,999
77.1
Home duties
76.7
Middle/lower
white-collar
87.1
3544 years
90.9
$58,000$79,999
89.5
Student
73.6
Upper blue-collar
83.6
4559 years
89.1
$80,000$99,999
90.1
Retired
72.6
Lower blue-collar
76.5
6069 years
81.6
$100,000$149,999
92.1
Unemployed
66.7
70 years or over
63.3
$150,000 or more
97.3
Highest level of
education
completed:
Main source of
income:
ARIA**
classification:
SEIFA***
classification:
Year 10 or less
70.7
Salary wages or
business income
88.9
Major cities
83.7
SEIFA group 1
(greatest
disadvantage)
75.5
Year 11/12
80.4
Government
benefit/payment
67.2
Inner regional
83.4
SEIFA group 2
80.7
Trade/TAFE/
diploma
88.2
Retired, government
benefit
66.0
Outer regional
80.8
SEIFA group 3
84.9
University
92.7
Retired, other
source of income
81.8
Remote/very
remote areas
75.6
SEIFA group 4
82.9
SEIFA group 5
(least
disadvantage)
87.6
*
**
***
Aboriginal and Torres Strait Islander.

Accessibility/Remoteness Index of Australia.
ABS Socio-Economic Index for Areas.
Source: Adapted from ANZ, 2008, pp. 1011. Note total possible scores could be more than 100.
Page 16
Table 4:
Demographic characteristics of financial literacy Quintiles 1 and 5 (ANZ, 2005)
Demographic
Quintile 1 (lowest knowledge)
Quintile 5 (highest knowledge)
Gender
More likely to be female (25%), less likely to

be male (16%). However, closer
examination of the data showed that the
underlying cause was more likely to be
lower levels of education and income, rather
than gender.
More likely to be male (24%) and less

likely to be female (16%).
Age
More likely to be younger (18 to 24 years:

33%) or older (aged 70+ years: 37%). Less
likely to be aged 35 to 44 (16%) or 45 to 59
years (14%).
More likely to be aged 35 to 44 years

(25%) and 45 to 59 years (24%). Less
likely to be younger (18 to 24 years: 10%).
Education
More likely to have lower levels of education

(primary/some secondary: 43%). Less likely
to have a degree (10%).
More likely to have a degree (29%). Less

likely to only have lower levels of
education (primary/some secondary: 7%).
Life stage
Less likely to be in a couple with children at

home (16%).
More likely to be in a couple with children

at home (24%). Less likely to be single
living in a shared household (13%) or a
single parent (12%).
Languages
No significant association.
Less likely to speak a language other than

English in the home (13%).
Work status
More likely to have no occupation (46%) or

to be unskilled (38%), semi-skilled (34%), or
not working (31%). Less likely to be working
(15%) or working full-time (12%). Less likely
to be professional (11%) or semiprofessional (13%) or other white-collar
(15%).
More likely to be full-time (24%) or selfemployed (30%) and professional (27%)

or an owner executive including small
business (33%). Less likely to be casual
(11%), semi-skilled (10%) or unskilled
(8%).
Income and
savings
More likely to have lower personal income

(less than $20k: 31%; and less than $50k:
25%), lower household income (less than
$20k: 37%) and lower savings excluding the
home (less than $5k: 34%; and less than
$100k: 25%). More likely to have low levels
of non-mortgage debt (less than $500k:
24%).
More likely to have higher personal

income ($50k or more: 30%; and $70k or
more: 36%), higher household income
($100k or more per year: 30%) and higher
savings excluding the home ($100k or
more: 32%; and $250k or more: 36%).
Home ownership
More likely to be renting (27%) and less

likely to be paying off home (13%). More
likely to have a lower home value (less than
$175k: 29%).
Less likely to be renting (14%) or have

lower home value (less than $175k: 10%).
More likely to have higher home value
($500k or more: 29%) and higher
mortgage debt ($250k or more: 30%).
Source: Selected extract from ANZ, 2005, pp. 24, 29.
Page 17
ABSs literacy and life skills survey

At a more general level, in 2006 the Australian Bureau of Statistics (ABS)
conducted an adult literacy and life skills survey as part of an international
study. The study measured skills in the areas of document literacy, prose
literacy, numeracy and problem solving.
The ABS survey found that, of Australians aged 15 to 74, approximately:
7 million (47%) had low scores (Level 1 or 2) on the document scale8
7 million (46%) had low scores (Level 1 or 2) on the prose scale9
7.9 million (53%) had low scores (Level 1 or 2) on the numeracy scale10
10.6 million (70%) had low scores (Level 1 or 2) on the problemsolving scale.11
Given that Level 3 is regarded by the survey developers as the minimum

required for individuals to meet the complex demands of everyday life and
work in the emerging knowledge-based economy, this result suggests that
around half the Australian population lack functional literacy and numeracy
skills (ABS, 2006).
Knowledge by product/activity
The key findings about Australians financial knowledge by financial
products and activities are summarised below. These summaries cite
indicative statistics only and are limited to the key pieces of research about
financial literacy in Australia.
Some of these findings are the result of objective tests, some subjective and
some both. As a result of these different methodologies (and other factors),
some of the findings conflict. For more comprehensive summaries of
available statistics, see Appendix 1.
Document literacy was defined as the knowledge and skills required to locate and use information contained in various
formats including job applications, payroll forms, transportation schedules, maps, tables and charts.
9
Prose literacy was defined as the ability to understand and use information from various kinds of narrative texts, including
texts from newspapers, magazines and brochures.
10
Numeracy was defined as the knowledge and skills required to effectively manage and respond to the mathematical
demands of diverse situations.
11
Problem solving was defined as goal-directed thinking and action in situations for which no routine solution is available.
Page 18
Savings and budgeting
People generally know they should make a budget12 and believe they
understand and have the ability to save (88%) and budget (90%).13 Yet
22% of adults say they dont save and nearly half (48%) do not budget
regularly for their day-to-day finances.
Some people (24%) say they have problems setting money aside for
major financial outlays.14 Those more likely to have problems include
people with household incomes below $25,000 (40%).
Some people also report that they do not keep a close eye on household
and personal expenses (23%).15 Men aged under 35 years (34%) are
more likely to report this.
Transaction methods and everyday banking
There is a high level of banking inclusion in Australia, with almost

every person having an everyday banking account (97%16 and 100%17).
However, around 120,000 adult Australians (0.8%) could be considered

financially excluded, with those most at risk being people in poverty,
people from Indigenous backgrounds, people with a disability and
people on social security benefits.18
Between 2002 and 2008, there has been significant growth in the use of
and/or understanding of how to use electronic payment methods. In
particular, internet banking has risen from 52% to 69%, BPAY has risen
from 60% to 72% and direct debits have risen from 78% to 87%.19
Peoples exposure to payday loans is low compared to other transaction

methods. Only 15% of people either use or know how to use payday
loans.20
Many people (81%) say they take steps to minimise bank fees (19%
either did not know or dont take any steps). 21 The most common steps
people take are only use ATMs from the same bank as my account
(27%), minimise the number of transactions I make per month (17%),
keeping the number of transactions I make to my monthly limit
(14%), make fewer but larger cash withdrawals (12%) and use
telephone/internet banking (12%).
12
Citibank (2008, p. 8).

FLF (2007a, pp. 49).
14
ANZ (2008, p. 21).
15
ANZ (2008, p. 21).
16
ANZ (2008, p. 14).
17
Citibank (2010).
18
ANZ (2004a, p. iii). Note that this figure predates the global financial crisis. Detailed findings about these groups are also
available in ANZ (2004b).
19
ANZ (2008, p. 20).
20
ANZ (2008, p. 20).
21
ANZ (2008, p. 29).
13
Page 19
Credit card management
Most people say they are confident in their ability to deal with and
understand credit cards (83%).22 They also indicate that they dont see
the importance of learning more about dealing with credit cards (49%),
compared to other financial products.23
People generally say they know the best way to reduce credit card
interest (94%).24 They also say they know/take steps to avoid credit card
fees by paying off the monthly credit card balance in full (12%),
ensuring minimum monthly payments are made (9%) and not exceeding
the limit on their credit card (6%).25
Nevertheless, of those with a credit card, 14% said they are sometimes
charged interest and 27% said they are usually charged interest on their
credit card. People in their 30s (35%) and 40s (39%) were most likely
to usually be charged interest.26
People who check their credit or store card transactions (93%) generally
check for fraudulent activity (74%) and to see whether everything is
right (28%).27 The most common reasons people say they dont check
their credit card transactions are someone else is checking the
transactions (23%) and lack of interest (e.g. couldnt be bothered
(23%), dont have the time (20%) and just assuming theyre correct
(17%)).
Loans and debt
The most common types of debt in Australia are mortgages on

properties, loans for businesses or farms, HECS (student) debt and
credit card debt.28 In 2008, 65% of people had credit cards, 34% had
mortgages on their own home, 17% had personal loans, 14% had a line
of credit/overdraft and 13% had store card loans.29
People most often borrow money from mainstream financial institutions

like banks, building societies and credit unions (24%), or from family
and/or friends (14%).30 Family and/or friends are most likely to be used
by younger people aged 18 to 24 (46%). The use of pawnbrokers (2%),
payday lenders (1%) and debt rescue companies (less than 1%) is
relatively low.
22
FLF (2007a, p. 15).

FLF (2007a, p. 35).
24
CBF (2004, p. 6).
25
ANZ (2008, p. 29).
26
FINSIA (2009, p. 14).
27
Only 7% indicated they did not check credit or store card transactions: ANZ (2008, p. 47).
28
Headey & Warren (2008, p. 49).
29
ANZ (2008, p. 41).
30
Based on the 45% of respondents who had borrowed money the last 12 months: ANZ (2008, p. 43).
23
Page 20
People say they are confident in their ability to manage personal debt
(89%).31 Men (81%) are more likely to say they feel comfortable with
debt than women (77%). However, people appear to be less able to deal
with spiralling debt (48%).32
People tend to struggle with understanding how personal credit ratings

work (62%).33 Some dont know what type of information is
collected/needed to determine a persons credit rating (28%).34 Those
who were aware of the types of information needed to determine a
credit rating nominated repayment defaults (29%), late payments
time not specified (20%) and history of loan or credit applications
made (14%) as the top sources of information needed.
More than forty percent of people (41%) do not know that being more
than 60 days late with the minimum payment on a credit card is the
thing most likely to give someone a bad credit rating.35 Women (47%)
are more likely than men (35%) to not know this, particularly women
aged 18 to 24 years (66%) and those 70 years and over (69%).
People are more likely to be aware of who is responsible for repayment

of a debt on joint loans (83%) than on credit cards for which the
primary card-holder arranges for a second person to be provided with
card access (77%).36 In both cases, lack of awareness is highest among
those aged 18 to 24 years and those aged 70 years and over.
People generally dont know what reverse equity loans (also known as
reverse mortgages) are (54%).37 When those who claimed to know what
reverse equity loans are were asked what they would consider when
deciding whether or not to take out a reverse equity loan, the most
common answers were the interest rate (13%), life expectancy (11%),
the conditions of the loan (11%) and the size of the loan that would be
needed (10%).38
People who have a reverse mortgage do not always clearly understand

the trade-offs between accessing loan funds now and having less
available in the future.39 They also have trouble understanding how a
reverse mortgage works and/or are not aware of all the terms and
conditions of the reverse mortgage.
31
FLF (2007a, p. 15).

CBF (2004, p. 6).
33
CBF (2004, p. 6).
34
ANZ (2008, p. 46).
35
ANZ (2008, p. 45).
36
ANZ (2008, p. 45).
37
More than one in two of those asked either didnt know (51%) or were unsure (3%) what a reverse equity loan was. Note
that only respondents aged 60 years and over were asked this question. ANZ (2008, p. 88).
38
14% of those who knew what a reverse equity loan was said they would never take one out and another 33% said they
didnt know what to consider.
39
ASIC (2007a, p. 6).
32
Page 21
Financial documents (PDSs, financial statements and

prospectuses)
People (including investors) are often overwhelmed by the volume and

complexity of investment information available to them, including
disclosure material such as Product Disclosure Statements (PDSs),
prospectuses and annual reports.40
People are generally confident about their ability to understand the

information provided in financial statements (79%) but are less
confident about their ability to understand financial language more
generally (64%).41 People with household incomes between $20,000
and $49,000 (60%), women (60%) and people aged 18 to 29 years
(57%) are among those who are more likely to struggle with financial
language.42
Women have reported that they feel overwhelmed with the amount and
complexity of financial information available and some describe
financial terms/expressions as another language (25%).43
Many students have difficulty interpreting a bank statement, with only

48% of Year 9 students able to understand the term debit and only
25% able to understand the term credit on a bank statement.44 Only
43% of Year 9 and Year 10 students are able to understand the term
product disclosure statement.
Seventy-five percent of people who have super indicate that they

receive and read their superannuation fund statements.45 Of those who
receive super statements, 31% believe the statements are difficult to
understand.46 Of the 15% of people who indicate that they receive super
statements but do not read them, most do so because they couldnt be
bothered (36%) or because the statements are too difficult to
understand (23%).47 Women (30%) are significantly more likely to not
read their superannuation statements because of the perceived difficulty
in understanding them compared to men (14%).
Some investors who receive a prospectus dont read it because they feel
that they wont understand the information in it.48
40
ASIC (2008b, p. 103).

FLF (2007a, p. 27).
42
FLF (2007a, p. 77).
43
WIRE (2007, p. 25).
44
CBF (2006, p. 12).
45
ANZ (2008, p. 72).
46
ANZ (2008, p. 74).
47
ANZ (2008, p. 72).
48
ASIC (2008c, p. 25).
41
Page 22
Planning for retirement
People aged under 65 who are not yet retired recognise the importance of
saving for retirement through superannuation (93%).49 Yet some people
believe that retirement is too far away to think about (21%) and that
financial planning is only important for those who have a lot of money
(16%).50 Those with low incomes are more likely to think that financial
planning is only important for those who have a lot of money.51
People are generally confident (81%) in their ability to plan for their
long-term financial future but less confident in their ability to ensure
they have enough money for retirement (63%).52 As few as 11% of
Australians in full-time employment have given retirement a lot of
thought and made preparations.53
Many people do not know how much money they will need to fund a
comfortable retirement and only 27% of those aged under 65 who have
super and are employed have identified an annual figure.54 Those aged
under 30 (27%) are more likely to have no idea how much money they
will need compared to those aged over 40 (23%).55 Two-thirds (66%) of
the people who have thought about retirement, and are able to say how
much money they will need, indicate they will need between $25,000
and $74,999 per year to live on when they retire.56 Based on the
Westpac-ASFA Retirement Standard these estimates appear optimistic.57
Eighty-two percent of people aged under 40 years are aware that they
can contribute a greater percentage of their salary to superannuation.58
Similarly, 79% agree that superannuation is a good way to make me
save and 78% agree that compulsory superannuation is forced savings,
I barely notice it. Women are significantly more likely to agree with
these statements (82%).59
Most people do not believe that the age pension (86%) or employerfunded superannuation alone (73%) will meet their retirement needs.60
The majority of those aged under 65 (91%) believe that they will need
49
ANZ (2005, p. 142).

FLF (2007a, p. 21).
51
FLF (2007a, p. 80).
52
FLF (2007a, p. 21).
53
MWS (2010, p. 4).
54
ANZ (2008, p. 82).
55
Citibank (2008, p. 16). Similarly, ANZ (2008, p. 82) found that 34% of people aged 45 to 59 years had identified a figure
for retirement, compared to those aged 18 to 24 years (13%).
56
ANZ (2008, p. 82).
57
According to the December quarter 2009 Westpac-ASFA Retirement Standard estimates, the annual income for a modest
single female would be $19,996 and for a comfortable single female would be $38,611. Couple estimates are $28,080
(modest) and $51,727 (comfortable). Westpac & ASFA (2009, p. 3).
58
FINSIA (2006, p. 9). Note that while the research refers to under 40s the underlying survey sample included a total of
600 people aged 25 to 44 years.
59
FINSIA (2006, p. 14).
60
FLF (2007a, p. 80). Similarly, FINSIA (2006, p. 17) found that only 8% of under 40s expected to rely entirely on the age
pension.
50
Page 23
to self-fund their retirement.61 Almost two-thirds (61%) of Australians

in full-time employment believe they will be less comfortable in
retirement.62
Superannuation
As many as 43% of people rate themselves as having none (8%) or

only minimal (35%) levels of knowledge about superannuation.63
Those who have super, are employed and under age 65 understand the
basic rules relating to superannuation (i.e. that employers are required
by law to make superannuation payments on their behalf and that they
themselves can make additional contributions to their superannuation)
but are less aware of the tax treatment of super: see Table 5.64 Women
(53%) are among those least likely to say super is taxed at a lower rate
than other investments (compared to 63% of men).
Table 5:
Understanding superannuation (ANZ, 2008)
Concept tested
Percent answered correctly

2005
2008
Employers are required by law to make super

payments on behalf of their employees
97%
96%
Employees can make super payments additional to

any payments made by their employer
92%
90%
Super is taxed at a lower rate than other investments
56%
58%
Source: Adapted from ANZ, 2008, p. 71.
People are also less aware of other super-related benefits, such as the
government co-contribution scheme, their entitlements regarding choice
of fund, and their understanding of the payment of death benefits: see
Table 6.65 Those who are unable to nominate any superannuation
benefits are more likely to be younger (18 to 24 year-olds (35%)).66
A significant minority of people (16%) cant identify the potential

disadvantages of having multiple superannuation funds.67 Those who do
61
ANZ (2008, pp. 8081).

MWS (2010, p. 4).
63
MWS (2006, p. 18). A subsequent MWS (2009, p. 41) study showed that 29% rated their current level of knowledge about
superannuation as minimal. The percentage of people rating their knowledge level as none was unspecified.
64
ANZ (2008, p. 71). Similarly, a recent MWS (2009, p. 35) study found that one in five (18%) working Australians were
unsure of the tax effectiveness of superannuation and a further 11% rated the tax effectiveness of superannuation as poor.
65
MWS (2006, p. 18).
66
20% of people couldnt nominate any advantages of superannuation. People that could nominate advantages indicated the
lower/favourable tax treatment (30%), money being locked away (29%) and superannuation being a low-risk investment
(15%) as the top three advantages. ANZ (2008, p. 77).
67
ANZ (2008, p. 70).
62
Page 24
know tend to cite the potential of losing track of superannuation (36%),

multiple administration or management fees (34%) and multiple entry
or set-up fees (20%) as the problems associated with having multiple
funds.
Nearly half of people (47%) dont know if they are in an accumulation

fund or a defined benefit fund and nearly a quarter (22%) dont know
what investment option their superannuation is in.68
Only 29% of people agree they could accurately state my

superannuation balance as at today to within $10,000.69
Just over two-thirds (68%) of people are able to correctly identify the
amount of return left after the fees are taken out as the best indication
of how their superannuation fund or managed investments are
performing: see Table 7.70
Age and proximity to retirement influences the degree to which people

monitor their superannuation. Among those making or receiving super
contributions, 40% of those aged 60 to 69 say they monitor the level of
their superannuation compared to only 3% of those aged 18 to 29.71
68
MWS (2010, p. 5).

A further 23% said they could state it within $5000, 16% within $1000, and 30% couldnt say at all. MWS (2009, p. 39).
70
ANZ (2008, p. 75).
71
FINSIA (2009, p. 20).
69
Page 25
Table 6:
Understanding superannuation (Mercer Wealth Solutions, 2006)
Test questions
Percent
answered
correctly
Percent
answered
incorrectly
Percent
dont know
On retirement, you must take your super as a lump sum benefit.

(False)
73%
5%
22%
John is a healthy 50-year-old who has decided to permanently

retire from the workforce. He can access all his super funds.
(False)
71%
9%
20%
If I am under 55 years of age and pay extra contributions into my

super account, I can withdraw that extra money at any time.
(False)
56%
13%
31%
If you were born after 1965, you will need to be aged 70 before
you can access your super. (False)
46%
9%
44%
Under the superannuation guarantee, your employer must

contribute 7% of your earnings to a super fund. (False)
44%
36%
20%
All Australian workers are eligible for the government cocontribution scheme, regardless of their income or age. (False)
42%
31%
27%
A growth style option invests most or all of your super assets in

shares and property investments. (True)
39%
11%
50%
A defensive fund invests most or all of your super assets in cash

and fixed interest investments. (True)
37%
8%
55%
Income from an allocated pension lasts until the money in your

account runs out. (True)
32%
15%
53%
All Australian workers are entitled to choose their own super fund
under Choice of Fund legislation. (False)
15%
77%
9%
In the event of your death, your super fund is required to pay your
death benefit to your nominated beneficiary. (False)
7%
73%
20%
Source: Adapted from MWS, 2006, p. 18.
Table 7:
Indicators of superannuation fund performance (ANZ, 2008)
Performance indicator
Percent of
respondents
Amount of return left after the fees are taken out
68%
Return
12%
Per-unit cost
5%
Fees
2%
Cant say
13%
Source: Adapted from ANZ, 2008, p. 75.
Page 26
Investing
Despite the rise in investment ownership among Australians in recent

years (see Table 8 for investments held), many people believe
investments are too complicated to understand properly (46%)72 and are
less confident in their ability to invest (69%) compared with other
financial activities.73 Men (75%) generally report higher confidence in
their ability than women (63%).
Even direct investors have become increasingly confused by all the

information on shares (44% in 2008 compared to 35% in 2006) and
only 40% feel they know enough to confidently make a decision.74
Table 8:
Most commonly owned investment products
Product owned
75
(ASIC, 2008a)
Australian population
(aged 18+)
Investor population
(aged 18+)
24%
51%
NA
24%
Extra super contributions
11%
23%
Term deposits
10%
21%
Investment property
10%
19%
4%
12%
5%
11%
6%
9%
76
Direct shares
High-interest savings accounts
Self-managed super funds

Other direct investments
77
Managed investments
Source: Selected extract from ASIC, 2008a, p. 15.
Many people recognise the importance of learning more about investing

(70%), especially those aged 18 to 29 years (81%) compared to those
aged over 64 years (43%).78
While many people know that high returns generally mean high risk
(86%), almost half (48%) have trouble applying the risk and return
72
Fear (2008, p. 44). In addition, 42% of people surveyed by MWS (2006, p. 15) rated their level of knowledge of
investment as nothing or minimal (i.e. a score of 03 out of 10). A further 41% rated their knowledge as moderate (46
out of 10).
73
FLF (2007a, p. 79).
74
ASX (2009, p. 25). Base sample: 2008 (n=816); 2006 (n=904) current direct investors.
75
Base for Australian population: n=53,307 and base for investor population: n=1217.
76
A third (33%) of share owners acquired their shares passively, while almost two-thirds (63%) of share owners acquired the
shares actively.
77
The most commonly owned other direct investment was debentures (39%), followed by bonds (21%), short-term securities
(9%) and options (9%).
78
FLF (2007a, p. 79).
Page 27
concept.79 Many (66%) would not consider risk and return when
choosing an investment.80
Similarly, some superannuation fund members81 had difficulty assessing

the risk associated with Australian shares, balanced and fixed
interest investments in particular (see Table 9).82
Table 9:
How people rated the risk associated with particular

investments (Gallery et al, 2010)
Investment options
Correct
Incorrect
Dont know
Cash
61%
21%
18%
Cash plus
52%
25%
24%
Fixed interest
44%
41%
15%
Balanced
44%
43%
13%
Socially responsible
51%
24%
25%
Australian shares
32%
53%
15%
International shares
57%
28%
15%
High growth
77%
10%
12%
Source: Adapted from Gallery et al, 2010, p. 23.
Two in three people (67%) understand that short-term fluctuations in

market value can be expected even with good investments.83
Only 5% of people would consider diversity/spread of investments

when making a financial decision.84 While most investors have heard of
the term diversification (78%), some have trouble applying the
concept (e.g. 36% said investing 100% of your money in government
bonds was good diversification).85
Insurance
Many people believe they have the ability and understanding to protect
themselves and their assets by choosing appropriate insurance (82%) (e.g.
home and contents insurance, car insurance, life insurance), although
79
Only 52% would consider an investment advertised as having a return well above market rates and no risk as too good to
be true and not invest in it. ANZ (2008, p. 64).
80
FLF (2007a, p. 11).
81
A sample of QSuper superannuation fund members.
82
Gallery et al (2010, p. 23).
83
ANZ (2008, p. 65).
84
FLF (2007a, p. 79).
85
ASIC (2008a, p. 6).
Page 28
women (84%) are more likely than men (79%) to believe in taking out
insurance to be prepared for the unexpected. 86 However, only 37% say
they have enough insurance to ensure that their loved ones wont suffer
financially in the event of their own death, sickness or disability.87
Many people (64%) also believe that its important to learn more about
how to choose appropriate insurance, particularly those aged 18 to 29
years (79%).88
Around half (54%) of people with insurance seem to be aware of their

responsibility to make honest and complete disclosure of matters
relating to a loss.89 More are aware about cooling-off periods when
taking out a new house and contents insurance policy (68%).
People generally consider the premium (53%), the general level of cover
needed (41%), the brand or reputation of the insurance provider (20%) and
the excess (15%) when they are taking out a new insurance policy.90
Scams and frauds
People feel that they have the ability to recognise a scam (88%) but it is
likely that they are more vulnerable to scams than they realise.91
In 2007, at least 5,809,100 people had been exposed to a scam over a

12-month period:92
Exposure involved people receiving and viewing or reading an
unsolicited invitation, request, notification or offer designed to obtain
their personal information or money or otherwise obtain a financial
benefit by deceptive means.
A total of 806,000 Australians aged 15 years and over were victims of at
least one incident of personal fraud over the 12-month period. This
equated to a victimisation rate for personal fraud of 5% of the population
aged 15 years and over.
There were 453,100 victims who lost money in the 12 months prior to
interview, incurring a combined financial loss of almost one billion
dollars ($977 million). Of the victims who lost money to personal frauds,
the average final loss was $2156 per person.
People tend to be aware that there are risks associated with internet
banking (78%).93 They believe the main risks are key logging and hacking
(53%), the use of unsecured sites (23%), identity theft (23%) and credit
86
FLF (2007a, p. 81).

Citibank (2010).
88
FLF (2007a, p. 81).
89
ANZ (2008, p. 99).
90
ANZ (2008, p. 102).
91
FLF (2007a, p. 25).
92
People surveyed during the survey reference period (July to December 2007) were asked to recall incidents that occurred
only in the last 12 months prior to the date of their interview. ABS (2008a, p. 7).
93
ANZ (2008, p. 120).
87
Page 29
card fraud (17%). Sixty-three percent of these people are also aware of
ways to minimise internet banking risk.94 They cite using an up-to-date
anti-virus software (38%), having a firewall (26%) and changing
passwords regularly (22%) as the best ways to reduce internet risks.
The top three tips investors suggest to avoid scams are:

deal with reputable or well-known companies/people (18%)
do lots of research (18%)
check out what you are investing in (17%).95
Many people (69%) acknowledge the importance of learning more

about recognising scams.96
Information, advice and further education
People tend to feel confident in their ability to get information about

money (85%).97 Those more likely to feel confident are people with a
household income of $100,000 or more (91%) compared to those with
household incomes less than $20,000 (73%).
Most people rely on a wide range of information and advice services

when researching financial decisions and/or trying to gain financial
knowledge. The most commonly nominated sources are family and
friends (47%), accountants (45%), newspapers/magazines (42%), bank
managers/employees (39%) and financial advisers (34%).98
The most likely sources of information and advice that people would
consider using are financial advisers (82%), accountants/tax agents
(81%), family members (63%), banks (60%) and friends (55%).99
The most common reasons people seek information and advice are tax
advice/assistance in completing a tax return (28%), investment advice
(27%), general advice (13%) and taking out a mortgage or refinancing
a mortgage (10%).100
One in two people (51%) feel they need further financial education or
information.101 Those most likely to say they need further
education/information are people under 35 years of age (64%). Those
aged 60 years and over (26%) are the least likely to say they need it.
The top five topics that people say they are interested in and want
further education/information about include investing (39%),
94
ANZ (2008, p. 121).

ASIC (2008a, pp. 2425).
96
FLF (2007a, p. 25).
97
FLF (2007a, p. 82).
98
ANZ (2008, pp. 3334).
99
FLF (2007a, p. 28).
100
FLF (2007a, p. 29).
101
ANZ (2008, p. 104).
95
Page 30
superannuation (25%), budgeting (14%), taxation (13%), managing

debt (9%) and borrowing, loans and mortgages (9%).102
Consumer rights and responsibilities
People express confidence in their ability to understand their rights and

responsibilities when dealing with money (85%), but they also recognise the
importance of learning more about their rights and responsibilities (74%).103
Those most likely to believe that its important to learn more about their
rights and responsibilities are people aged 18 to 29 years (86%).104
People are generally aware that providers of professional advice about

financial services are legally bound to inform clients of any
commissions they might receive as a result of their advice (78%).105
Those least likely to be aware are women aged 70 years and over
(66%), single parents (65%) and those whose main source of income is
a government benefit or allowance (67%).
Most people know that consumers have a duty of honest disclosure

when taking out a financial service or product (93%).106
People feel reasonably confident about how to make an effective

complaint against a bank or other financial institution (63%).107 Yet
17% are unsure about whom they would approach if they experienced
difficulties with a financial product and they were unable to resolve
these with the product provider, particularly men aged 25 to 34 years
(28%) and people working in lower blue-collar occupations (30%).108
Those who knew what to do were most likely to mention an
ombudsman/industry ombudsman (36%) or a government department
like consumer affairs or ASIC (26%).
Investors tend to have relatively low awareness of ASIC (28%) and/or

what protection ASIC can provide.109 Similarly, people more broadly
are unaware of ASICs roles and responsibilities. For example, one in
two people (52%) incorrectly believe that ASIC checks the accuracy of
all prospectuses lodged with it.110 Those more likely to believe that
ASIC has this role are men aged 25 to 34 years (72%) and people
holding investments in shares, managed funds or debentures, bonds,
notes or derivatives (56%).
102
ANZ (2008, p. 112).

FLF (2007a, p. 35).
104
FLF (2007a, p. 81).
105
ANZ (2008, p. 105).
106
ANZ (2008, p. 107).
107
ANZ (2008, p. 108).
108
ANZ (2008, p. 109).
109
ASIC (2008a, p. 25).
110
ANZ (2008, p. 105).
103
Page 31
What people do
Key points
At a time when consumers are being asked to make more financial
decisions than ever before, the environment in which they are making
those decisions is becoming increasingly complex.
Knowledge alone is not enough. People dont always act in their own best
interests, sometimes by not engaging at all and sometimes by making bad
decisions.
Behavioural studies and ASICs own consumer and investor research
identifies a range of related barriers that prevent people from making good
financial decisions, including information and choice overload, complexity
and uncertainty, time factors and pressures, over (and under) confidence,
self-control and framing (i.e. how information is presented).
Research in this area, particularly applied research in real financial
settings, is still developing. More (and better) research is necessary to
understand the drivers of action/inaction.
A key obstacle to saving more is not necessarily lack of awareness, but rather
the ability to take action on the knowledge (Mitchell & Utkus, 2003, p. 6).
While raising peoples level of financial knowledge forms the basis of many
financial literacy initiatives around the world, there is a growing body of
research suggesting that knowledge is only one factor when considering how
to help people make positive financial decisions. This section covers what
people do with the knowledge they have and, more commonly, what people
do in spite of their knowledge and why.111
Common barriers
Consumer and investor research suggests that the ways in which people
approach financial decisions vary widely and depend on a range of shifting
and conflicting factors, including life stage, past experience, emotional
impulses, social networks, personal traits, socio-economic status and the
external environment. Financial decisions, like many life decisions, are
contextual and complex.
111
For detailed statistics about what surveyed Australians say they do (e.g. budgeting), see Appendix 1 Tables A1.1A1.16.
Page 32
There are considerable obstacles for consumers to overcome when making

financial decisions, including increasingly complex product choices, long
disclosure documents, unfamiliar jargon, uncertain financial markets and, at
the extreme end, unfair or illegal practices.
Behavioural studies from within and outside the finance field suggest that
peoples decisions can also be hampered by behavioural biases.
Behavioural biases
Behavioural finance, sometimes referred to as behavioural economics
outside Australia, has established a range of theories and a growing body of
research to explain how peoples thought processes affect their ability to
make financial decisions. Behavioural economists argue that the rational
consumer that underpins traditional economic theory does not exist
instead, people are simply normal.
Behavioural economists claim that normal people are affected by
behavioural biases when making everyday decisions and particularly when
making complex decisions, including financial decisions. They believe these
barriers are not limited to certain types or groups of people and in fact can
also affect professional financial service providers such as investment traders
(Gervais & Odean, 2001).
The notion of decision biases is not new or exclusive to behavioural
economics. Essentially, the effect of these shortfalls is that people:
disengagethat is, they:

put off making a decision until later or never, commonly referred to as
procrastination and inertia
defer the decision to someone else
make mistakes.
For a summary of key behavioural biases, see Appendix 1 Table A1.17.

Indicative examples of decision biases and other behavioural factors are
explored in the discussion below. These findings illustrate the interrelated
nature of behavioural barriers, and also the important role that supply-side
factors can play in compounding behavioural shortfalls.
Information and choice overload

Some of the best known experiments testing the impact of choice overload
have been conducted by Iyengar et al (2003), who found that although
extensive choice proved initially more enticing than limited choice, limited
choice was ultimately more motivating (p. 3). In one of these experiments,
two options were tested in a tasting booth environment, a limited-choice
option with six jams and an extensive-choice option with 24 jams. In all,
Page 33
60% of the passers-by approached the table with the extensive-choice option
compared to only 40% for the limited-choice option.
However, purchasing habits were reversed, with 30% of those encountering
the limited option actually purchasing a jam, compared to only 3% of those
offered the extensive choice. Subsequent studies by Iyengar et al (2003) in a
retirement savings context have confirmed these findings. After testing
employee records (including non-participants records) from hundreds of
401(k) retirement plans, they found that plans offering fewer than 10 options
had significantly higher employee participation rates.
Local research too has uncovered the de-motivating impact of too many choices.
For example, Fear (2008) conducted focus groups with Australians about a range
of finance issues and found that many participants, and particularly people over 30,
found the breadth of product choice bewildering:
Even our credit union had seven or eight different types of home loan. And Im
thinking, I just want to buy the bloody house (5070, Adelaide, higher income).
Its just day-to-day things, like mobile phone contracts or your electricity.
What sort of a genius can work out which of these five or six options is the
best one? (5070, Adelaide, higher income) (Fear, 2008, p. 24).
More choice also means more information to evaluate:

You might have the best intentions, but you sit down with it all and never
get through it all. So you need to come back to it again and again (3049,
Wollongong, lower income) (Fear, 2008, p. 24).
In a survey conducted by Roy Morgan Research for ASIC (2008b), investors

were asked about their concerns about investing. Information and choice
overload was one of the concerns raised. Regardless of their demographic
characteristics or level of experience, many investors were overwhelmed
both by the volume of information available, and the difficulty in assessing
the validity of the available information:
I think there [is] a lot of information out there. The difficult thing is making
sense of that information and if that information has any integrity (Female,
investment property interview, 4549).
Sorting out what is a good producttheres so much information and
opinion, to sort out the facts from advice thats not necessarily reliable or
suitable (Male, shares interview, 4549) (ASIC, 2008b, p. 62).
These findings echoed an earlier in-depth piece of research about retirees

and their point of retirement decisions, conducted by Chant Link and
Associates for ASIC in 2004. Retirees decision-making process took
anywhere between a few weeks to up to two years, and often followed
several stages of collection, corroboration, and comparison. Again, most
retirees felt they had sufficient access to information but found it difficult to:
absorb and analyse the large quantity of available information
assign weight to the various (at times, conflicting) sources of advice

they received.
Page 34
Information overload was only one of a range of factors that made the
decision process deeply unpleasant for these retirees: see Figure 2.
Figure 2: Reasons retirement decision was unpleasant (ASIC, 2004)
Degree of concentration
required
Confusing issues involved,

including conflicting advice
Time consuming process
Importance of decision (a
lot at stake) combined with
uncertainty that decision
would meet future needs*
Coincidence of decision
with negative life events**
Requirement to consult
with financial advisers,
and their costs
Examples include anxiety about making an incorrect or irreversible decision, concerns

about recent years of poor returns from investment markets.
**
Examples include loss of job, ill-health.
Source: Adapted from ASIC, 2004, p. 9.
These factors were also raised by those who participated in ASICs

subsequent investor research (2008b). However, while a number of the
investors reported procrastinating or giving up when faced with these
barriers, most of the retirees viewed their decision as something that simply
had to be taken, regardless of any challenges or concerns.
This was particularly so for those for whom retirement was unavoidable (e.g.
those forced to retire due to ill-health). Unfortunately, this meant that some
retirees remained uncertain about whether they had made the right decision
long after the action was taken:
I found it a bit complicated. I had to make up my mind which was the best
being offered. I dont know whether I did the right thing or not (Recent
retiree).
I felt reasonably comfortable about my knowledge in the years before
retirement and then I realised, when somebody explained a few things to
me, how much I didnt know. You can feel comfortable with the advice
you are getting or the knowledge you have but you dont know what you
dont know. Somebody might open up another door and mention another
issue, which might conflict with the other advice you have received or
show you something better which you had not heard about before (Recent
retiree) (ASIC, 2004, p. 39).
The knowledge and experience these retirees gained didnt necessarily lead
to an increased sense of financial competence or comfort. Indeed, at the time
of their interviews, some appeared to be confused about the features and
terminology of the products they had purchased, suggesting that just as we
Page 35
cannot assume financial literacy leads to appropriate behaviour, we cannot

assume that behaviour or experience leads to greater financial literacy.
These reasons are in line with the results of research conducted by ClarkMurphy et al (2002), which studied superannuation fund members faced
with a decision about whether or not to remain with a defined benefit plan
(DBP) or change the fund to a defined contribution plan (DCP).
Overall, the proportion of people who remained in the DBP, either by active
choice (35.2%) or by not acting at all (31.6%) far outweighed those who
actively chose to switch to the DCP (33.3%). As well as studying the
decision itself, Clark-Murphy et al found that 61% of people found the
decision difficult. They identified four key decision barriers, which are
summarised in Table 10 (and in greater detail in Appendix 1 Table A1.18).
Like ASICs retirement research, these findings show that peoples difficulty
dealing with choices and information is not limited to the volume of available
information, but is also affected by complexity, uncertainty, the decision
context and personal driversfactors that are explored later in this section.
Table 10: What makes superannuation decisions difficult?
(Clark-Murphy et al, 2002)
High-level barrier
Nature of barrier
Uncertainty/risk (38%)
Uncertainty (general)
Employment
Political/legal/taxation
Financial outcomes
Personal financial situation
Life expectancy
Information/knowledge (32%)
Complexity
Acquiring information
Lack of knowledge/understanding
Ambiguity
Nature of the decision/time (22%)
Importance of the decision

Once-only decision
Deciding
Timing
Time constraint
Emotion (8%)
Frustration and lack of control

Anxiety
Distrust
Avoidance
Source: Adapted from Clark-Murphy et al, 2002, pp. 1314. See Appendix 1 Table A1.18 for
more detailed information.
Page 36
Age and gender emerged as demographic drivers in this study. Those aged
under 55 and women were more likely to find the decision difficult.112
Gender differences appear regularly in the literature. For example, the ANZ
financial literacy survey (2008) found that women (30%) were significantly
more likely than men (14%) to say their superannuation statements were too
difficult to understand (p. 72).
However, the underlying causes of these differences remain contentious and
inconclusive. For example, Clark-Murphy & Gerrans (2002) later explored
the gender drivers they had discovered in their superannuation study in
closer detail and concluded that the cause might have been that men and
women processed the supporting information differently rather than an
inherent ability/difficulty understanding finances.
Complexity and uncertainty

In his paper about how people cope with financial decisions, Fear (2008)
described what Randy Martin has called the financialisation of daily life:
ordinary people are now asked to make complicated decisions that in the
past would have been made by bureaucrats, entrepreneurs or bankers.
Mum and Dad investors are now forced to come to terms with complex
financial concepts and make sophisticated decisions that will ultimately
affect their future standard of living (p. 7).
As mentioned earlier, complexity and uncertainty were both key concerns

for retirees making decisions about how to fund their retirement (ASIC,
2004). For example, when making their decision, most retirees had either
ignored social security and taxation treatments or asked their adviser for
guidance on the best option for them to take due to a perception that these
rules were too complex and/or frequently changing.
They also worried about the uncertainty of future market fluctuations, and
the potential burden of future investment decisions:
I dont want to have another job as an unpaid financial planner and spend
the rest of my life worrying about whats happening (in the markets)
(Recent retiree) (ASIC, 2004, p. 59).
These concerns are unsurprising given the sharp rise in investment

ownership in Australia over recent years, meaning investments such as
shares and managed funds remain relatively unfamiliar to many investors,
and particularly to those who have acquired them passively (e.g. through
demutualisation or compulsory superannuation).
112
Those who were over 55 might have found the decision less difficult because of their closer proximity to retirement.
Page 37
Shares and managed funds are also intangible, which leads some investors to
believe they are more risky than more concrete or familiar investments
such as property:
The stock market is more volatile, whereas real estate is less volatile and
long term and the level of risk is lower. You can be scientific about it.
Property vacant for two weeks every year and add another 5% to
maintenance costs (Female, investment property focus group, Melbourne)
(ASIC, 2008b, p. 38).
This may in part be explained by the availability bias, which causes people
to over-value information that is easy to recall or visualise (Tversky &
Kahneman, 1974).
Underestimating product complexity and/or risk was an important factor in
ASICs research about unlisted, unrated debenture (UUD) investors (ASIC,
2008c), in which some investors were motivated by a false perception that
their investment was comparable to a simple, familiar bank deposit product.
This was the case even though the average self-assessed level of
understanding of the prospectus (which described the product) was as high
as 7 out of 10.
Ironically, the disclosure documents designed to help people make financial
choices are themselves considered complex by many people. In ASICs
research into UUD investors, a number of investors (across different
comparison groups) chose not to read the prospectus or ignored the
information in it. Some felt they didnt or wouldnt understand it, some had
already made their decision, some relied on other factors (e.g. assurances
from the salesperson), and others were uncertain about the validity of the
document:
I make a decision before I read the prospectus; its probably naive of me
But even the prospectus can be full of lies anyway, like in this case, its
only a piece of paper with all this information. Even if you read it they can
tell lies as well (Female, ACR,113 in-depth interview, NSW) (ASIC, 2008c,
pp. 2526).
A number of focus group participants in Fears (2008) research recalled

receiving financial information that was so difficult to interpret that they
suspected financial organisations set out to confuse their customers:
They put in all this legal jargon [into financial documents]. Its a way of
getting people not to read it (5070, Adelaide, lower income) (p. 25).
Research released by the Investment and Financial Services Association

(IFSA) (2008c) also found that terminology can be a significant barrier to
reading a PDSmore significant than document length. It also found that
the role of the PDS was confused, with people viewing it as an education
tool, a reference document and/or a selling tool.
113
Australian Capital Reserve Ltd (Administrators Appointed).
Page 38
Both terminology and length were raised by focus group participants in

ASICs (2008b) investor research:
Unless you are a qualified accountant or some sort of forensic CPA, its
quite difficult to read a companys budget trying to wade through
anywhere between 50 and 250 pages of information, its very difficult and I
know that they do provide an executive summary one pager to
understand some of the finer detail is very difficult (Male, shares (active)
in-depth interview, 3034, Income >$50k, Brisbane).
I get a feel for it, but I find it very confusing, it is all jargon, not in
laymans terms (Female, novice investor: managed investments focus
group, Melbourne) (p. 104).
Time factors and pressures

One of the reasons people give for not reading disclosure documents and
other financial material is a lack of time.
Insufficient time also regularly appears as a barrier to shopping around in
the ANZ financial literacy survey (2008): see Table 11.
Table 11: Reason for not shopping around: Dont have the time
(ANZ, 2008)
Product
Percent who didnt

shop around*
Percent who didnt

shop around
because dont
have the time
Superannuation
28%
8%
Everyday bank account
34%
8%
Loans (other than a mortgage)
30%
8%
Insurance
24%
6%
Mortgage
26%
4%
Financial planner/adviser
41%
3%
Retirement income product
40%
3%
Excludes Cant say responses.
Source: Adapted from ANZ, 2008, pp. 38101.
Recent ASIC (2010b) research into retirees and pre-retirees found that some
people approaching retirement had a life-long pattern of making decisions
on the fly due to a combination of both personality and time pressures.
It is not only complex decisions or actions that are affected by real or
perceived time pressures. For example, time factors featured in an omnibus
survey commissioned by ASIC (2008d) about financial complaints. In this
research, 52% of those surveyed were dissatisfied with their financial
product or service provider in the last two years, but only 29% of those
surveyed had made a complaint in the same period: see Table 12.
Page 39
Table 12: Time-related reasons for not making a complaint to an

unsatisfactory financial product or service provider
(ASIC, 2008d)
Reason
Percent
Waste of time / dont have time/time involved / not worth the

time/effort/bother / too much hassle/trouble
16%
Slow process / takes a long time / takes too long
3%
On hold for a long time / transferred / automated phone service /

waiting to speak to the right person
3%
Source: ASIC, 2008d (based on Newspoll study conducted in June 2008 by phone among
n=1200 adults aged 18 and over nationally).
Competing time pressures is only one of the time factors that affect peoples
financial decision making. Behavioural economists have also described
peoples tendency towards myopiathat is, the further away an event is, the
harder it is for people to appropriately judge (and respond to) it. As a result,
people tend to overvalue things that are immediate and concrete over things
that are distant and abstract. This has obvious implications for peoples
propensity to save for retirement:
For hyperbolic discounters, rewards are left to accelerate quickly, and then
taper off. Put simply, workers who are hyperbolic discounters place a lower
value on future benefits and overvalue the present. The application to
retirement is clear: they will overconsume today and undersave, as a result
of self-control problems when it comes to saving for retirement (Mitchell &
Utkus, 2003, pp. 56).
It is not surprising then that ASIC and industry surveys regularly find
evidence of poor retirement planning, not only in younger populations
(e.g. FINSIA, 2006) but also those approaching retirement (e.g. ASIC, 2010
and MWS, 2006).
Not only can too much time be just as de-motivating as too much choice, but
the more indefinite the future event is, the more difficult it is to act. For
example Tversky & Shafir (1992, cited by Shafir in Productivity
Commission, 2007) conducted an experiment in which they offered
participants $5 for answering and returning a long questionnaire by a given
date. Three groups of participants were each given different deadlines, and
response rates declined the longer the time given:
five days (60%)
three weeks (42%)
indefinite period (25%).
This would help explain why less than half (47%) of the 1217 general investors
surveyed by ASIC in 2007 said they had a long-term financial goal and a plan to
reach that goal, and many (37%) had neither a plan nor a goal (2008a).
Page 40
ASICs retiree (2010, 2004) and investor (2008b) research has also found that
people often underestimate the amount of time they need to plan for events
such as retirement, and as a result find themselves faced with sudden, major
financial decisions after unexpected negative life events such as redundancy,
illness, death or divorce. People are not only often bad planners but their
future forecasts are often characterized by widespread overconfidence and
excessive optimism (Mitchell & Utkus, 2003, p. 22). The cold realisation that
they now need to make an important, life-changing financial decision (and the
emotion generated by the negative life event that precipitated the decision)
drives some to panicked, financially unhealthy choices.
Over (and under) confidence

Overconfidence in financial decision making takes various forms. As in the
example above, behavioural experiments consistently show that people
underestimate the likelihood of negative outcomes. Indeed, Mitchell &
Utkus (2003) report that:
the accumulated psychological evidence regarding overconfidence in
decision-making has been described as the Lake Wobegone effect,
named after a fictional US town described on a popular radio program
where all of the children are above average (p. 23).
In reviewing the available literature, Mitchell & Utkus (2003) explore a

range of biases that lead to overconfidence, including those in Table 13.
Table 13: Overconfidence drivers (Mitchell & Utkus, 2003)
Drivers
Examples
Underestimating the role of

random chance in determining
the future
People are notoriously poor statisticians and

find patterns and trends in data that could just
as easily be explained by random chance.
People significantly underestimate the impact
of random chance on their lives, and in
hindsight overemphasise the degree of control
they have over outcomes.
Lack of objectivity
People generally perceive themselves as

better than others.
Poor risk calculations
People who are 100% sure of their

responses to certain questions are usually
wrong 20% of the time.
Perceived sense of control
The stronger ones sense of control, the more

powerful ones sense of confidence.
Source: Adapted from Mitchell & Utkus, 2003, p. 23.
According to ASIC (2005), estimates of the proportion of uninsured homes

range from 2% to more than 15% of households and the rate of under
Page 41
insurance is much higher. After studying underinsured homes affected by

specific natural disasters, ASIC (2005, 2007b) found that some people had
experienced trouble estimating the future costs of rebuilding their home
when assessing their building insurance and others had made an active
choice to accept a degree of under insurance on their home.
Evidence of these biases is also commonly reported in investor research,
ranging from studies looking at excessive trading (Barber & Odean, 1999,
2001) to local research about the take-up of scams (ASIC, 2002). In the first
example, Barber & Odean (1999) used data from 10,000 randomly selected
accounts provided by an American brokerage house to argue that
overconfidence causes investors to act on misguided convictions and trade
to their detriment (pp. 51, 52). In a later study (2001), they demonstrated a
strong gender trend, with men trading 45% more than women overall, and
single men trading 67% more than single women.
In research about Australians exposed to an international cold calling scam,
ASIC (2002) found that investors not only seriously underestimated the chance
that the out of the blue investment offer was too good to be true, but some
ignored the cautionary advice of others, including family, friends and experts,
due to a belief that they knew better and/or were prepared to take a gamble:
He got his son in law to look up some of the website information provided.
His son in law didnt like it but he convinced himself it was okay
despite the son in laws doubts. He felt it looked like a big company (Male
investor, 5059, draftsman) (p. 58).
He spoke to his accountanthe said once you send your money overseas
you kiss it goodbye. He went ahead because he just had a gut feeling that it
might be alright and you take risks at times (Male investor, 4049, small
business owner) (p. 57).
Again, gender emerged as a key factor, with men more likely to invest and
ignore the advice of others, and women less likely to invest and more likely
to urge caution.
In 2005, the OECD reported that one of the key commonalities across the
financial literacy surveys conducted by 11 OECD countries at that time was
that consumers often believe they know more about financial matters than is
actually the case (p. 91). Therefore, overconfidence not only hampers
peoples financial decisions but also researchers ability to measure financial
literacy levels. This means that financial literacy tests based on selfassessment are likely to overstate levels of financial literacy.
Nevertheless, even self-assessment based surveys reveal evidence of
overconfidence. For example, 69% of the Australians surveyed in the Financial
Literacy Foundations Understanding Money research (2007a) believed they
understood investing and 88% believed they could recognise a scam or an
investment scheme that seemed too good to be true, but only 34% said they
would consider both risk and return when making an investment decision.
Page 42
Perhaps more worryingly, overconfidence may mask or confuse

demographic drivers. For example, findings that women are less competent
and more risk averse might be due to greater awareness of (or willingness to
admit to) what they dont know, rather than comparatively poorer financial
literacy. Similarly, it is difficult to conclude whether (and if so why) women
appear to be more likely to find dealing with money stressful and
overwhelming (FLF, 2008; Clark-Murphy et al, 2002). Further research is
required to test whether (and why) gender differences exist. Without this,
policy makers and financial educators may act on unsound conclusions about
at risk groups.
The flip-side of overconfidence is, of course, under-confidence. While some
people have a healthy awareness of what they dont know and respond
appropriately, others are overwhelmed by it. The de-motivating effects of
under-confidence were described by the professional adviser involved in an
intervention reported by AXA (2007). In this intervention, one-half of the
residents in a British street were offered free professional advice and were
evaluated against those not offered the advice:
I believe that this lack of confidence to make good financial decisions
stems from a belief in some people that they do not possess the necessary
skills, social background, or information to positively affect their financial
wellbeing. Unfortunately, in most instances this appears to lead a person to
make no financial decisions at all, which more often than not turns out to
be a bad decision in itself (Saran Allott-Davey in AXA, 2007, p. 6).
ASICs investor research (2008b) also found that low self-confidence can
lead to inertia:
Thereve been many, many times when I meant to do something and I
didnt have quite enough confidence in what I thought (Male, novice
investor: managed investment focus group, Melbourne) (p. 62).
Others were driven by a fear of failure or, more commonly, a fear of risk:
I dont think its procrastination, just having a fear of failure. No one wants
to fail (Female, novice investor: shares focus group, Melbourne) (p. 62).
Ive got to be careful that I keep enough to live off. Just knowing that its
going to be safe and I dont make any wrong decisions (Female, shares
CATI interview, 5559) (p. 58).
The Financial Literacy Foundation (FLF, 2007a) has identified three possible
paths to a poor or suboptimal financial outcome stemming from either a lack of
confidence, confidence or overconfidence: see Appendix 1 Figure A1.1. They
also described the important interplay between confidence and self-efficacy:
In effect, self-efficacy gives a person a boost in confidence to believe that
they can influence the outcome Self-efficacy is a concept that is closely
related to confidence, but is created through the process of taking action.
Self-efficacy is built on the experience of having mastered and overcome
challenges, and can be characterised as learning by doing. It is not
developed through merely thinking about a situation. For each individual,
the action which builds their sense of self-efficacy will be different (p. 53).
Page 43
Self-control
As in other facets of daily life, people sometimes struggle with self-control
when dealing with their finances. This includes knowing what you should do
but not doing it (e.g. budgeting, saving) and knowing what you should not
do but doing it anyway (e.g. credit card overuse and investing in risky offers
that others have advised against, like the cold calling scam described above).
Although other factors such as income, social norms and other behavioural
biases influence peoples spending habits, self-control is undoubtedly one of
the factors behind the Financial Literacy Foundations (FLF, 2007a) finding
that, while ability to budget is the area in which Australians are most
confident (90%):
48% of adults said they do not budget regularly for their day-to-day
finances
27% had difficulty setting money aside for big purchases or spending
17% could not get by for some time in case of a financial emergency.
Statman (cited in ASIC, 2003) likens peoples financial indulgences to

delicious deserts that harm their waistlines (p. 6). For example, people know
overspending is bad for them but they cant resist. Even when people genuinely
desire to act differently, and are armed with the information necessary to make
that change, they have trouble carrying out their good intentions:
saving for retirement requires behavior similar to those undertaken in
other behavior modification programs such as exercising, dieting, quitting
smoking, or following through on New Years resolutions. It would seem
that while people intellectually understand the benefits of a specific
behavior, and they may even have some idea of how to get started, they
have difficulty implementing their intentions. Too often, they struggle to
take action, and when they do act, their behaviors are often half-hearted or
ineffective (Mitchell & Utkus, 2003, p. 5).
This not only helps explain why people make poor financial decisions (or
neglect to act at all), but also why some financial literacy programs dont work.
For example, Choi et al (2001) found that two-thirds (68%) of their sample of
401(k) retirement plan participants believed their savings rate was too low but:
only 35% intended to increase the rate in the next few months
four months later, only 14% had actually made changes to their plan.
Choi et al also describe a study involving workplace seminars (summarised

in Table 14), concluding that, while financial education does improve
savings outcomes, its effects are modest at best (2001, p. 5).
Page 44
Table 14: Financial education and actual v. planned savings changes

(Choi et al, 2001)*
Seminar attendees
Non-attendees
Planned
change
Actual
change
Actual
change
100%
14%
7%
Increase contribution rate
28%
8%
5%
Change fund selection
47%
15%
10%
Change fund allocation
36%
10%
6%
Planned action
Non-participants
Enroll in 401(k) plan
401(k) participants
The sample is active 401(k)-eligible employees at company locations that offered financial
education seminars from January to June 2000. Actual changes in savings behaviour are
measured over the period from December 31, 1999 to June 30, 2000. Planned changes
are those reported by seminar attendees in an evaluation of the financial education
seminars at the conclusion of the seminar. The planned changes from survey responses
of attendees have been scaled to reflect the 401(k) participation rate of seminar
attendees.
Source: Choi et al, 2001, p. 49.
Framing
The concept of framing effects, first explored in an economic context by
Tversky & Kahneman (1981), essentially refers to the fact that people are
susceptible to the way options are presented to them, a bias that heavily
informs legitimate commercial advertising and is widely exploited by those
who market scams and frauds.
The powerful impact of framing was evident in ASICs research into UUD
investors (2008c). ACR/Fincorp investors in particular were strongly
influenced by the product advertising: see Figure 3.
Page 45
Figure 3: Most influential factor (#1) in investment decision (ASIC,

2008c)
ACR/Fincorp
100
88.1
Active
General
80
60
45.2
37.0
40
26.6
20
20.7
20.3 19.0
3.9
17.3
3.3
13.8
4.7
0
Advertising ranked as #1
Adviser ranked as #1
Associate ranked as #1
Other ranked as #1
ACR/Fincorp=362,Active=261,General=473
Source: ASIC, 2008c, p. 21.
Investors were particularly attracted to the way the messages were framed
around security and certainty.
This framing capitalised on another behavioural bias known as loss
aversion, in which people feel losses more acutely than gains (Tversky &
Kahneman, 1981, 1991). ACR/Fincorp investors were sold safety (i.e. the
prevention of loss) over gain. Indeed, investors often described the fact that
the interest rate offered was modest, and felt this contributed to the
perception that the investment was relatively safe:
I call risk, 10, 12, 14, 16%. I dont call 8% a big risk. Thats why I invested
with them, because I thought it was a steady company and they werent
offering any big money, just a little bit [more than] a bank (Male, ACR,
focus group, NSW) (ASIC, 2008c, p. 27).
The safety theme was also reinforced by the company staff some investors
spoke with:
I think it depends on the salesmanship, because he convinced me the
money was safe...and he gave me a prospectus and he convinced me, thats
it (Female, ACR, in-depth interview, NSW) (p. 23).
Framing was also used to great effect by the marketers described in ASICs
study of Australians approached by international cold calling investment
scams. For example, the language used by the cold callers was carefully
designed to trigger a persons sense of identity and pride:
It is instructive that the cold callers often used the expression capacity
to invest when first making their offers. This wording implies that having
the money is an ability that the person possesses rather than an objective
statement about their finances. This would suggest that the power to invest
had implications about potential investors as people (ASIC, 2002, p. 78).
Framing has also been used to achieve positive financial outcomes. For
example, behavioural economists have attempted to lift savings rates by
Page 46
shifting retirement plan defaults from a voluntary opt-in option to an

automatic opt-out option, a method that capitalises on inertia and
procrastination more broadly:
This simple rephrasing of the saving question elicits a dramatically
different response in plan participation rates. Madrian and Shea (2001)
have powerfully shown that when workers are required to opt-in, the
default decision (or the non-decision) is to save nothing; by dramatic
contrast, with automatic enrolment, the default decision proves to be that
people save at the rate specified by the employer. For one large US firm,
plan participation rates jumped from 37 percent to 86 percent for new hires
after automatic enrolment was introduced What this suggests, in the end,
is that many workers do not have particularly firm convictions about their
desired savings behaviour. Merely by rephrasing the question, their
preferences can be changedfrom not saving to saving (Mitchell & Utkus,
2003, p. 8).
More recently, the ANZ (2009) examined framing effects in an evaluation of

its Saver Plus program. Saver Plus was developed to help people on low
incomes establish a long-term savings habit. The program works by
matching peoples savings dollar-for-dollar once they reach their savings
goal to a maximum amount.114 They discovered both positive and negative
implications of the $1000 maximum matched amount and the way it was
communicated, which are summarised in Table 15 below.
Table 15: The framing effects of the ANZ Saver Plus $1000 matched amount (ANZ, 2009)
Positive
Negative
$1000 was seen as a target set by knowledgeable

experts, which implied it was both a reasonable
and achievable aim for participants.
It discouraged some from setting a goal at lower

amounts (i.e. some felt that setting a goal of $500
was not taking full advantage of the available
matched funds).
It matched well with the cost of a laptop, which for

many participants was a desirable reward.
It bought acceptance of the application process
and of being asked personal questions (i.e. the
reward outweighed the hassle of joining).
It was viewed as large enough to enable a
significant purchase without necessarily having to
dip into the participants own saved funds.
Some felt $1000 was an unattainably large goal and

therefore avoided the program (note, however, that
this initial perception emphasised the importance of
dedicated relationship managers framing the goal
in terms of saving small amounts over time rather
than the larger and psychologically bigger barrier of
115
the total amount).
Source: ANZ, 2009, p. 9.
114
The maximum matched amount was $1000 at the time the research was conducted. This amount was subsequently
reduced to $500.
115
The relationship managers worked closely with the Saver Plus participants to help them set and achieve their savings
goal. The relationship managers were from community organisations, including the Brotherhood of St Laurence, the
Benevolent Society and the Smith Family.
Page 47
How to change behaviour
Key points
Although the financial literacy movement has gained momentum over the
past few years, there remains little reliable, conclusive research about
whether financial literacy campaigns and programs work (i.e. whether they
result in sustained changes in behaviour and improved financial outcomes).
Best-practice principles for program and evaluation techniques are still
developing, and it is widely recognised that both are inherently difficult.
In the interim, the established principles of social marketing, frequently
used in health and environmental fields, provide a practical big picture
framework for financial literacy-based behavioural change initiatives.
Simply providing comprehensive and well intentioned education resources

will not be adequate. There is no shortage of quality resources available
already to consumers with an active interest in building their money skills
(FLF, 2007a, p. xii).
As described in Section C, improving peoples knowledge will not

automatically improve the quality of their financial decisions. Nor will the
provision of information, or even the benefit of experience, necessarily
improve knowledge. The problems financial literacy seeks to address are
multifaceted. Accordingly, the tools used to change behaviour need to be
multifaceted. This section looks at some of the documented tools used to
date and identifies gaps that need to be addressed in the future.
Evaluation to date
Robust evaluation is essential to draw reliable conclusions about financial literacy
interventions. Without evaluation, an intervention is unproven. Without
appropriate evaluation, an interventions impact might be misinterpreted.
A recent review of financial literacy research by Agarwal et al (2010)
concluded that:
... it is not clear that effective programs improve behaviour through
increased literacy, whether programs are cost-effective, or which types of
programs are most effective. Answering these questions will require a great
deal more research. Fortunately, the recent proliferation of financial
education programs provides ample opportunity to conduct such research.
However, the designs of existing programs are rarely conducive to robust
impact evaluations (Agarwal et al, 2010, p. 25).
In 2008, the Financial Services Authority (FSA) released a review of over 70

evaluations of financial capability strategies in the United Kingdom and
Page 48
abroad.116 It found little evidence that could be used to draw broader

conclusions about which strategies work, and no systematic testing of the
delivery methods used to increase financial capability. These findings
echoed the results of a similar review prepared by OConnell for the NZ
Retirement Commission in 2007, which found that:
little evaluation is currently taking place, and the evaluations made so
far show mixed and inconclusive results. It is not clear whether this is a
consequence of poor evaluation methods or poor programme design, or,
that financial education works patchily. But it does mean that a positive
impact from financial education has not been unambiguously proven; nor
has a clear picture emerged of what works best and why (OConnell for the
NZ Retirement Commission, 2007, p. 1).
The types of design shortfalls identified in these and other reports include:
no evaluation at all
evaluation as an afterthought (e.g. instrument delivered after program

delivery only) rather than thoughtfully planned and fully integrated into
the program (e.g. before, during and after program delivery)
unstated or unclear objective(s)
poor administrative records (leading to difficulties tracking program

participants)
absence of a control group to help determine causal factors
absence of a baseline measure117
focus on output measures (e.g. number of programs) rather than

outcome measures (e.g. underlying knowledge or behavioural change)
using a short-term measure for a long-term strategy
using knowledge as a proxy for behavioural change
over-reliance on (unreliable) instruments based on self-assessment
selection bias/non-random samples/unrepresentative samples
poor response rates/sample sizes.
A US study by Lyons et al (2006), which also concluded that evaluation

techniques are falling short at a time when funders expectations are
increasing, recommended that educators develop a more standardized and
consistent approach to program evaluation, but one that is also realistic and
flexible enough to account for the wide variation in programs (p. 209). The
FSA review and the NZ Retirement Commission review go one step further,
each offering practical suggestions for program evaluators.
116
Atkinson for the FSA (2008).

In 2005 the OECD identified 15 countries that either had conducted, or were planning to conduct, surveys to identify
levels of financial understanding. According to OConnells review (2007), most of these covered a particular target segment
rather than a national population and Australia, New Zealand and the United Kingdom appear to be the only countries with
national baseline surveys.
117
Page 49
The FSA review, which distinguishes process and outcome evaluation,

presents a list of best-practice requirements for the latter: see Table 16.
Table 16: Suggestions for best-practice outcome evaluation
(FSA, 2008)
Evaluation requirements
1.
Outcome evaluation designed before the program is implemented.
2.
Clear objectives of the project and the evaluation (including identification

of the target audience).
3.
Good quality data, including administrative records. This should be

focused on key measures and background information to reduce the
burden on program participants and providers.
4.
Quantitative data collection with a high response rate giving a sample

that is broadly representative of the target population.
5.
Careful consideration of the sample size, taking into account the analysis
that will be needed to understand the outcomes.
6.
Well-designed data collection instruments that are appropriate to the

target group and to the initiative under evaluation and the outcome being
measured.
7.
A benchmark measure of knowledge, attitude and behaviour (before the

initiative) and follow-up measures to identify change at various points
after the initiativeidentifying immediate and sustained change.
8.
Consideration of the time period necessary to identify change, balanced

with consideration of the likelihood of collecting reliable data over
extended periods of time.
9.
A control group to show the normal changes that take place in the
absence of such an initiative.
10.
When reporting results:

make it clear to the reader exactly what the initiative set out to achieve,
how the evaluation was designed, and what weaknesses are apparent
in that design
report outcomes that relate clearly to the initiative
explain the choice of any scoring method used to summarise
outcomes.
Source: Adapted from Atkinson for the FSA, 2008, p. 12.
The NZ Retirement Commission review presents a possible evaluation

framework, adapted from Jacobs (1988) Five-tiered approach to program
evaluation (see Table 17) and advocated by Fox et al (2005) and Fox &
Bartholomae (2008). Fox & Bartholomae felt Jacobs model was particularly
appropriate because it could potentially address a myriad of program goals and
objectives regardless of the programs stage of development (2008, p. 64).
Page 50
Their vision was to interweave evaluation into the program itself, making good
programming a part of good measurement and vice versa (p. 65).
Table 17: Suggested framework for the evaluation of the effectiveness
of financial education* (NZ Retirement Commission, 2007)
Tier
Requirements
1. Need
What objectives does the program address?

knowledge and/or behaviour
particular target group(s) or national population
similar/difference needs.
2. Accountability
How much is the program used and how much does it

cost?
cost side of value for money
attendance/user numbers
cost per unit.
3. Fine-tuning
How could the program be improved?

which elements work best and why?
satisfaction surveys (participants and administrators).
4. Micro impact
How effective is the program against its objectives?

benefit side of value for money
measures must match Need (1).
5. Macro impact
What impact is the program having relative to the big

policy picture?
how does it compare against other initiatives?
measures must match Need (1).
Adapted from Jacobs (1988) Five-tiered approach to program evaluation as presented in

Fox et al (2005)
Source: OConnell for the NZ Retirement Commission, 2007, p. 22.
Notwithstanding these suggestions, both the UK and NZ reviews caution that

evaluation of financial education is inherently difficult, and the impact of
any one programme can probably never be fully isolated (OConnell for the
NZ Retirement Commission, 2007, p. 1). Financial literacy is a long-term
goal and, like any long-term behavioural change strategy, it is subject to a
wide array of causal factors and a constantly shifting external environment.
Since the UK and NZ studies, the OECD has identified the development of
best practice guidelines to support evaluation of financial education
programs as a top priority and established a dedicated Measurement subgroup under its International Network on Financial Education (INFE).118
118
For more information about the INFEs initiatives, including its guidelines, see:
www.oecd.org/document/50/0,3343,en_39665975_39666038_39711282_1_1_1_1,00.html.
Page 51
The UK and NZ reviews also recognise that robust evaluation is costly and
time-consuming, a key concern for American financial professionals and
educators surveyed by Lyons et al in 2006: see Table 18. Unfortunately the
cheapest and quickest method of evaluation (i.e. a simple satisfaction
survey) is the least reliable.
Table 18: Barriers and challenges associated with program evaluation
(Lyons et al, 2006)
Barriers and challenges
Percent
Most common barriers and challenges:*

Not enough time
59.5%
Conducting follow-ups with program participants
52.3%
Limited financial resources
48.3%
Difficult to motivate program participants to complete

evaluation
38.9%
Lack of existing evaluation materials and resources
34.6%
Lack of attention paid to evaluation
29.9%
Do not feel comfortable conducting a program evaluation
8.1%
Other barriers and challenges:
N/A
Lack of support by administration for program evaluation

Administrators have lack of understanding of the role of
education
Lack of manpower
Obtaining funding to support program evaluation
Participants lack of interest in evaluation
Difficult to track participants over time to show program impact
Preparing evaluations for low-literacy and non-English
speaking audiences
Developing consistent measures and standards to make
comparisons across programs
Lack of personal expertise in evaluation
Developing consistency with program delivery and the
evaluation process
Collecting consistent data and aggregating it at the state and
national level
Analyzing data and showing program impact with the data
Difficult to create a standard evaluation process with a wide
range of programs and audiences
Lack of existing evaluation materials and resources
*
n=321; multiple answers were allowed.
Source: Selected extract from Lyons et al, 2006, p. 229.
It is presently difficult to judge whether the benefits of financial literacy

interventions outweigh the costs, and indeed some have actively challenged
the value of financial literacy education in particular. For example, Willis
Page 52
(2008) argues that the effectiveness of financial literacy education lacks

empirical support and the pursuit of financial literacy poses costs that
almost certainly swamp any benefits (including non-monetary costs) (p. 3).
Instead, Willis believes the search for effective financial literacy education
should be replaced by a search for policies more conducive to good
consumer financial outcomes (Abstract).
A 2008 review the FSA commissioned into the implications of behavioural
economics for financial capability also questions the merits of financial
literacy education in favour of other approaches:
Overall, there is a lack of direct evidence that the National Strategy for
Financial Capability will substantially improve long-term financial decision
making. The indirect evidence from behavioural economics is that low
financial capability is more to do with psychology than with knowledge.
Institutional design and regulation are probably far more effective than
education, though crisis counselling may be helpful. More research is
needed on whether cognitive biases can be overcome in the personal
finance domain (de Meza et al for the FSA, 2008, p. 4).
While not going so far as to abandon its financial capability initiatives, the
FSA endeavoured to take into account these findings when undertaking
costbenefit analysis.
Since then, it has established the Consumer Financial Education Body
(CFEB), a body responsible for helping consumers understand financial
matters and manage their finances better. The CFEB is committed to
examining behavioural change programs and commissioned a study by
Elliott et al (2010) that examined a number of financial capability
interventions. The study concluded that there was enormous scope to alter
the [decision] environment in a way that encourages greater levels of
financial capability and that, while the process was at an early stage,
wellstructured research leading to interventions being implemented and
evaluated to ensure that the desired creation of financial capability is taking
place was an essential element (p. 71).
Campaigns (key social marketing principles)

Financial literacy seeks to address something the Australian Public Service
Commission (APSC) has termed a wicked problema complex policy
problem that goes beyond the capacity of any one organisation to
understand and respond to and attracts conflicting views about the causes
of the problems and the best way to tackle them (APSC, 2007a, p. 1). While
acknowledging that tackling wicked problems is an evolving art, the APSC
has recommended that a collaborative, innovative and flexible approach is
needed to address such problems (APSC, 2007a, p. 35).
Page 53
In a related paper, Changing behaviour: A public policy perspective (2007b),

the APSC emphasises the need for governments to go beyond a rational choice
model that assumes people rationally seek to maximise their welfare and
instead attempt to address behaviour at the individual, interpersonal and
community levels (APSC, 2007b, p. 7). The APSC also advocates social
marketing as a useful practical tool in influencing peoples behaviour.
While the definition and scope of social marketing is fluid, it essentially
refers to the use of marketing techniques to influence and improve personal
and social wellbeing. In a literature review commissioned by ASIC, Flowers
et al defined social marketing as simply:
An organised effort by one group that is designed to persuade people in
another group to change their social beliefs, attitudes and behaviours
(Flowers et al, 2001, pp. 5, 29).
In Australia, much of the literature about social marketing appears within the
health field. Below are the 12 key principles of an effective social marketing
approach devised by Kotler and Lee and advocated by the APSC (2007b,
pp. 2126). These principles are supplemented with finance-based findings
from other relevant sources.
1. Take advantage of prior and existing campaigns

The planning stage of a social marketing campaign should include reviewing
the efforts of others, including both successes and failures. There are a
number of ways this can be done, including networking directly with other
agencies and simple internet research. For example:
119
Tools of Change (www.toolsofchange.com) is a Canadian website that

contains 100 case studies of public campaigns designed to change
behaviour.
There is also a social marketing wiki, which includes resources and a

discussion forum: see www.socialmarketing.wetpaint.com.
The OECD has a website listing some of the available research about
financial literacy, called the International Gateway for Financial
Education (IGFE).119
The Social Marketing Downunder website has a number of Australian

and New Zealand case studies and research papers: see
www.socialmarketing.co.nz.
The IGFE is available at: www.oecd.org/pages/0,3417,en_39665975_39666038_1_1_1_1_1,00.html.
Page 54
In 2001, ASIC commissioned Flowers et al to review the literature on

effective education techniques. While they found conflicting views about the
most effective way to conduct a social marketing campaign, a central
feature of most campaigns [was] the need to recognise the diversity of
peoples backgrounds and experiences (Flowers et al, 2001, p. 38).
Helpfully, Flowers et al also identified examples of what doesnt work. For
example, Quay Connections (2001) reviewed 40 Australian social marketing
campaigns and concluded that campaign failures were most commonly due to:
inadequate market segmentation and failure to tailor or target messages

according to market segmentation
lack of clarity in messages
doubts about message credibility
inadequate levels of community involvement
lack of coordination with or involvement from key stakeholders,

partners or champions
inadequate lead time to develop relationships with community groups,

stakeholders or partners
failure to capitalise on developments in the broader environment

(cited in Flowers et al, 2001, p. 34).
2. Target people most ready for action

Social marketing suggests that the most efficient way to prioritise resources
is to focus on those most likely to change. One common way to classify and
identify people is the stages of change model, sometimes referred to as the
transtheoretical model of change (TTM). People do not necessarily move
through these stages in a linear direction and may be caught in one stage for
long periods of time. The model is also applied at a program level (e.g. credit
counselling (Xiao & Wu, 2006)).
Table 19: Stages of change model
Phase
Characteristics
Pre-contemplation
Oblivious to or in denial about need to change.

No intention to change behaviour.
Contemplation
Beginning to think about changing, and might be

aware of the need for and/or the benefits of change.
No commitment to change behaviour.
Preparation/action
Commitment to new behaviour and possibly some

observable change in behaviour but new behaviour
is not yet habit.
Page 55
Phase
Characteristics
Maintenance
Maintaining commitment and regularly performing

new behaviour but managing/avoiding relapses.
Termination
New behaviour is a fully integrated habit.
Source: Adapted from information in APSC, 2007b; Xiao & Wu, 2006; ONeill et al, 1999.
The TTM was developed by Prochaska et al.
Existing research indicates that Australians generally support the idea of financial
literacy, including government involvement (Fear, 2008), and have some appetite
for financial education across a range of money topics: see Appendix 1 Table
A1.15. However, as demonstrated in Section C, people dont necessarily know
what they dont know and they have trouble carrying out their good intentions.
This also makes it difficult to assess existing findings.
For example the Financial Literacy Foundation (FLF, 2008) found that 68%
of women believe it is important for them to learn more about how to invest
money now, yet ASIC (2008b) research found that only 8% of female
investors have attended paid training courses or seminars. Given the many
possible reasons for these conflicting results (e.g. social desirability bias, low
confidence, competing priorities, a preference against group learning, limited
time, cost restraints), caution must be exercised when assessing which stage
of change particular groups and/or individuals are in.
3. Promote single, doable behavioursone at a time

As discussed in Section C, people can become bewildered by too much
information and choice, leading to inertia and/or ineffective actions.
Therefore a successful social marketing campaign must promote simple,
clear messages. Where messages are complex, they should be broken down
into single steps or calls to action (e.g. ring this hotline, visit this
website). These simple, action-oriented messages are particularly important
for those in the contemplation or preparation/action stages of change.
This was a method used by the Financial Literacy Foundation (FLF, 2006) in
its Understanding Money media campaign. The aim was to raise awareness
about the importance of managing money and the call to action was to visit
the Understanding Money website. Over the 19 weeks of the campaign,
243,691 people made 333,381 visits to the website and the most popular
parts of the site were activity-related:
the budget planner (86,270 visits)
ordering the handbook (54,081 visits)
the financial health check (59,983 visits).
Page 56
4. Identify and remove barriers to behavioural change

Sustained, widespread behavioural change is unlikely if barriers, such as
those identified in Section C, are not addressed. While this principle is
usually directed at environmental barriers rather than the individual, it is
important to identify the reasons why a particular target group feels unable
or unwilling to carry out the desired behaviour.
Given the nature of the barriers raised in this report, we need to recognise
that single measures (e.g. a large-scale advertising campaign) are unlikely to
work in isolation, and that education is only one tool in the behavioural
change toolbox. Other regulatory responses might include, for example:
helping raise the quality of (and access to) personal financial advice
improvements to disclosure
addressing misleading advertising.
We also need to remember that ASIC is only one player in the cause to
remove barriers. The financial wellbeing of Australians is the responsibility
of a wide range of stakeholders, including industry, government,
communities and individuals. Where possible (and appropriate), we should
aim to pool resources and establish a consistent voice.
Interestingly, the work of behavioural economists provides us with an
opportunity to turn barriers into advantages. Based on the argument that
departures from rationality are often, though not always, systematic (Barber &
Odean, 1999), some have designed interventions that use the same behavioural
biases that currently hinder peoples financial decisions to instead improve their
financial outcomes, a strategy referred to as libertarian paternalism (Thaler &
Sunstein, 2008, p. 4).
Specific examples are covered later in this report under the discussion about
programs (see pp. 6269) but they include:
soft compulsion (e.g. opt-out defaults)
self-commitment devices (e.g. agreeing to a future automated debit into

a savings account).
Thaler & Sunstein (2008) argue that people need these nudging devices
for decisions that are difficult and rare, for which they do not get prompt
feedback, and when they have trouble translating aspects of the situation into
terms that they can easily understand (p. 72).120
120
Thaler & Sunstein (2008) define the term nudge as any aspect of the choice architecture that alters peoples behaviour
in a predictable way without forbidding any options or significantly changing their economic incentives (p. 6). The word
nudges also stands for the six principles Thaler & Sunstein recommend for choice architects when designing systems to
improve peoples financial (or other) outcomes:
iNcentives; Understand mappings; Defaults; Give feedback; Expect error; Structure complex choices (p. 100).
Page 57
Again, while these theories and experiments are promising, there is

consensus (even among those who support behavioural economics) that it is
presently difficult to integrate behavioural economics into policy (Sandlant,
2007; Frijters in Productivity Commission, 2007).121
5. Bring real benefits into the present

As discussed in Section C, the long-term nature of many financial decisions can
be especially difficult for people to conceptualise and process (e.g. retirement
savings, mortgages and life insurance). In the face of widespread myopia, and in
the interests of presenting messages in the most compelling way possible,
campaigns need to emphasise the benefits of the new behaviour (and the
disadvantages of the old behaviour) as close to the present time as possible.
This is a strategy increasingly used in health campaigns:
physicians reportedly lament the fact that warning about the risk of skin
cancer from excessive sun exposure is less effective than warning about
sun exposures tendency to cause acne. In fact, quit smoking campaigns
have begun to stress the immediate benefits of quitting (quick reduction in
chances of heart attack, improved ability to taste foods within two days,
and so on) more prominently than the substantial long-term benefits
(Shafir in Productivity Commission, 2007, p. 18).
Although it is a long-term investment, superannuation is one area in which

there is scope to improve peoples appreciation of the benefits involved. For
example, ASICs retirement decision research (2004) found that even recent
retirees misunderstood the tax benefits of superannuation and allocated or
life pensions/annuities.
More recently, the latest ANZ financial literacy survey (2008) found that
27% of people were unsure whether or not super was taxed at a higher or
lower rate than other investments (only 58% thought it was taxed at a lower
rate). Similarly, Table 20 shows that important superannuation advantages,
such as the governments co-contribution scheme, are poorly understood. This
scheme is an example of one that could focus on the immediate part of the
benefit (i.e. the free money that goes into the fund sooner rather than later).
121
For a summary of some of the ways in which behavioural economics might be applied to policy, see Behavioural
economics: seven principles for policy-makers (Dawnay & Shah, 2005).
Page 58
Table 20: Awareness of advantages of superannuation over other

investments (ANZ, 2008)
Advantages
Percent*
Tax-related advantages:
Lower tax/favourable tax treatment of contributions
30%
No tax on payments if youre 60 years or older
8%
No tax on superannuation fund if its paying a pension
6%
Nature of investment:
Money is locked away so you cant get at it
29%
Secure/safe/low-risk
15%
Long-term investment gives good return
7%
Other advantages:
Government co-contribution
9%
Compulsory, regular contributions
6%
All other responses
6%
Cant say**
20%
The sample for this question included only superannuation fund members who were
under age 65 (n=766).
**
More common among young people aged 18 to 24 years (35%) and members of
Quintile 1 (46%) and Quintile 2 (34%).
Source: Selected extract from ANZ, 2008, p. 77.
6. Highlight costs of competing behaviours

Messages should emphasise what will happen to the target audience if they
continue to engage in the old, undesirable behaviour. As described in Section C,
people are sensitive to the way messages are framed and tend to weigh losses
about twice as much as gains. Therefore, focusing on what might be lost by
failing to act might prove more successful than emphasising gains.
However, negative messages in isolation might feed the very emotions that are
causing peoples inertia in the first place (e.g. under-confidence, fear, regret,
hopelessness). We must carefully balance negative and/or confronting messages
with tangible, straightforward counter actions that the audience feels are within
their reach: see principles 3 and 7. Indeed, evidence from health campaigns
indicates that consumers tend to understand, value and respond to messages of
fear, threat or risk when they believe they are personally relevant and when they
are accompanied by brief, simple and feasible solutions (Flowers et al, 2001).
Page 59
7. Promote a tangible object or service to help target

audiences perform the behaviour
Tangible objects or services such as helplines are believed to provide encouragement,
remove barriers and create more attention, appeal and memorability.
In the United Kingdom, the Thoresen Review (2008) examined the feasibility of
delivering a national generic financial advice tool and concluded that significant
benefits would flow from a multi-channel (phone, web and face-to-face) Money
Guidance service to help people with a wide range of money matters.
Nevertheless, the United Kingdoms AXA Avenue intervention, in which
one-half of the residents in a British street were offered free professional
advice and were evaluated against those not offered the advice, found that
even those given free professional advice struggled to remain engaged:
Filling in the forms was such a chore. It was like doing homework. This
was a recurring theme and highlights how difficult the task is for anyone
interested in improving the nations financial understanding. Unless there is
a promise of some sort of tangible financial gain, or alternatively the threat
of a supervisor or parental figure who checks, people do not have the
inclination to take control of their finances. There are too many distractions
in life (AXA, 2007, p. 15).
8. Consider non-monetary incentives in the form of

recognition and appreciation
This principle suggests considering what can be given to the target audience
in recognition and appreciation of their behavioural change. Non-finance
examples include:
a window sticker for businesses that adopt environmentally friendly practices
a letter from a community health clinic congratulating a client on being

smoke-free for 30 days.
These methods are often less expensive than direct monetary incentives and
have the added benefit of social proof, in which the behaviour becomes
desirable among, and spreads within, peer groups.122 They also act as useful
reminders for those trying to avoid relapses.
As well as considering innovative non-monetary incentives to recognise and
reward those who take steps to improve their financial wellbeing, ASIC
could make use of its existing non-monetary resources. While not linked to
actual changes in behaviour, anecdotal evidence suggests that some
Retirement Expo attendees visit the ASIC stall because they are attracted to
ASICs FIDO showbags (e.g. they have seen other expo attendees with the
bags). Anecdotal feedback also suggests that some of the booklets in the
122
For more information about the important role of social networks in changing behaviour see the APSCs (2007b)
discussion about social capital theory (p. 17). See also Brobecks (1999) discussion about the tipping point, which is said to
occur when approximately half the community have changed their behaviour (p. 7).
Page 60
showbags are not only read by the expo attendees but also recommended and
passed on to family members and/or friends.
9. Have a little fun with messages

While using humour and fun can be risky, used appropriately it is very
effective at securing attention, appeal and memorability.
Scam campaign research commissioned by the Australasian Consumer Fraud
Taskforce (ACFT, 2008) suggests that the use of personal stories is also an
important and valuable tool to engage the audience with the campaign
messages.
Creative use of channels is also effective. The Monetary Authority of
Singapore (MAS) delivered its national financial education program,
MoneySENSE, through innovative games, including a TV game show which
attracted 1.3 million viewers and led to an increase in demand for its
MoneySENSE talks (ASIC, 2008e, pp. 89).
Messages need not only be delivered directly to the target audience. For
example, they might reach the target audience through a respected third
party (e.g. a family member, friend, employer, teacher or community leader).
Indeed, research suggests that messages can be particularly powerful when
they come from someone the target audience knows and/or identifies with:
People are more likely to hear and personalise a message that may result in
changing their attitudes and behaviour if they believe the messenger is
similar to them in lifestyle and faces the same concerns and pressures
(Sloane & Zimmer, 1993 cited in Saunders & Sampson, 1998, p. 29).
Similarly, in its survey of Australian investors, ASIC (2008a) found that 8% of

investors who had attended a paid investment seminar did so because friends
(4%) or family (4%) had recommended it or invited them along.
10. Use media channels at the point of decision making

Sometimes the best time to engage with a target audience is when they are
about to choose between alternative, often competing, behaviour. This is the
rationale behind graphic warnings on cigarette packets and prominent logos
such as the Made in Australia symbol on locally produced products.
ASIC might, for example, run advertisements in the same section of the
newspaper as risky investments. After research found that UUD investors
testing a new ASIC investor guide would expect to see the guide before they
invested (distributed by the debenture issuer along with the prospectus),
ASIC has encouraged issuers of UUDs to do just that.
However, care must be taken when assessing the point at which a decision
will be madesome decisions are formed instantly and some over time.
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Indeed, Consumer Affairs Victoria (2006) has noted that information

disclosed as consumers make a final commitment to a deal may be too late
because the consumer is already locked in to a decision (p. 11).
11. Get commitments and pledges

This principle is based on the belief that commitments and pledges to
perform a particular behaviour can significantly increase the likelihood that
the target audience will change their behaviour. Tips to increase the
likelihood of a successful commitment include:
start with small requests (research suggests that people who agree to
small changes are more likely to agree to a subsequent larger change)
written commitments stick better than oral ones
where possible, it is best to facilitate a commitment with face-to-face

interaction
seek commitments in groups (e.g. ASICs staff speaker events,

workplace training, school classrooms)
seek commitments at existing points of contact
use durable forms and formats to display commitments.
12. Use prompts for sustainability

Reminders are an important tool to help fight procrastination and inertia.
They work best for those who have already started to engage in the new
behaviour (e.g. those in the action and maintenance stages of change). They
are often visual (e.g. posters, signs, packaging labels) but not necessarily so
(e.g. could be delivered via follow-up calls, emails or online newsletters).
UK research group Decision Technology (2007) suggest that, because
people are more likely to continue with tasks that make them feel good,
prompts should aim to provide positive feedback and might even compare
peoples progress against under-performers to sustain motivation.
Personal reminders and prompts may have other benefits. For example,
research conducted by Deloitte Eclipse for the Financial Literacy Foundation
(FLF, 2007b) suggests that the more personalised a website is, the more
likely people are to return to it.
Programs
The number of programs dealing with financial literacy has risen steadily in
recent years. While some of these programs have not recorded or reported
Page 62
their outcomes, Table 21summarises the types of programs reported locally

and abroad.123
Some programs are targeted at broad populations (e.g. the general public)
and others at very specific groups (e.g. people in the defence forces).
Overall, the most common topic appears to be savings (e.g. everyday
budgeting/savings and retirement savings).
The tools used to deliver financial education programs vary widely and
warrant further testing and research:
There has been no systematic testing of the delivery methods used to
increase financial capability. This is a serious oversight. The process
evidence that is available indicates that classroom or workshop delivery
depends on the quality and suitability of the teaching materials available
but also on the confidence of the teacher or facilitator. We know virtually
nothing about the factors that might influence the success or failure of
schemes using other forms of delivery (Atkinson for the FSA, 2008, p. 73).
Table 21: Nature of existing financial literacy programs
Target audiences
Topics
Delivery tools
General public
Budgeting/savings
Online resources/training
School children/teenagers
(primary and high school)
Credit/debt management
Group/classroom training
Investment/retirement planning
One-on-one training/coaching
Employees/workplaces
Home ownership
Printed materials
Special audiences (e.g. lowincome, defence forces, new

parents, young adults, elderly)
Insurance
TV/film
Tax
Mixed methods (including

combining education with new
product design/features)
Mixed (bundled) topics
Program aims vary: sometimes they seek to improve knowledge, sometimes

behaviour, sometimes both, and sometimes it is unclear. Some rely on
financial education only, and some have other elements such as personal
guidance or matched savings schemes.124 As mentioned earlier, programs are
not always evaluated (or properly evaluated) or informed by pre-research
about the target market.
Some program evaluations are returning negative results. For example, the
US Jump$tart schools study has found that teenagers who do a personal
finance course perform slightly worse in a program exam than those who
havent done the course (Mandell, 2006). More recently, an analysis of a set
of state-mandated financial literacy education programs in the United States
123
For more comprehensive information about the scope of the programs in the United States specifically, see Appendix 1
Table A1.19. For a review of programs in the 27 European Union (EU) member states, see Evers & Jung (2007).
124
A local program called Saver Plus, which was developed by the ANZ and the Brotherhood of St Laurence for those on
low incomes, has all three of these elements (Russell et al, 2008a, 2008b).
Page 63
revealed they had no effect on individual savings decisions (Cole & Shastry,
2008). Possibly the benefits of these programs, and in particular schoolbased interventions, will appear in the longer term. Indeed, this was
Atkinsons (2008) conclusion in her review of financial literacy evaluations
for the FSA:
In the shorter term there may be some improvement in confidence but the
evidence that is currently available suggests that only the very youngest
gain financial knowledge through school interventions. Rather, it appears
that the main impact of school financial education is to improve behaviour
in adulthood (p. 73).
This further supports the need for well-designed evaluation techniques.

Without them, it is difficult to draw reliable conclusions about the
programa negative result might be due to poor evaluation design rather
than poor program design and, conversely, positive results may reflect
incorrect measures rather than real successes.
Again, the best measure isnt always the easiest or cheapest measure. The
FSA review found that most evaluations that have identified measurable
outcomes appear to have focused on savings behaviour, but it is not clear
whether this is the easiest behaviour to change or the easiest to measure
(Atkinson for the FSA, 2008, p. 73). Overall, the review found that the
evidence for improvements to money management and planning ahead
was stronger than improvements in the other financial capability areas such
as staying informed (the area that includes knowledge), but that it was
possible that short-term improvements in knowledge might only be retained
through hands-on experience.
There is also evidence that some education interventions have unintended
positive outcomes. For example, the FSA review observed that some workplace
seminars designed to increase peoples likelihood of saving for retirement have
also positively impacted recruitment and retention. Nevertheless, Choi et al
(2001) (see pp. 4445) argue that seminars alone (or at least the type of
seminars tested) only make a modest difference to behaviour:
Most employees feel that they save too little, and many plan to raise their
contribution rate in the near future, but few act on these good intentions. By
contrast, employees do succeed in raising their contribution rates if they are
given a low effort opportunity to sign up for an automatic schedule of
increases in their contribution rate. All of these examples have a common
theme: employees often take the path of least resistance (p. 32).
For this reason, some financial interventions have incorporated findings from
behavioural economics. While still voluntary, these programs are designed to
help people to who want to save more but lack the willpower to act.
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Save More Tomorrow (SMarT)

One key example is Thaler & Benartzis (2004) trial of the Save More
Tomorrow (SMarT) program in which employees commit in advance to
allocating some of their future salary increases toward their retirement
savings. The design of the program takes advantage of three behavioural
biases in particular: see Table 22. Importantly, the employee can opt out of
the plan at any time, which is designed to make them feel more comfortable
about joining and also gives them some degree of choice.
Table 22: SMarT program (Thaler & Benartzi, 2004)
Behavioural bias
How SMarT aims to address/use bias
Hyperbolic
discounting
Employees are approached about increasing their

contribution rates a considerable time before their
scheduled pay increase. Because of hyperbolic
discounting, the lag between the sign-up and the startup dates should be as long as feasible.
Loss aversion
If employees join, their contribution to the plan is

increased, beginning with the first paycheck after a
raise. This feature mitigates the perceived loss
aversion of a cut in take-home pay.
Inertia/status quo
bias
The contribution rate continues to increase on each

scheduled raise until the contribution rate reaches a
preset maximum. In this way, inertia and status quo
bias work toward keeping people in the plan.
Source: Thaler & Benartzi, 2004, pp. 170171.
This program has been tested in the United States across three different
firms, each under slightly different conditions (e.g. some gave employees
access to a one-on-one financial consultant and some didnt).
The first firm, a manufacturing company, initially gave eligible employees
the opportunity to speak with an external investment consultant about their
retirement savings levels. Of the 315 eligible employees, 286 agreed to talk
to the consultant. However, only 79 (28%) were willing to accept the
consultants advice. The remainder were given the opportunity to join the
SMarT plan instead, of which 162 (78%) did.
The results for this group were very positive, and have remained positive,
over four subsequent pay increases:
Most participants did not change their mind once the savings increases
took place:
80% remained in the plan through all four pay increases
Page 65
three participants (2%) dropped out of the plan prior to the second pay
increase, 23 (14%) dropped out between the second and third pay
increases and six (4%) between the third and forth pay increases.
Even those who withdrew from the plan saved significantly more than
before the plan (i.e. they did not reduce their contribution rates to the
original levels but rather stopped future increases from taking place).
Those participating in the SMarT plan ended up with a much higher

saving rate than those who accepted the consultants recommendation.
SEED (Save, Earn, Enjoy Deposits)

Ashraf et al (2005) had similar success with a commitment savings program
tested in the Philippines called SEED (Save, Earn, Enjoy Deposits)a
commitment-based bank savings account in which eligible customers could
choose the type of withdrawal restriction that applied.125 Importantly, all
participating customers, regardless of the type of restriction they chose, were
encouraged to set a specific savings goal as the purpose of their SEED
savings account, and this goal was written on:
the bank form used to open the account
a Commitment Savings Certificate that was given to customers to

keep.
Before selecting participants for this field experiment, the researchers first
conducted a baseline survey with 1777 existing or former customers of a real
bank. The survey included questions designed to identify peoples time
discounting preferences (i.e. to identify those who might have a preference for
commitment).126 One month later, 710 of the original customers were
randomly selected and offered the commitment product. Of these, 202 (28%)
opened an account. The researchers found that women who exhibited a lower
discount rate for future relative to current tradeoffs, and hence potentially
have a preference for commitment, were indeed significantly more likely to
open the commitment savings account (Ashraf et al, 2005, p. 1).127
Importantly, Ashraf et al used a control group during this field experiment.
Those not offered the SEED product were assigned to either:
a control group that received no further contact, or
a marketing group that received a special visit to encourage savings

using traditional, existing savings products.
125
One withdrawal restriction was based on reaching a predefined date and one on reaching a certain monetary limit. Once
the decision was made, it could not be changed and withdrawals were restricted until the chosen goal was met. Of the 202
opened accounts, 140 opted for the date-based goal and 62 opted for the amount-based goal.
126
More specifically, the researchers were looking for answers indicating impatience in relation to near-term trade-offs but
patience in relation to future trade-offs.
127
A similar trend was observed for men but it was not statistically significant.
Page 66
After a year, the average savings balances of those who accessed the SEED
product increased by 81 percentage points relative to those assigned to the
control group, suggesting not only that the intervention was successful at
raising peoples savings levels, but also that the result was less likely to be a
short-term response to a new product (Ashraf et al, 2005, p. 1).
Saver Plus
Saver Plus was developed to help people on low incomes establish a longterm savings habit. The program works by matching peoples savings dollarfor-dollar once they reach their savings goal, to a maximum amount.128 ANZ
(2009) research conducted by Chant Link and Associates identified sustained
behavioural change in some participants as a result of the Saver Plus
program, and analysed these outcomes within a behavioural economics
framework. The three levels of change the researchers identified were:
Significant change: For some participants, Saver Plus was

transformational. These people tended to complete the program and
exhibited sustained behavioural change and major positive outcomes.
Moderate change: For these Saver Plus participants, the program had
some positive impact (e.g. new skills or financial benefits) but did not
significantly change their longer-term financial situation.
No change: Some Saver Plus participants exited the program (either

prematurely or at completion) and reported no impact on either attitudes
or behaviour. This included early leavers who had positive attitudes
towards the program but believed that their lives would be unaffected
by it, and also participants who entered the program with pre-existing
savings habits who completed it but claimed to have learned little.
The research suggested that certain program elements increased the likelihood
of behavioural change, including the involvement of a relationship manager,
financial education workshops, matching funds, and the program rules in
general.129 These factors influenced participants at different stages of the
program (e.g. the financial incentive tended to be most successful in
encouraging participation at the start). Although all program elements were
found to be important, overall the most critical were, in order of importance:
the involvement of the relationship manager (they motivated,

encouraged, supported, educated and even bonded with participants)
the personal relevance of the savings goal.
128
The maximum matched amount was $1000 at the time the research was conducted. This amount was subsequently
reduced to $500.
129
The relationship managers worked closely with the Saver Plus participants to help them set and achieve their savings
goal. The relationship managers were from community organisations, including the Brotherhood of St Laurence, the
Benevolent Society and the Smith Family.
Page 67
The research also identified four key participant characteristics that

influenced outcomes:
level of personal motivation
level of stability (work, family, life)
financial skills and level of financial stress
presence of support networks.
Further research needed

More research is required to explore how behavioural studies might be
applied to programs designed to improve peoples financial outcomes. For
example, the review the FSA (de Meza et al for the FSA, 2008)
commissioned into the implications of behavioural economics for financial
capability recommended that further research is necessary to see whether
people can learn techniques that help them recognise and neutralise the
biases that thwart their decision making. Therefore, what should be taught
may not be explicit financial capability but thinking skills (de Meza et al for
the FSA, 2008, p. 69).
The FSA review also suggests that two of Willis (2008) proposals might
prove promising:
Norm manipulation: This involves integrating suitable, simple financial

rules of thumb as widely as possible (i.e. something like the dont
drink and drive message).
Accessible face-to-face crisis counselling: In this case, an individual

knows they are in trouble and gets specific advice about what to do and,
if necessary, help with filling in forms.
Norms are also an essential component of the changing contexts approach

advocated by Elliott et al (2010) in their preliminary examination of
financial literacy interventions for the CFEB. In particular, they highlight the
MINDSPACE framework, which focuses on:
Messenger: We are heavily influenced by who communicates

information.
Incentives: Our responses to incentives are shaped by predictable

mental shortcuts such as strongly avoiding losses.
Norms: We are strongly influenced by what others do.
Defaults: We go with the flow of preset options.
Salience: Our attention is drawn to what is novel and seems relevant to

us.
Priming: Our acts are often influenced by subconscious cues.
Affect: Our emotional associations can powerfully shape our actions.
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Commitments: We seek to be consistent with our public promises, and

reciprocate acts.
Ego: We act in ways that make us feel better about ourselves (p. 11).
Others add that further research is needed to test proposed interventions

before implementation, and that policy-makers should bear in mind the high
likelihood that such interventions will have unintended and variable effects:
There is such an abundance of findings in behavioural economics that we
can predict that any interventions proposed are likely to have unanticipated
consequences (even if that means only that they dont have the effects they
are supposed to have) it is inevitable that these solutions may not work
as expected, and to reiterate a frequently repeated theme, I recommend that
even modest changes to policy be field tested before implementation (Read,
2007, p. 62).
Policy-makers are also cautioned against a narrow view about what is

required to help people attain good financial outcomes:
A second consequence of behavioural economics for the construction of
policy is that we cannot begin the task with the assumption that consumers
know what they want, so that our goal is to make it easy for them to choose
it. Rather, any intervention in the marketplace will create preferences as
well as facilitate their expression. Policy discussions must always involve
normative questions of what is best for the consumer, as well as the
delicate question of how far we should go to help them achieve it (Read,
2007, pp. 6263).
Conclusion
In closing, while there appears to be little certainty about the ultimate direction
of financial literacy, there does seem to be reasonable consensus that:
more (and better) research is necessary before we can adequately assess

which strategies work best and why
it seems unlikely that the problems financial literacy seeks to address

will be resolved by education alone.
Regardless of the debates about the best way to change peoples behaviour
for the better, most agree that there is a genuine need to do so, and that the
government plays an important role:
Ultimately we have to realise that people have weaknesses and limitations.
People realise that themselvesthey want help and are willing to ask for it,
including from government (Shafir in Productivity Commission, 2007, p. 145).
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Appendix 1: Detailed tables

Table A1.1 gives detailed information about the research items (sources)
listed in Tables A1.2 to A1.16 and the research methodology used. Some of
the information in Tables A1.2 to A1.16 is sourced directly and some has
been paraphrased for ease of reference.
Table A1.1: Research sources used for Tables A1.2A1.16
Research
item
(source)
Research title
Methodology/sample
Method(s) used
to assess
behaviour
and/or financial
130
literacy
ABS (2009)
Retirement and
retirement
intentions
The ABS presents information about the retirement

status and retirement intentions of people aged 45
years and over who have, at some time, worked for two
weeks or more. The statistics presented are compiled
from data collected in the Multi-Purpose Household
Survey (MPHS) that was conducted throughout
Australia in the 200809 financial year as a supplement
to the ABS monthly Labour Force Survey (LFS).
Subjective
assessment
Total sample: 6647 people aged 45 years and over.

ABS
(2008a)
Personal fraud
The ABS in consultation with the ACFT conducted the

personal fraud survey throughout Australia in 2007.
This was part of the 200708 MPHS, which was a
supplement to the monthly LFS. One randomly selected
person per household aged 15 years and over was
asked about their experiences of personal fraud,
providing information about incidents that occurred over
a 12-month period prior to the date of interview.
Subjective
assessment
Total sample: 14,320 randomly selected Australians

ABS
(2008b)
Retirement and
retirement
intentions
The AB S presents information about the retirement

status and retirement intentions of people aged 45
years and over who have, at some time, worked for two
weeks or more. The statistics presented are compiled
from data collected in the MPHS that was conducted
throughout Australia in the 200607 financial year as a
supplement to the ABS monthly LFS.
Subjective
assessment
Total: 7168 people aged 45 years and over.
130
Methods used to assess behaviour and/or financial literacy include:

Subjective assessments, which rely on peoples perceptions, attitudes, self-reported behaviour and self-assessed level of
financial knowledge.
Objective assessments, which measure and test peoples understanding of financial terms through methods like quiz style
or true/false questions.
Combination assessments, which use both objective and subjective measures to assess behaviour and/or financial literacy.
Page 70
Research
item
(source)
Research title
Methodology/sample
Method(s) used
to assess
behaviour
and/or financial
130
literacy
ANZ (2009)
Understanding the
success of Saver
Plus
The ANZ commissioned Chant Link and Associates to

conduct qualitative in-depth interviews in 2009.
Combination
assessments
ANZ survey of adult

financial literacy in
Australia
The ANZ commissioned the Social Research Centre to

randomly survey Australians between 29 April and
6 June 2008.
ANZ (2008)
Qualitative sample: 67 prospective participants, current

participants, early leavers or graduates of the Saver
Plus program.
Combination
assessments
Total sample: 3500 randomly selected Australians aged

18 years and over.
ANZ (2005)
ANZ survey of adult

financial literacy in
Australia
The ANZ commissioned AC Nielsen Research to

randomly survey Australians between 21 April and
3 July 2005.
Combination
assessments
Total sample: 3500 randomly selected Australians aged

18 years and over.
ASIC
(2008a)
Australian investors:
At a glance
ASIC commissioned Roy Morgan Research to conduct

the research between November 2006 and June 2007.
Combination
assessments
Quantitative sample: 1217 investors (phone survey).

Qualitative sample: 49 investors (focus groups, mini
groups and interviews).
Note that ASIC (2008b) is the long version of this
research report.
ASIC
(2008c)
Understanding
investors in the
unlisted, unrated
debenture (UUD)
market
ASIC commissioned brandmanagement to conduct the

research between October 2007 and March 2008.
Subjective
assessment
Quantitative sample: 1142 investors (online/phone

questionnaires) across all investor groups
(ACR/Fincorp, active and general investors).
Qualitative sample: 3 focus groups and 12 in-depth
interviews.
ASIC
(2008d)
Complaint
resolution in relation
to financial
institutions study
ASIC commissioned Newspoll Market Research to

conduct a phone survey between 20 June and 22 June
2008.
Subjective
assessment
ASIC
(2007a)
All we have is this

house: Consumer
experiences with
reverse mortgages
Total sample: 29 in-depth phone and/or face-to-face

interviews with people who had taken out a reverse
mortgage.
Subjective
assessment
CBA (2007)
The Commonwealth
Banks 2007
E-Money survey
highlights
Commonwealth Bank commissioned Galaxy Research

to conduct a phone survey in April 2007.
Subjective
assessment
Total sample: 1100 people aged 16 years and over

(quantitative survey).
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Research
item
(source)
Research title
Methodology/sample
Method(s) used
to assess
behaviour
and/or financial
130
literacy
CBF (2006)
Australian financial
literacy assessment
An assessment asking Year 9 and Year 10 students 48

multiple-choice questions related to everyday financial
situations.
Objective
assessment
Total sample: 50,000 Year 9 and Year 10 students from

over 500 schools across the Catholic, government and
independent sectors in Australia.
CBF (2004)
Improving financial
literacy in Australia:
Benefits for the
individual and the
nation
The CBF commissioned the Commonwealth Banks

Quantitative Research division, in partnership with
Eureka Strategic Research and the Centre of Policy
Studies, Monash University, to conduct a phone survey
during August and September 2004. The survey
consisted of 20 multiple-choice questions.
Objective
assessment
Total sample: 5000 Australians aged 16 to 65 years.

Citibank
(2010)
Results and insights

from the Citi Fin-Q
Survey
The Citi Fin-Q Survey was conducted among 5200

people across 11 countries. However, these particular
results are based on a representative sample of 500
Australians aged 18 years and over who were surveyed
between 6 October and 12 October 2009.
Subjective
assessment
Citibank
(2008)
Results and insights

from the Citi Fin-Q
Survey
The Citi Fin-Q Survey was conducted among 4400

people across 11 countries. However, these particular
results are based on a representative sample of 400
Australians aged 18 years and over who were surveyed
between 8 October and 12 October 2007.
Subjective
assessment
Fear (2008)
Choice overload:
Australians coping
with financial
decisions
Quantitative sample: online survey of 1002 Australians

Subjective
assessment
Generational wealth
divide research
FINSIA commissioned UMR Research to conduct the

research in 2009.
FINSIA
(2009)
Qualitative sample: 6 focus groups held in Wollongong,

Canberra and Adelaide, in late September and early
October 2007.
Subjective
assessment
Quantitative sample: online survey of 1000 Australians

aged 18 and over.
Qualitative sample: 3 focus groups, which included a
mixed-gender cross-section of Australians delineated
by age, although each group contained subsets of
people with home mortgages and who expressed
concern about their superannuation.
Page 72
Research
item
(source)
Research title
Methodology/sample
Method(s) used
to assess
behaviour
and/or financial
130
literacy
FINSIA
(2006)
Saving the future:

Can the under-40s
afford to grow old?
FINSIA commissioned Crosby|Textor to conduct the

research in 2005.
Subjective
assessment
Quantitative sample: survey of 600 Australians aged 25

to 44 years conducted between 15 September and
19 September 2005.
Qualitative sample: two focus groups held in Sydney in
July 2005.
FLF
(2007a)
Financial literacy:
Australians
understanding
money
The FLF commissioned DBM Consultants to conduct

the research.
Subjective
assessment
Quantitative sample: a survey of 7500 Australians aged

12 to 75 (6947 adults aged between 18 and 75 and 533
youths aged between 12 and 17 years).
Qualitative sample: 140 interviews with people sourced
from the quantitative sample.
FPA (2007)
Consumer attitudes
to financial planning
FPA commissioned Galaxy Research to conduct a

phone survey between 23 March and 25 March 2007.
Subjective
assessment

IFSA
(2008c)
Report of findings of
qualitative research
into effective
disclosure (stage II)
IFSA commissioned Wallis Consulting Group to conduct

the research between 11 February and 29 February
2008.
Subjective
assessment
Total sample: 10 workshop groups across Victoria,

NSW and WA among people who had changed or had
considered changing their superannuation fund in the
past 12 months.
A further 12 in-depth interviews among people aged 30
years and over.
IFSA (2007)
MWS
(2010)
Super decisions:
Communicating with
customers and
effective disclosure
IFSA commissioned Investment Trends to conduct an

online survey in June 2007.
Superannuation
sentiment index
MWS conducted the research during December 2009

and compared results against previous surveys
conducted in June 2009, December 2008 and June
2008.
Subjective
assessment
Total sample: 1572 people, including a target sample of

746 people who had changed super in the last 12
months.
Subjective
assessment
Quantitative sample: an online survey of 1033 full-time

working Australians aged between 25 and 65.
Qualitative sample: an unspecified number of
interviews.
Page 73
Research
item
(source)
Research title
Methodology/sample
Method(s) used
to assess
behaviour
and/or financial
130
literacy
MWS
(2009)
Superannuation
sentiment index
MWS conducted the research during December 2008

and compared results against a previous survey
conducted in June 2008.
Subjective
assessment
Quantitative sample: an online survey of 1022

Australians working full-time aged between 25 and 65.
Qualitative sample: an unspecified number of
interviews.
MWS
(2006)
Mercer 2006
financial literacy
and retirement
readiness study
MWS conducted the research during March and April

2006.
Combination
assessments
Quantitative sample: an online survey of 802 working

Australians aged between 18 and 64.
Qualitative sample: 4 focus groups among 39 recent
retirees in Sydney and Melbourne.
Page 74
Table A1.2: What Australians know and do: Banking and payment/transacting methods
What people know
Percent of respondents
Research item
Know how to use:
2005
2008
ATM
92%
94%
ANZ (2005, 2008)
EFTPOS
90%
91%
ANZ (2005, 2008)
Credit card
92%
92%
ANZ (2005, 2008)
Direct debit
83%
87%
ANZ (2005, 2008)
BPAY
68%
72%
ANZ (2005, 2008)
Cheques
90%
88%
ANZ (2005, 2008)
Internet banking
62%
69%
ANZ (2005, 2008)
Telephone banking
71%
72%
ANZ (2005, 2008)
Lay-bys
83%
83%
ANZ (2005, 2008)
Money orders
82%
83%
ANZ (2005, 2008)
Store cards
71%
69%
ANZ (2005, 2008)
NA
15%
ANZ (2005, 2008)
Payday loans
What people do
Percent of respondents
Research item
Use:
2005
2008
ATM
78%
80%
ANZ (2005, 2008)
EFTPOS
74%
76%
ANZ (2005, 2008)
Credit card
68%
65%
ANZ (2005, 2008)
Direct debit
60%
64%
ANZ (2005, 2008)
BPAY
46%
52%
ANZ (2005, 2008)
Cheques
44%
39%
ANZ (2005, 2008)
Internet banking
40%
51%
ANZ (2005, 2008)
Telephone banking
36%
32%
ANZ (2005, 2008)
Lay-bys
27%
25%
ANZ (2005, 2008)
Money orders
21%
20%
ANZ (2005, 2008)
Store cards
16%
13%
ANZ (2005, 2008)
NA
2%
ANZ (2005, 2008)
Have an ordinary or everyday account
97%
97%
ANZ (2005, 2008)
Have a high interest savings account
NA
46%
ANZ (2005, 2008)
Have a term deposit
22%
20%
ANZ (2005, 2008)
Take no steps or cant say what steps are taken to

minimise everyday banking fees
21%
19%
ANZ (2005, 2008)
2008
2010
100%
100%
Payday loans
Have a bank account
Citibank (2008, 2010)
Some of the information contained in these tables is sourced directly and some has been paraphrased for ease of reference.
Page 75
Table A1.3: What Australians know and do: Savings

Percent of
respondents
Research item
Have the ability and understanding to save
88%
FLF (2007a)
Recognise the importance of learning more about saving
65%
FLF (2007a)
Understand the benefits of a savings account
34%
FLF (2007a)
Percent of
respondents
Research item
Dont save
22%
FLF (2007a)
Save on a regular basis
62%
FLF (2007a)
Only save when wanting to buy something big or special
15%
FLF (2007a)
Havent saved in the last 6 months
4%
FLF (2007a)
Have an account that is just used for savings
72%
FLF (2007a)
What people know
What people do
2008
2010
Save money when they can
50%
45%
Citibank (2008, 2010)
Rarely save anything
22%
18%
Citibank (2008, 2010)
Disciplined enough to set aside something every time

they get paid
28%
36%
Citibank (2008, 2010)
Dont know how long their savings would last
15%
13%
Citibank (2008, 2010)
2005
2008
Try to save on a regular basis
69%
72%
ANZ (2005, 2008)
No point trying to save because theres never enough money
11%
10%
ANZ (2005, 2008)
NA
46%
ANZ (2005, 2008)
22%
20%
ANZ (2005, 2008)
Have a high-interest savings account

Have a term deposit
Page 76
Table A1.4: What Australians know and do: Budgeting

Percent of
respondents
Research item
Have the ability and understanding to budget
90%
FLF (2007a)
Recognise the importance of learning more about budgeting
57%
FLF (2007a)
Percent of
respondents
Research item
Do not budget regularly for their day-to-day finances
48%
FLF (2007a)
Have difficulty setting money aside for big purchases or spending
27%
FLF (2007a)
Unable to keep track of their everyday spending
18%
FLF (2007a)
Could not get by in case of a financial emergency
17%
FLF (2007a)
What people know
What people do
2008
2010
Can make and stick to their monthly budget
19%
21%
Citibank (2008, 2010)
Despite their best intentions they make a budget but dont always
stick to it
60%
59%
Citibank (2008, 2010)
Are not organised enough to make a budget at all
21%
20%
Citibank (2008, 2010)
People with a poor or very poor understanding of personal

finances dont budget at all
44%
NA
Citibank (2008, 2010)
2005
2008
Have problems setting money aside for major financial outlays
24%
24%
ANZ (2005, 2008)
Spend all of their income as soon as they get it and dont really
plan for the future
14%
14%
ANZ (2005, 2008)
Do not keep a close eye on household and personal expenses
24%
23%
ANZ (2005, 2008)
Page 77
Table A1.5: What Australians know and do: Debt

Percent of
respondents
Research item
Confident in their ability to manage debt
89%
FLF (2007a)
Recognise the importance of learning more about managing debt
61%
FLF (2007a)
Able to choose the cheapest way to draw money
88%
CBF (2004)
Able to choose the best option when they cannot pay a bill
55%
CBF (2004)
Understand how to deal with spiralling debt
48%
CBF (2004)
Percent of
respondents
Research item
Will get into debt by buying something they cant afford
21%
FLF (2007a)
Dont feel comfortable with their level of debt
17%
FLF (2007a)
Pay more than the minimum required on loans
32%
FLF (2007a)
Pay more than the minimum and make extra payments where
they can
31%
FLF (2007a)
Dont regularly pay the total balance owing on their credit card
when its due
20%
FLF (2007a)
Pay only the minimum balance owing on their credit card when
its due
13%
FLF (2007a)
What people know
What people do
Page 78
Table A1.6: What Australians know and do: Credit cards

Percent of
respondents
Research item
Confident in their ability to deal with and understand credit cards
83%
FLF (2007a)
Recognise the importance of learning more about dealing with

credit cards
49%
FLF (2007a)
What people know
2005
2008
Able to correctly identify the most likely cause of bad credit rating
61%
59%
ANZ (2005, 2008)
Able to correctly determine information needed for a credit rating
29%
NA
ANZ (2005, 2008)
Able to correctly identify that the primary card holder is entirely

responsible for debt incurred by a secondary card holder
72%
77%
ANZ (2005, 2008)
Able to choose the best way to reduce credit card interest
94%
CBF (2004)
Able to understand how personal credit ratings work
62%
CBF (2004)
Percent of
respondents
Research item
What people do
2008
2010
69%
73%
2005
2008
Have a credit card
68%
65%
ANZ (2005, 2008)
Have a store card
16%
13%
ANZ (2005, 2008)
Missed loan/credit card repayments in the last 12 months
5%
8%
ANZ (2005, 2008)
Pay off monthly credit card balance in full
12%
12%
ANZ (2005, 2008)
Ensure minimum monthly payments are made on their credit card
5%
9%
ANZ (2005, 2008)
Check credit card or store card transactions
NA
93%
ANZ (2005, 2008)
Have a credit card
Citibank (2008, 2010)
Top three areas looked at when checking credit card transactions

include:
Transactions are correct and not fraudulent
NA
74%
ANZ (2005, 2008)
Check that everything is right
71%
28%
ANZ (2005, 2008)
Check account balance
21%
21%
ANZ (2005, 2008)
Page 79
Table A1.7: What Australians know and do: Loans and mortgages
Percent of
respondents
Research item
Able to choose the cheapest way to borrow (unsecured loan)
93%
CBF (2004)
Able to choose the cheapest way to borrow (secured loan)
51%
CBF (2004)
What people know
Understanding loan products:

Which of the following is most likely to give someone
a bad credit rating?
2005
2008
Being more than 60 days late with the minimum payment on a

credit card
61%
59%
ANZ (2005, 2008)
Taking out a second mortgage to buy your own home
11%
11%
ANZ (2005, 2008)
Borrowing from an organisation other than a bank
9%
11%
ANZ (2005, 2008)
Asking the bank for an increased overdraft
7%
6%
ANZ (2005, 2008)
Unsure
12%
13%
ANZ (2005, 2008)
Both persons are responsible for the repayment of the entire loan
80%
83%
ANZ (2005, 2008)
Each person is responsible for the repayment of half the loan
15%
12%
ANZ (2005, 2008)
Only one person must be responsible for repayment of the entire

loan
3%
3%
ANZ (2005, 2008)
The older of the two persons is responsible for repayment of the

entire loan
1%
<1%
ANZ (2005, 2008)
Unsure
1%
2%
ANZ (2005, 2008)
What people do
Percent of
respondents
If two people take out a loan, which one of the following most
accurately describes the responsibility for repayment of the loan?
Research item
Loan products held:

Own home or have a mortgage
62%
FLF (2007a)
2008
2010
Have a mortgage
38%
46%
Citibank (2008, 2010)
Have a personal loan/line of credit
30%
NA
Citibank (2008, 2010)
2005
2008
Have a mortgage on own home
29%
34%
ANZ (2005, 2008)
Have a mortgage on investment property
11%
11%
ANZ (2005, 2008)
Have a personal loan
14%
17%
ANZ (2005, 2008)
Have a line of credit or overdraft
12%
14%
ANZ (2005, 2008)
Have a lease or hirepurchase agreement
9%
9%
ANZ (2005, 2008)
Have a home equity loan
9%
7%
ANZ (2005, 2008)
Have a margin loan
2%
2%
ANZ (2005, 2008)
Have an equity release product
NA
2%
ANZ (2005, 2008)
Page 80
Table A1.7 (cont.): What Australians know and do: Loans and mortgages
What people do (cont.)
Percent of
respondents
Research item
Lending sources used in the last 12 months:
2005
2008
Bank, building society or credit union
27%
24%
ANZ (2005, 2008)
Family or friends
14%
14%
ANZ (2005, 2008)
Store loan or interest-free/retailer finance
11%
10%
ANZ (2005, 2008)
Finance company
6%
7%
ANZ (2005, 2008)
Cash advance on salary
1%
1%
ANZ (2005, 2008)
Pawnbroker
1%
2%
ANZ (2005, 2008)
Payday lender
1%
1%
ANZ (2005, 2008)
Debt rescue or debt relief company
NA
<1%
ANZ (2005, 2008)
Other
1%
2%
ANZ (2005, 2008)
None of these
55%
55%
ANZ (2005, 2008)
Page 81
Table A1.8: What Australians know and do: Equity release product (reverse mortgages)
Percent of
respondents
Research item
Know what a reverse equity loan is
46%
ANZ (2008)
Dont know what it is
51%
ANZ (2008)
Unsure
3%
ANZ (2008)
Would never take one out
14%
ANZ (2008)
Interest rate
13%
ANZ (2008)
Conditions of the loan
11%
ANZ (2008)
Size of the loan that would be needed
10%
ANZ (2008)
My ongoing expenses
9%
ANZ (2008)
Whether it was really necessary
9%
ANZ (2008)
How children feel about it
7%
ANZ (2008)
Might need the money/equity to move into a retirement village
4%
ANZ (2008)
All other considerations
8%
ANZ (2008)
Dont know
33%
ANZ (2008)
Borrowers who did not know how much the loan was likely to cost
them over time
14 out of 29
(ASIC 2007a)
Borrowers who were unaware of how compound interest works
6 out of 29
(ASIC 2007a)
Borrowers who did not know what would happen if they breached
a loan condition
17 out of 29
(ASIC 2007a)
Percent of
respondents
Research item
2%
ANZ (2008)
What people know

Reverse equity loans:
Things to consider when deciding whether or not to take out

a reverse equity loan:
Limited understanding of how reverse mortgages worked:
What people do
Have an equity release product
Page 82
Table A1.9: What Australians know and do: Financial documents (financial statements, PDSs,
prospectuses)
Percent of
respondents
Research item
Understand only some or none of the information provided in

financial statements
21%
FLF (2007a)
Understand all or most of the information provided in financial

statements
79%
FLF (2007a)
Year 9 students able to understand the term debit on a bank

statement
48%
CBF (2006)
Year 9 and Year 10 students able to understand the term credit

on a bank statement
25%
CBF (2006)
What people know

Financial statements:
Superannuation fund statementsease of understanding

annual statements:
2005
2008
Very difficult
6%
4%
ANZ (2005, 2008)
Difficult
28%
27%
ANZ (2005, 2008)
Easy
52%
53%
ANZ (2005, 2008)
Very easy
12%
12%
ANZ (2005, 2008)
Cant say
3%
4%
ANZ (2005, 2008)
Prospectuses:
Type 1 investor rated their understanding as medium to high
6.7 out of 10
ASIC (2008c)
Type 2 investor rated their understanding as medium to high
7.0 out of 10
ASIC (2008c)
PDSs:
People are confused about the role of PDSs. They view them either as a selling tool
and/or an education tool, and/or a reference document.
Year 9 and Year 10 students able to understand the term product
disclosure statement
What people do
IFSA (2008c)
43%
CBF (2006)
Percent of
respondents
Research item
Reading superannuation fund statements:
2005
2008
Receive fund statements and read them
76%
75%
ANZ (2005, 2008)
Receive fund statements and dont read them
15%
17%
ANZ (2005, 2008)
Dont recall receiving fund statements
9%
8%
ANZ (2005, 2008)
Couldnt be bothered
39%
36%
ANZ (2005, 2008)
Dont have time
8%
14%
ANZ (2005, 2008)
Other priorities more important
7%
13%
ANZ (2005, 2008)
Reasons for not reading superannuation fund statements:
Page 83
Table A1.9 (cont.): What Australians know and do: Financial documents (financial statements,
PDSs, prospectuses)
Percent of
respondents
Research item
Reasons for not reading superannuation fund statements

(cont.):
2005
2008
Just assume theyre correct/OK
10%
4%
ANZ (2005, 2008)
Too difficult to understand
29%
23%
ANZ (2005, 2008)
Someone else reads them
8%
8%
ANZ (2005, 2008)
All other reasons
11%
12%
ANZ (2005, 2008)
NA
4%
ANZ (2005, 2008)
Unsure/cant recall
Prospectuses:
Investors who said they received the prospectus
71.6%
ASIC (2008c)
14%
IFSA (2007)
PDSs:
People who reviewed the PDS before making the decision to
switch their superannuation
Page 84
Table A1.10: What Australians know and do: Investing

Percent of
respondents
Research item
Self-rated knowledge about investment is nothing or minimal

(03 out of 10)
42%
MWS (2006)
Recognise the importance of learning more about investing
70%
FLF (2007a)
Indicate financial investments are too complicated to understand

properly
46%
Fear (2008)
Able to understand the importance of net returns from investments
89%
CBF (2004)
Able to choose the best investment given a certain objective
88%
CBF (2004)
Able to understand the liquidity of different investments
84%
CBF (2004)
Able to choose the most liquid investment
82%
CBF (2004)
Able to choose the best long-term investment
79%
CBF (2004)
Understand the power of compound interest
78%
CBF (2004)
What people know
Key investment concepts (risk and return/diversification):
2005
2008
Believe that investments with high returns are likely to have higher
than average risks
87%
86%
ANZ (2005, 2008)
Would consider it too good to be true and not invest in an

investment advertised as having a return well above market rates
and no risk
47%
52%
ANZ (2005, 2008)
64%
67%
ANZ (2005, 2008)
79%
78%
ANZ (2005, 2008)
Believe that short-term fluctuations in market value can be

expected, even with good investments
Consider diversification of funds across different types of
investments to be very or quite important
Would consider both risk and return when making an investment
decision
34%
FLF (2007a)
Would consider diversity/spread of investments
5%
FLF (2007a)
Would consider background information such as the reputation of

the company
6%
FLF (2007a)
Would consider their personal circumstances
6%
FLF (2007a)
Able to correctly select reasonable rate of return to expect from

a fixed-interest product over 10-year period
51%
ASIC (2008a)
Know the current interest rate
7%
ASIC (2008a)
Believe investing 100% of your money in government bonds is

good diversification
36%
ASIC (2008a)
Page 85
Table A1.10 (cont.): What Australians know and do: Investing

What people do
Percent of
respondents
Research item
2005
2008
Hold high-interest savings accounts
NA
46%
ANZ (2005, 2008)
Hold other investments (e.g. debentures, bonds, notes or

derivatives)
NA
4%
ANZ (2005, 2008)
Hold term deposit accounts
22%
20%
ANZ (2005, 2008)
Hold any superannuation funds
74%
76%
ANZ (2005, 2008)
Hold shares
40%
38%
ANZ (2005, 2008)
Hold managed investments (other than superannuation)
27%
20%
ANZ (2005, 2008)
Hold retirement income stream product
24%
20%
ANZ (2005, 2008)
Have an investment property
19%
19%
ANZ (2005, 2008)
Have an investment property
18%
FLF (2007a)
Have other investments
46%
FLF (2007a)
Own home or have a mortgage
62%
FLF (2007a)
Have shares and managed funds
46%
FLF (2007a)
Have a savings account
72%
FLF (2007a)
Have only one type of investment
49%
ASIC (2008a)
Investors who showed interest in a hypothetical investment

advertisement offering fixed returns of 9.75% p.a. All loans are
secured by registered mortgages over real property
46%
ASIC (2008a)
Investors who were very interested in an offer promising to pay

off a 20-year home loan in less than five years. No outlay by you
ever
16%
ASIC (2008a)
Investors who were interested in an investment opportunity

offering 20% interest paid monthly. Plus ongoing shareholding
24%
ASIC (2008a)
Investors who were interested in an offer of a capital guaranteed

investment with targeted returns of 12% if you hold the product to
maturity
46%
ASIC (2008a)
Investors who were interested in an investment opportunity to

earn 13% p.a. for 3 years by contacting John on his phone
number
14%
ASIC (2008a)
Investors level of interest in hypothetical advertisements:
Page 86
Table A1.11: What Australians know and do: Planning for retirement
Percent of
respondents
Research item
Believe retirement is too far away to think about
21%
FLF (2007a)
Believe that financial planning is only important for those who

have a lot of money
16%
FLF (2007a)
Confident in their ability to plan for their long-term financial future
81%
FLF (2007a)
Have the ability to ensure enough money for retirement
63%
FLF (2007a)
Recognise the importance of learning more about planning for the

financial future
77%
FLF (2007a)
Recognise the importance of learning more about having enough

money for retirement
71%
FLF (2007a)
What people know
2008
2010
Either have no idea how much they need to fund a comfortable

retirement or have not started planning for their retirement
51%
44%
Citibank (2008, 2010)
Know how much they need to fund a comfortable retirement and

feel they are on track to reach their goal
13%
20%
Citibank (2008, 2010)
2005
2008
Understand the need to save for retirement
93%
NA
ANZ (2005, 2008)
Have not identified how much money they would need each year
to live on when they retire
64%
73%
ANZ (2005, 2008)
Feel they need to provide for self-funding for their retirement
94%
91%
ANZ (2005, 2008)
Expect their superannuation would enable them to live more

comfortably than now or about as comfortably as now
44%
50%
ANZ (2005, 2008)
Less than $15,000
NA
1%
ANZ (2005, 2008)
$15,000$24,999
NA
4%
ANZ (2005, 2008)
$25,000$49,999
NA
34%
ANZ (2005, 2008)
$50,000$74,999
NA
32%
ANZ (2005, 2008)
$75,000$99,999
NA
10%
ANZ (2005, 2008)
$100,000 or more
NA
15%
ANZ (2005, 2008)
Unsure
NA
4%
ANZ (2005, 2008)
Consumer expectations of required retirement income:
Expected source of income at retirement:
2008
2009
Government pension or allowance
22%
27%
ABS (2008b, 2009)
Do not know
12%
7%
ABS (2008b, 2009)
Do not believe that the age pension will be sufficient for retirement
86%
FLF (2007a)
Do not believe that employer-funded superannuation will meet

retirement needs
73%
FLF (2007a)
Page 87
Table A1.11 (cont.): What Australians know and do: Planning for retirement
What people do
Percent of
respondents
Research item
76%
FLF (2007a)
Have thought about their long-term financial plans, including for

retirement
2009
2010
Have not given much thought to retirement and have not made
any preparations for it
15%
19%
MWS (2009, 2010)
Have given some thought to retirement but made very little

preparations for it
29%
34%
MWS (2009, 2010)
Have given some thought to retirement and made some

preparations for it (but not enough)
41%
36%
MWS (2009, 2010)
2008
2010
Have a dedicated retirement savings account
12%
14%
Citibank (2008, 2010)
Dont have a formal retirement plan that has been prepared by a

finance professional
83%
80%
Citibank (2008, 2010)
2005
2008
24%
20%
Have a retirement income stream product
ANZ (2005, 2008)
Types of retirement income stream products held:

Lifetime pension/annuity
45%
24%
ANZ (2005, 2008)
Allocated pension
16%
37%
ANZ (2005, 2008)
Life expectancy pension/annuity
12%
15%
ANZ (2005, 2008)
Market-linked pension/annuity
8%
15%
ANZ (2005, 2008)
Fixed-term pension/annuity
10%
10%
ANZ (2005, 2008)
Other type
14%
8%
ANZ (2005, 2008)
Unsure
5%
7%
ANZ (2005, 2008)
Page 88
Table A1.12: What Australians know and do: Superannuation

Percent of
respondents
Research item
Believe superannuation is too complicated to understand properly
44%
Fear (2008)
Experience difficulty in understanding superannuation
39%
FPA (2007)
Self-rated knowledge about superannuation is minimal (23 out

of 10)
29%
MWS (2009)
Aware they can contribute a greater percentage of their salary to

superannuation
82%
FINSIA (2006)
Understand the need for voluntary superannuation
82%
CBF (2004)
What people know
Understanding of regulatory requirements of superannuation:
2005
2008
Know that their employer is required to make superannuation

contributions on their behalf
97%
96%
ANZ (2005, 2008)
Understand that they can make additional superannuation

contributions
92%
90%
ANZ (2005, 2008)
Unsure how superannuation is taxed compared to other

investments
22%
27%
ANZ (2005, 2008)
Did not know about the potential problems with having multiple
superannuation funds
15%
16%
ANZ (2005, 2008)
34%
31%
ANZ (2005, 2008)
Correctly answered that the best indication of performance of a

superannuation fund was return minus fees
77%
68%
ANZ (2005, 2008)
Did not know the types of things people commonly do that often
result in the reduction of the final value of superannuation or
managed investments
42%
42%
ANZ (2005, 2008)
2009
2010
30%
27%
MWS (2009, 2010)
Did not know if their superannuation was in a defined benefit fund

or an accumulation fund
47%
47%
MWS (2009, 2010)
Did not know their superannuation funds investment strategy

(aggressive, balanced or conservative)
24%
22%
MWS (2009, 2010)
Did not know about the tax effectiveness of superannuation
18%
21%
MWS (2009, 2010)
Rated the tax effectiveness of superannuation as poor
11%
13%
MWS (2009, 2010)
Understanding of superannuation fund statements:

Find it difficult to understand annual statements from a
superannuation fund
Understanding of superannuation fund performance:
Did not know what their superannuation balance was

Understanding of superannuation fund type:
Understanding of tax incentives of superannuation:
Page 89
Table A1.12 (cont.): What Australians know and do: Superannuation

What people do
Percent of
respondents
Research item
33%
FINSIA (2006)
Contribute a greater percentage of their salary to superannuation

Number of superannuation funds held:
2005
2008
Member of one or more superannuation fund
74%
76%
ANZ (2005, 2008)
Belong to just one superannuation rollover fund
59%
54%
ANZ (2005, 2008)
Belong to two funds
26%
28%
ANZ (2005, 2008)
Belong to three funds
8%
9%
ANZ (2005, 2008)
Belong to four or more funds
6%
6%
ANZ (2005, 2008)
Unsure
2%
3%
ANZ (2005, 2008)
Corporate and employer fund
27%
19%
ANZ (2005, 2008)
Industry fund
21%
33%
ANZ (2005, 2008)
Public sector fund
15%
18%
ANZ (2005, 2008)
Self-managed superannuation fund
14%
14%
ANZ (2005, 2008)
Retail superannuation fund
7%
7%
ANZ (2005, 2008)
Retirement savings account
5%
5%
ANZ (2005, 2008)
Private fund (bank/insurance)
1%
1%
ANZ (2005, 2008)
Other
1%
2%
ANZ (2005, 2008)
Unsure
21%
20%
ANZ (2005, 2008)
Type of superannuation funds held:
Page 90
Table A1.13: What Australians know and do: Protecting moneyinsurance

Percent of
respondents
Research item
Have the ability and understanding to protect their money by

choosing appropriate insurance
82%
FLF (2007a)
Understand life insurance is necessary
44%
CBF (2004)
What people know
2005
2008
Not aware that a claim can be refused if the policyholder did not
meet duty of accurate disclosure
51%
54%
ANZ (2005, 2008)
Not aware of the cooling-off period when taking out new insurance
policy
65%
68%
ANZ (2005, 2008)
Premium
54%
53%
ANZ (2005, 2008)
Level of cover needed
40%
47%
ANZ (2005, 2008)
Reputation of the insurance provider
17%
20%
ANZ (2005, 2008)
Nature of the policy (including benefits offered)
16%
14%
ANZ (2005, 2008)
Size of any excess
11%
15%
ANZ (2005, 2008)
Considerations when opening a new insurance policy (other

than life insurance):
What people do
Percent of
respondents
Research item
2008
2010
Do not have any insurance
48%
47%
Citibank (2008, 2010)
Have life insurance
18%
16%
Citibank (2008, 2010)
Have enough insurance to ensure their loved ones wont suffer

financially in the event of their own death, sickness or disability
34%
37%
Citibank (2008, 2010)
2005
2008
Have building and contents insurance
82%
88%
ANZ (2005, 2008)
Have comprehensive motor vehicle insurance
79%
87%
ANZ (2005, 2008)
Have private health insurance
60%
55%
ANZ (2005, 2008)
Have life insurance
35%
34%
ANZ (2005, 2008)
Have income protection insurance
12%
30%
ANZ (2005, 2008)
NA
10%
ANZ (2005, 2008)
Undertook comparison shopping when looking for a new

insurance policy
74%
75%
ANZ (2005, 2008)
Dont shop around when arranging a new policy
24%
24%
ANZ (2005, 2008)
Have third-party motor vehicle insurance
Hold some type of insurance (e.g. home and contents insurance,

car insurance, life insurance)
86%
FLF (2007a)
Page 91
Table A1.14: What Australians know and do: Protecting moneyscams and fraud
Percent of
respondents
Research item
Have the ability and understanding to be able to recognise a scam

or an investment scheme that seems to good to be true
88%
FLF (2007a)
Acknowledge the importance of learning more about recognising

a scam
69%
FLF (2007a)
Logging out correctly at the end of each session
93%
CBA (2007)
Ignoring emails asking for personal information
92%
CBA (2007)
Regularly updating and protecting passwords
55%
CBA (2007)
Setting daily withdrawal limits to suit their needs
47%
CBA (2007)
What people know

Scams:
Awareness of internet banking risks:

What consumers know about how to prevent banking fraud:
Perceived there was a risk associated with internet banking:
2005
2008
Yes
78%
78%
ANZ (2005, 2008)
No
20%
19%
ANZ (2005, 2008)
Key logging by hackers
59%
53%
ANZ (2005, 2008)
Unsecured sites
27%
23%
ANZ (2005, 2008)
Credit card fraud
19%
17%
ANZ (2005, 2008)
Lack of security/access to personal details/privacy issues
11%
11%
ANZ (2005, 2008)
Email scams
8%
9%
ANZ (2005, 2008)
Phishing
4%
8%
ANZ (2005, 2008)
Viruses
3%
2%
ANZ (2005, 2008)
Identity theft
NA
23%
ANZ (2005, 2008)
Cant say/unsure
4%
4%
ANZ (2005, 2008)
Other
3%
12%
ANZ (2005, 2008)
Aware of ways to minimise internet banking risks
66%
63%
ANZ (2005, 2008)
Use a firewall
32%
26%
ANZ (2005, 2008)
Keep anti-virus software up-to-date
27%
38%
ANZ (2005, 2008)
Change password regularly
23%
22%
ANZ (2005, 2008)
Ensure bank has a secure site/has good security measures

in place
19%
14%
ANZ (2005, 2008)
Dont use links in emails which claim to go to financial institution

websites
11%
12%
ANZ (2005, 2008)
Vigilant with passwords/codes/details/PINs
9%
12%
ANZ (2005, 2008)
Awareness of types of internet banking risks:
What consumers know about how to minimise internet banking risks:
Page 92
Table A1.14 (cont.): What Australians know and do: Protecting moneyscams and fraud
What people know (cont.)
What consumers know about how to minimise internet banking
risks (cont.):
Percent of
respondents
Research item
2005
2008
Check for viruses
9%
7%
ANZ (2005, 2008)
Dont open suspect files
7%
8%
ANZ (2005, 2008)
Dont use public computers/public internet access
2%
6%
ANZ (2005, 2008)
Cant say/unsure
7%
5%
ANZ (2005, 2008)
Other
10%
9%
ANZ (2005, 2008)
Percent of
respondents
Research item
36% (5,809,100)
ABS (2008a)
2% (329,000)
ABS (2008a)
Lotteries
0.5% (84,100)
ABS (2008a)
Pyramid schemes
0.4% (70,900)
ABS (2008a)
Phishing and related scams
0.4% (57,800)
ABS (2008a)
Financial advice
0.2% (28,500)
ABS (2008a)
Chain letters
0.2% (26,700)
ABS (2008a)
Advance fee fraud
0.1% (16,000)
ABS (2008a)
Other scams
0.4% (69,100)
ABS (2008a)
5% (806,000)
ABS (2008a)
Victim of ID fraud
3.1% (499,500)
ABS (2008a)
Credit card fraud
2.4% (383,300)
ABS (2008a)
Identity theft
0.8% (124,000)
ABS (2008a)
Deal with reputable, well-known companies/banks/people
18%
ASIC (2008a)
Do lots of research/homework
18%
ASIC (2008a)
Check out what you are investing in/who you are dealing with
17%
ASIC (2008a)
If it sounds too good to be true it probably is/avoid scams
14%
ASIC (2008b)
Invest in well-known companies/products
11%
ASIC (2008b)
What people do
Scams:
Exposed to a scam
Victim of a scam
Victim of selected scams:
Fraud:
Victim of personal fraud
Victim of ID fraud:
Tips about avoiding scams:
Page 93
Table A1.15: What Australians know and do: Information, advice and further education
Percent of
respondents
Research item
Opportunity to learn more about investing
40%
ASIC (2008a)
Opportunity to learn about new investment opportunities
24%
ASIC (2008a)
Tax advice or assistance in completing a tax return
28%
FLF (2007a)
Investment advice
27%
FLF (2007a)
General advice
13%
FLF (2007a)
Taking out mortgage/refinancing mortgage
10%
FLF (2007a)
Taking out other debt (e.g. car loan)
9%
FLF (2007a)
Wanted superannuation advice
8%
FLF (2007a)
Change in life (e.g. retiring, having children, getting married)
4%
FLF (2007a)
Financial adviser
82%
FLF (2007a)
Accountant/tax agent
81%
FLF (2007a)
Family
63%
FLF (2007a)
Bank
60%
FLF (2007a)
Friends
55%
FLF (2007a)
Seminars/educational institutions
52%
FLF (2007a)
Government website
49%
FLF (2007a)
Other website
48%
FLF (2007a)
Business/money-related magazines
48%
FLF (2007a)
Newspapers
47%
FLF (2007a)
Community services
42%
FLF (2007a)
Work
37%
FLF (2007a)
TV/radio
31%
FLF (2007a)
Centrelink
29%
FLF (2007a)
What people know

Reasons for attending investment seminars:
Most common reported reason for seeking information and advice:
Preferred sources:
Topics for further education/information:
2005
2008
Investing
33%
39%
ANZ (2005, 2008)
Superannuation
31%
25%
ANZ (2005, 2008)
Budgeting
12%
14%
ANZ (2005, 2008)
Taxation
7%
13%
ANZ (2005, 2008)
Borrowing, loans and mortgages
9%
9%
ANZ (2005, 2008)
For more information about financial advisers please see Appendix 2, Statistics on access to advice.
Page 94
Table A1.15 (cont.): What Australians know and do: Information, advice and further education
What people know (cont.)
Topics for further education/information (cont.):
Percent of
respondents
Research item
2005
2008
NA
9%
ANZ (2005, 2008)
How to make complaints/resolve disputes
12%
7%
ANZ (2005, 2008)
Financial management and planning
10%
7%
ANZ (2005, 2008)
Business finance
5%
5%
ANZ (2005, 2008)
Retirement planning
3%
3%
ANZ (2005, 2008)
Insurance
3%
3%
ANZ (2005, 2008)
General banking information
5%
2%
ANZ (2005, 2008)
Consumer rights and responsibilities
2%
2%
ANZ (2005, 2008)
Interest rates
NA
2%
ANZ (2005, 2008)
Other responses
2%
5%
ANZ (2005, 2008)
Cant say
16%
16%
ANZ (2005, 2008)
Managing debt
What people do
Percent of
respondents
Research item
Publications and seminars used in the last 5 years

(self education):
2005
2008
Financial sections of newspapers/magazines
37%
42%
ANZ (2005, 2008)
Books/other financial publications
27%
26%
ANZ (2005, 2008)
Finance websites
22%
27%
ANZ (2005, 2008)
Finance industry publications
30%
27%
ANZ (2005, 2008)
Government finance publications (e.g. ASIC, consumer affairs)
24%
23%
ANZ (2005, 2008)
Community organisation publications
11%
12%
ANZ (2005, 2008)
Seminars
17%
15%
ANZ (2005, 2008)
Financial management/planning specialist
62%
64%
ANZ (2005, 2008)
Accountant
44%
45%
ANZ (2005, 2008)
Tax specialist
23%
26%
ANZ (2005, 2008)
Financial planner/adviser
34%
34%
ANZ (2005, 2008)
Mortgage broker
13%
18%
ANZ (2005, 2008)
Insurance broker
12%
12%
ANZ (2005, 2008)
Stockbroker
10%
10%
ANZ (2005, 2008)
Bank manager/employee
35%
39%
ANZ (2005, 2008)
Family/friends
45%
47%
ANZ (2005, 2008)
Financial counsellor
13%
13%
ANZ (2005, 2008)
NA
11%
ANZ (2005, 2008)
Financial adviser/specialists used:
Centrelink Financial Information Service officers
Page 95
Percent of
respondents
Research item
Friends and family are the main point of reference
29%
Citibank (2008)
Accountants or financial planners
18%
Citibank (2008)
Internet
13%
Citibank (2008)
Investors who have ever paid for investing seminars
8%
ASIC (2008a)
Investors who have ever paid for training courses
6%
ASIC (2008a)
Investors who have ever paid for software
3%
ASIC (2008a)
Accountant/tax agent
68%
FLF (2007a)
Financial adviser
54%
FLF (2007a)
Bank
57%
FLF (2007a)

Where people source information on money matters:
Investors use of seminars, courses and software
Ever used for financial information or advice:
Total percentage of Australians aged 14+ who have ever met a

financial adviser
131
Information sources selected by actual
2006
2009
33%
37%
Roy Morgan
Research (2006 [12
months to March
2006], 2010b [12
months to
December 2009])
investors:
Financial institutions (e.g. bank, building society or credit union)
18%
ASIC (2008a)
Friend or family member
17%
ASIC (2008a)
Professional financial adviser
15%
ASIC (2008a)
Daily newspapers
14%
ASIC (2008a)
11%
ASIC (2008a)
28%
ASIC (2008a)
Friend or family member
21%
ASIC (2008a)
Daily newspapers
19%
ASIC (2008a)
Internet
14%
ASIC (2008a)
Financial magazines
9%
ASIC (2008a)
Internet
132
Information sources selected by hypothetical
investors:
131
Actual investors were people who were surveyed about the last investment decision they had actually made (as opposed
to hypothetical investors).
132
Hypothetical investors were people who were surveyed about a hypothetical investment scenario in which they had
inherited $100,000 (as opposed to actual investors).
Page 96
Percent of
respondents
Research item
22%
FPA (2007)
Mass affluent investors who said they use a professional financial

adviser
29%
brandmanagement
(2008)
Mass affluent investors who said they have ever used a

professional financial adviser
34%
brandmanagement
(2008)

Currently use a financial adviser:
Total percentage of Australians aged 16 and over who currently
use the services of a financial planner
133
Use of advisers by mass affluent
investors:
Use of ratings agencies/organisations:
2005
2008
Financial product rating agency
NA
6%
ANZ (2005, 2008)
Organisations like the Australian Consumers Association or the

magazine Choice
NA
19%
ANZ (2005, 2008)
Either of these
NA
23%
ANZ (2005, 2008)
133
Mass affluent investors are defined as those with greater than $500,000 investable assets, excluding their home.
Page 97
Table A1.16: What Australians know and do: Consumer rights and responsibilities
Percent of
respondents
Research item
Are highly confident in their ability to understand their rights and

responsibilities
85%
FLF (2007a)
Recognise the importance of learning more about understanding

rights and responsibilities
74%
FLF (2007a)
What people know

Consumer rights and responsibilities:
People who agreed they were very clear about their rights if they
had a problem with a financial institution
2005
2008
68%
67%
ANZ (2005, 2008)
57%
52%
ANZ (2005, 2008)
Awareness of ASICs role and responsibilities:

People who incorrectly identified that the Australian Securities and
Investments Commission checks the accuracy of all prospectuses
lodged with it
Who Australians would contact if they experienced difficulties with a financial product/ service:
Industry ombudsman/Ombudsman
36%
ANZ (2008)
Government organisation (e.g. consumer affairs or ASIC)
26%
ANZ (2008)
Professional adviser (e.g. solicitor)
14%
ANZ (2008)
Financial adviser or accountant
13%
ANZ (2008)
Family or friends
13%
ANZ (2008)
Industry/professional association
5%
ANZ (2008)
Bank manager
5%
ANZ (2008)
Department of fair trading
1%
ANZ (2008)
Provider
1%
ANZ (2008)
Local MP
1%
ANZ (2008)
Unsure
17%
ANZ (2008)
Percent of
respondents
Research item
Dissatisfied with a financial organisation in the last 2 years
52%
ASIC (2008d)
Made a complaint to a financial organisation in the last 2 years
29%
ASIC (2008d)
Wont change anything
36%
ASIC (2008d)
Waste of time / dont have time / time involved / not worth the
time/effort/bother / too much hassle/trouble
16%
ASIC (2008d)
Better/easier to go elsewhere / went to another

company/bank/organisation / change company / find better
product / took our business elsewhere / didnt use their service
11%
ASIC (2008d)
Cant be bothered / lazy / apathetic
11%
ASIC (2008d)
28%
ASIC (2008a)
What people do
Consumer complaints:
Common reasons for not making a complaint:
Awareness of ASICs role and responsibilities:

Investors who were able to name ASIC as the corporate
watchdog
* Some of the information contained in these tables is sourced directly and some has been paraphrased for ease of reference.
Page 98
Table A1.17: Taxonomy of cognitive biases likely to be relevant for financial decision making
(de Meza et al for the FSA, 2008)
Adjustment
Naive statistics
Memory
Bias
Description and potential relevance

Curse of knowledge
Knowledge of an events outcome can compromise the ability to reason

about another persons beliefs about that event.
Hindsight [3]
Outcomes that are considered improbable ex ante are often

overestimated ex post.
Mental accounting [2]
Mental accounting is the set of cognitive operations used by individuals

and households to organize, evaluate, and keep track of financial
activities. People are assumed to group their assets into a number of
non-fungible mental accounts.
Procrastination [3]
Postponing things one knows one should do today. A psychological

reason might be that present or immediate costs/benefits are unduly
salient or vivid in comparison to future costs/benefits.
Recall, imaginability [3, 4]
An event or class may appear more numerous or frequent if its instances

are more easily recalled than other equally probable events.
Base-rate neglect,
stereotyping [1, 3, 4]
The base-rate fallacy is peoples tendency to ignore base rates in favour

of, e.g. individuating information (when such is available), rather than
integrate the two.
Conjunction [1, 4]
Probability is often overestimated in compound conjunctive problems.
Correlation [1, 3, 4]
The probability of two events occurring together can be overestimated if

they can be remembered to have co-occurred in the past.
Disjunction [1, 4]
Probability is often underestimated in compound disjunctive problems.
Small number [1, 4]
Believers in the law of small numbers tend to over-infer the outcome of a

random process after a small series of observations. People tend to
believe that small samples replicate the probability distribution properties
of the population.
Anchoring [4]
Assimilation of a numeric judgement to a previously considered standard.
Default [3, 5]
People tend to stay with the default.
Disposition [2]
The original purchase price of an item is treated as the reference point

(closely related to mental accounting and loss aversion).
Endowment [2, 3, 5]
The value of an item increases when it becomes a part of a persons

endowment. The person demands more to give up an object than they
would be willing to pay to acquire it.
Loss aversion [2, 3, 5]
Tendency of individuals to weigh losses about twice as much as gains.
See notes at end of Table A1.17.
Page 99
Table A1.17 (cont.): Taxonomy of cognitive biases likely to be relevant for financial decision
making (de Meza et al for the FSA, 2008)
Confidence
Adjustment (cont.)
Bias

Projection [3]
People exaggerate the degree to which their future tastes will resemble
their current tastes.
Regression to mean
Consider two variables X and Y which have the same distribution. If one
selects individuals whose average X score is higher than the mean of X
by k units, then the average of their Y scores will usually deviate from the
mean of Y by less than k units. Often people do not take this into account
in their judgements. For example, investments that have been
extraordinarily profitable yesterday are likely to regress back to their
mean today.
Regret aversion [3, 5]
Tendency to avoid taking an action due to a fear that in hindsight it will

turn out to have been suboptimal.
Omission [3]
Tendency to judge harmful actions as worse or less moral than equally

harmful omissions (inactions), especially in the short run.
Status quo [3, 5]
People like things to stay the same. An alternative may be chosen only
because it was used before (habit).
Belief [3, 4, 5]
Difficulty evaluating conclusions that conflict with what one thinks one
knows about the world.
Completeness [3, 4, 5]
Perception of an apparently complete or logical data presentation of

information base can stop the search process too early.
Confirmation, Myside
[3, 4, 5]
Tendency to evaluate evidence, generate evidence, and test hypotheses

in a manner biased toward ones own previously held opinions.
Unrealistic optimism,
desire, wishful thinking [3]
The probability of desired outcomes is assessed to be greater than

actually warrants.
Illusion of control [4]
The expectancy of a personal success probability of an outcome often

increases (normally above the objective one) when one has some control
over the outcome.
Planning fallacy [3]
Refers to the tendency to underestimate task-completion times.
Overconfidence [3]
The ability to solve difficult or novel problems and the accuracy of our
own judgements is often overestimated.
Success
Often failure is associated with poor luck and success with the abilities of
the decision maker.
See notes at end of Table A1.17.
Page 100
Table A1.17 (cont.): Taxonomy of cognitive biases likely to be relevant for financial decision
making* (de Meza et al for the FSA, 2008)
Situation
Presentation
Bias

Dilution [4, 5]
The weakening of a belief by providing irrelevant neutral information.
Framing [3, 4, 5]
Alternative wordings of the same objective information can significantly

alter the decision, though differences between frames (e.g. as losses or
gains) should have no effect on the rational decision.
Linear
Decision makers are often unable to extrapolate a non-linear growth

process.
Information order,
recency [4]
The first item presented or the last may be over-weighted in judgement.

Decision makers derive different conclusions depending on the order in
which they receive information.
Pruning bias, partition

dependence
Bias in probability assessment due to which the particular choice of

events into which the state space is partitioned does affect the assessed
probability distribution over states.
Scale [4]
The perceived variability of data can be affected by the scale of the data.
This might cause that small extra purchases are perceived as minor
expenditures when they follow larger purchases.
Attribution
Tendency to draw inferences about a persons unique and enduring

dispositions from behaviours that can be entirely explained by the
situations in which they occur.
Complexity [4, 5]
Time pressure, information overload, cognitive busyness, increased

(internal) inspection and other factors that increase the perceived
complexity of the task can lead to worse decisions.
Escalation, sunk cost [1]
Commitment to follow or escalate a previous unsatisfactory course of

action. This leads to throw good money after bad.
Extract only. For full table, see de Meza et al, 2008, pp. 94103.
Numbers in brackets [ ] indicate (most) likely relevance for different characteristics of financial capability: [1] being able to
manage money; [2] keeping track of finances; [3] planning ahead; [4] making informed decision about financial product; [5]
staying up-to-date about financial matters.
Source: Selected extract from de Meza et al for the FSA, 2008, pp. 94103.
Page 101
Table A1.18: What makes superannuation decisions difficult? (Clark-Murphy et al, 2002)
Nature of the decision/time
Information/knowledge
Uncertainty/risk
Classification
Description
Representative comment
Uncertainty
General uncertainty about the future.

Having to predict future conditions.
Trying to foresee the future
Employment
Uncertainty of career path, salary,

length of employment at university,
years to retirement.
Unpredictability of future
economic conditions
Political/legal/taxation
Possibility of future changes in

superannuation rules, taxation law etc.
Not knowing what the

Government will do with Super
in the future
Financial outcomes
Concern about overall risk, return on

investment, final payout. Wish for
security, wish to maximise return.
Evaluation of risk and return.
Assessing the risk versus

security versus growth
Personal financial
situation
Standard of living in retirement,

superannuation as sole source of
income.
I expect to be self funded in

retirement and want a high
quality of life
Life expectancy
Uncertainty of longevity and health.

How much money will be needed?
Poor understanding generally

of what I will need (e.g. will I live
to 65 or 95?)
Complexity
Complexity of superannuation and of

the information available. Complexity of
financial issues in general. Difficult to
understand the language, jargon.
Too much technical

information
Acquiring information
Difficult to get information. Not enough

information and poor quality of
information.
No real advice available. My

individual circumstances meant
that the info provided had to be
modified to suit
Lack of knowledge/
understanding
Lack of knowledge and understanding

of financial issues and superannuation.
Little knowledge and essence

in Superannuation and
investments
Ambiguity
Unclear information. Not understanding

the implications of the choices.
Confusion, doubt, conflicting advice.
Understanding what was being

offered
Importance of the
decision
How important the decision is and why.
Knowing that the decision

could have a major effect on my
ultimate retirement benefits
Once-only decision
Concern that such a choice will not be

given again.
Only one time choice between

the two systems
Deciding
Difficulty in choosing amongst the

alternatives. Difficulty in choosing
between risk and return.
Whether to take a risk or not
Page 102
Description
Representative comment
Timing
Closeness to retirement.
Relatively short time to

retirement and need to be
cautious
Time constraint
Not enough time to do the required

research. Too much time required to do
the research.
No time to consider all options

(i.e. no time available to
become better informed)
Frustration and lack of

control
Not being in control of own financial

situation or lack of control due to lack of
knowledge/understanding. Anger.
Unable to cope with the decisions or the
issues.
I felt frustrated with myself and

lack of skill in determining the
best course to take
Anxiety
Fear of losing money. Fear of being

poor. Fear of regret.
Fear of losing out
Distrust
Lack of confidence in the system and/or

in financial advisers.
Lack of trust in the system
Avoidance
Dislike of financial issues. Avoidance of

handling the issues. Wish for someone
else to take on the responsibility.
Superannuation is a pain
Emotion
Classification
Nature of the decision
/time (cont.)
Table A1.18 (cont.): What makes superannuation decisions difficult? (Clark-Murphy et al, 2002)
I have no faith whatsoever in

money that I have no control of
Source: Selected extract from Clark-Murphy et al, 2002, pp. 1314.
Page 103
Figure A1.1: Role of confidence in financial outcomes (Financial Literacy Foundation, 2007a)
Source: FLF, 2007a, p. 40.
Page 104
Table A1.19: Financial education and program delivery in the United States (Lyons et al, 2006)
Details of program
Percent*
Financial topics covered in program (n=334)

Budgeting and cash-flow management
93.4%
Credit/debt management
91.6%
Savings and investment
88.6%
Consumer protection
63.5%
Home ownership
60.2%
Retirement and estate planning
53.6%
Risk management/insurance
46.4%
Taxation
37.1%
Primary target audiences (n=335)

General public
49.2%
Low-to-moderate income
60.6%
Moderate-to-upper income
18.8%
Young adults
46.3%
Youth and children
29.5%
Elderly
20.9%
Baby boomers
19.1%
Military
19.4%
Other
13.1%
Other audiences (n=332)

Audiences with eighth-grade reading level
55.4%
Non-English speaking audiences
36.7%
Methods of delivery (n=337)
Workshops/seminars
77.0%
Multi-session courses
69.7%
Printed materials
84.0%
One-on-one financial counselling
66.4%
Internet delivery
35.2%
Electronic materials such as CDs
25.1%
Distance education
15.9%
Based on total sample of 342 respondents.
Source: Selected extract from Lyons et al, 2006, p. 224.
Page 105
Appendix 2: Statistics on access to advice

This Appendix covers findings about:
What percentage of Australians use a financial planner?
What percentage of investors use a financial planner?
Who does and doesnt use a financial planner?
Why dont people use financial planners?
The findings are presented in order of recency.
Some of these statistics were also detailed in the 2010 report, Access to
financial advice in Australia (ASIC, 2010a).
Page 106
What percentage of Australians use a financial planner?
Key points
It is difficult to pinpoint the percentage of Australians who use financial
planners because:
some survey respondents have a loose understanding of what a
financial planner/adviser is (e.g. some view knowledgeable
friends/colleagues as financial advisers)
the result varies depending on the survey at hand, including the way the
question is asked, when the survey was conducted and who is included
in the survey (e.g. the proportion of Australians who have ever used a
financial adviser is higher than those who currently use or have recently
used one).
However, a significant number of Australians appear to have never used a
financial planner, based on the information at hand (as many as 63% of
Australians aged 14 and over).
Overall, friends and family are the most common source of financial advice,
and a considerable number of Australians do not seek any advice.
According to a survey by Investment Trends published in 2010:
21% of people had used a financial adviser in the previous 12 months
among those respondents planning to seek financial advice on a given

matter, the most preferred source was a financial planner (38% of
respondents).134
According to Roy Morgan Single Source data (12 months to December

2009):
The estimated percentage of Australians aged 14 and over who had ever
met an adviser (either from a bank, building society, credit union or
another institution) was 37%, including:
34% who had met an adviser from a bank, building society or credit
union, and
16% who had met an adviser from another financial institution.
The estimated percentage of Australians aged 14 and over who had met
an adviser in the last four weeks (either from a bank, building society,
credit union or another institution) was only 5%, including:
5% who had met an adviser from a bank, building society or credit union,
and
1% who had met an adviser from another financial institution.135
134
135
Base sample: 1085 Australians sourced via an online survey. Investment Trends (2010).
Base sample: 51,874 Australians aged 14 and over. Roy Morgan Research (2010b).
Page 107
According to a survey commissioned by The Department of Families,

Housing, Community Services and Indigenous Affairs (FaHCSIA) in 2009,
26% of people had used a financial planner for information, advice or help
with financial management issues.136
According to research commissioned by the Industry Super Network (ISN)
in 2009:
28% of people had consulted a financial planner/adviser within the last

12 months
39% of people had consulted a financial planner/adviser within the last

3 years
60% of people had consulted a financial planner/adviser at some

point.137
According to brandmanagement research commissioned by the FPA in 2008,

an estimated 5 million Australians were at that time engaged with and using
the services of advisers, which equated to:
31.8% of the adult population
23.5% of the total population.138
According to the 2008 ANZ financial literacy survey, 34% of Australians

aged 18 and over had used a financial planner/adviser (the same result as
2005: see below).139
According to the results of the Citibank Citi Fin-Q survey released in 2008,
18% of Australians aged 18 and over relied on finance professionals such as
accountants, financial planners or bank officials when looking for
information on money matters.140
According to an omnibus survey commissioned by the FPA in 2007:
22% of Australians aged 16 and over were at that time using the
services of a financial planner
half (49%) of those who had ever used a financial planner had not used
one in the last 12 months.141
136
Base sample: 1400 Australians (data weighted to represent the Australian population). FaHCSIA (2009a, 2009c).
Base sample: 1201 Australians aged 18 and over. Question: When was the last time you personally consulted a financial
planner or financial adviser? ISN (2009).
138
Estimates only. See source report for parameters. FPA (2008).
139
Base sample: 3500 Australians aged 18 and over. Question: And have you consulted any of the following people
regarding your finances? ANZ (2008).
140
Base sample: 400 Australians aged 18 and over. Citibank (2008).
141
Base sample: 1100 Australians aged 16 and over. FPA (2007).
137
Page 108
According to the Understanding Money research released by the Financial

Literacy Foundation in 2007, 54% of Australians aged 18 and over had used
a financial adviser for information or advice.142
According to the results of an online survey released by MWS in 2006, 28%
of working Australians aged between 18 and 64 had consulted a financial
adviser/planner in the last 12 months.143
According to the 2005 ANZ survey, 34% of Australians aged 18 and over
had used a financial planner/adviser. This was the fourth most common
source of advice. The top three sources were family or friends (45%),
accountants (44%) and a bank manager or bank employee (35%). The
responses indicated that consumers tend to utilise multiple sources of advice
for their finances; however, 17% reported that they consulted no-one about
their finances.144
142
Base sample: 6947 Australians aged 18 to 75. FLF (2007a).

Base sample: 802 working Australians aged between 18 and 64. MWS (2006).
144
Base sample: 3500 Australians aged 18+. ANZ (2005).
143
Page 109
What percentage of investors use a financial planner?
Key points
It is difficult to pinpoint the percentage of investors who use financial
planners (for the same reasons as for Australians in general) and also
because there is no consistent definition for the category investor.
Notwithstanding the difficulties measuring the percentage of investors who
use financial planners, it appears that a considerable proportion of
investors, even relatively active or affluent investors, do not use a
financial planner:
At best, IFSA research found 62% of active investors would use a
planner if they were looking for information about managed investments,
including superannuation.
At worst, ASIC research found that only 15% of general investors
surveyed used a financial planner as a main source of information when
they made their last investment decision.
Again, friends and family were a common source of financial advice and a
considerable number of investors do not seek any advice.
According to an omnibus survey commissioned by IFSA in 2008:
21% of working Australians aged 18 to 64 had used the services of a

financial planner for their super
35% of Australians aged 50 to 64 had seen a financial planner for their

super.145
According to a 2008 IFSA investor sentiment survey, qualified financial

advisers/planners were the preferred source of advice and information if
you were looking for information on managed investments, including
superannuation for 62% of active investors (compared to 55% in 2006).146
In 2008, brandmanagement surveyed their mass affluent investor population
(i.e. a population skewed toward higher wealth).147 They found that:
28.7% mass affluent investors said they use a professional financial

adviser148
33.6% mass affluent investors said they have ever used a professional
financial adviser.149
145
Base sample: 683 working Australians aged 18 to 64 living in capital cities. IFSA (2008a).
Base sample: 789 active investors. active investors included: a) those with investments $10,000 plus (not including
super) for managed funds, property, direct shares, cash management accounts, fixed-term deposits, savings accounts; and b)
those with investments less than $10,000 but with super $25,000 plus making additional contributions. IFSA (2008b).
147
Mass affluent investors are defined as those with greater than $500,000 investable assets, excluding their home.
brandmanagement (2008).
148
Question sample: 4271 mass affluent investors.
149
Question sample: 3058 mass affluent investors.
146
Page 110
In 2008, ASIC commissioned brandmanagement to survey unlisted, unrated

debenture (UUD) investors. Survey respondents were asked what
information sources they typically use when considering and researching an
investment. ACR150/Fincorp investors were much less likely to have used a
professional financial adviser than active UUD or general investors: see
Figure A2.1 below.151
Figure A2.1: Information sources used when considering investments
(ASIC, 2008c)
Newspaper articles
TV Advertising
Print advertising
Company provided material
Family/friends/work colleagues
Radio advertising
Investment magazines
Other finance professionals (e.g. accountant)
Magazines
Internet sites (excluding ASIC/FIDO websites)
TV shows
Radio shows
ACR/Fincorp
ASIC website
Active
General
FIDO website
0%
ACR/Fincorp=368, Active=280, General=494
10%
20%
30%
40%
50%
60%
Very few ACR/Fincorp investors cited advisers as influential on their

specific decision to invest in ACR and/or Fincorp: see Figure A2.2.
150
Australian Capital Reserve Ltd (Administrators Appointed).

Base sample: 1142 investors. General investors did not include those with under $50,000 to invest and the results for
general investors were therefore skewed to investors with higher than average wealth. ASIC (2008c).
151
Page 111
70%
Figure A2.2: Most influential factor (#1) in investment decision

152
(ASIC, 2008c)
ACR/Fincorp
100
88.1
Active
General
80
60
45.2
37.0
40
26.6
20
20.7
20.3 19.0
3.9
17.3
3.3
13.8
4.7
0
Advertising ranked as #1
Adviser ranked as #1
Associate ranked as #1
Other ranked as #1
ACR/Fincorp=362,Active=261,General=473
In 2008, ASIC released the results of research conducted by Roy Morgan

Research during 200607. In the quantitative stage of this research, Roy
Morgan Research conducted a national survey that compared two groups of
investors, one group explaining how they would invest a hypothetical
$100,000 inheritance (hypothetical) and one group explaining how they
had actually recently invested (actual).153 Respondents were allocated into
these two groups based on when their last investment decision was made
(i.e. actual investors had made their last investment decision more recently
than hypothetical investors).154
The survey found that hypothetical investors were more likely than actual
investors to nominate professional financial advisers as an information
source used when making their investment decision:
28% of hypothetical investors nominated a professional financial

adviser as a main source of investment information
15% of actual investors nominated a professional financial adviser as a

main source of investment information.
Demographic analysis of the two investor groups found that hypothetical

investors were more likely to be aged 65 and over, in retirement or
unemployed, while actual investors were more likely to be in paid
employment or in the higher socio-economic quintiles.
152
Other included a wide range of influences on investment decisions (e.g. bank manager, own research, internet and direct mail).
Base sample: 1217 investors. Hypothetical investors were told to imagine they had received $100,000 from an inheritance
and were asked to describe how they would invest this money. They were not permitted to pay off debts or give the money to
charity, family and friends. ASIC (2008b).
154
Hypothetical investors were those who had not made an investment in the past year (or more than five years in the case of
property).
153
Page 112
Overall, the most common sources of advice for these investors were a
financial institution/bank/building society/credit union (18%) and family and
friends (17%). Echoing the trends for Australians in general, 16% of
investors in this survey did not rely on any advice sources.
According to a survey of self-managed superannuation fund (SMSF) trustees
released by IFSA in 2006, 28% of SMSF trustees used a financial planner to
help with their funds.155
155
Base sample: 2775 SMSF members. IFSA (2006).
Page 113
Who does and doesnt use a financial planner?

Key points
While the research results vary, socio-economic factors and age appear to
be the most consistent drivers of planner use:
Those with higher socio-economic status and those aged 50 and over
are more likely to have used planners.
Those with lower socio-economic status and those aged under 25, are
less likely to have used planners.
However, ASICs research into UUD investors identified a significant at
risk group that prefers not to seek advice from planners or informal advice
sources and tends to be older (average age 64).
ASICs research into UUD investors identified two key types of investors,
Type 1 and Type 2. Type 1 investors were less likely to seek advice about
their investment decision (from either formal or informal networks). Type 1
investors tended to be older than Type 2 investors: see Table A2.1 below.
Table A2.1:
Key characteristics of investor types (ASIC, 2008c)
Key
investment
characteristics
Key
demographic
characteristics
Typical Type 1 investor

(53.7% of total investors)
Typical Type 2 investor

(46.3% of total investors)
Attracted by perceived security, rate of

interest/return and capital protection
Attracted by perceived security, rate of

interest/return and capital growth
Seeking income for retirement
Seeking long-term saving
Attracted to/influenced by product advertising,

seeing frequency as a proxy for quality
Noticed but less influenced by product

advertising
Less likely to seek advice about investment

decision (from either formal/informal networks)
More likely to have and use informal

and formal advice networks
Less likely to enjoy or spend time investing

generally
More likely to enjoy and spend time

investing generally
More likely to be ACR/Fincorp investor

(86.7%) than active UUD investor (43.7%)
or general investor (34.8%)
More likely to be general investor

(65.2%) or active UUD investor (56.3%)
than ACR/Fincorp investor (13.3%)
Mean age of 64
Mean age of 41
More likely to be female (39.6%)
156
Less likely to be female (35.4%)
More likely to be divorced (11.6%) or

widowed (10.4%)
Less likely to be divorced (3.0%) or

widowed (0.4%)
Over-represented among those educated

at high school level or below
Over-represented among those with

post-graduate qualifications
More likely to be retired and receiving

some form of government support
Less likely to be retired and receiving

some form of government support
Source: ASIC, 2008c, pp. 56.
156
ACR investors were particularly likely to be female (61.8% of ACR investors were female).
Page 114
According to research published by Investment Trends in 2010, there were

several differences between people who had used financial planners in the
previous 12 months and those who had not. Specifically, when compared to
those who had not used a planner or other financial adviser during the
previous 12 months, those who had used a planner during the same period:
rated their own financial expertise more favourably (average self-rating

of 5.5 out of 10, compared to 4 out of 10 for non-users of advisers
during the period)
had more invested in super (average of $254,000, compared to $63,000)
were older (average age of 51 years, compared to 40 years)
had higher personal income (average of $74,000, compared to $52,000)
had a larger total investment portfolio size157 (average of $304,000,

compared to $77,000)
were more likely to own their own home outright (just over 50%,
compared to just under 10%).158
According to Investment Trends 2009 research, amongst pre-retirees, people

with higher superannuation balances were more likely to nominate a financial
planner as their preferred source of assistance with retirement planning (around
60% of those with super balances of $200,000 and over) than people with lower
balances (under 50% for people with balances lower than $50,000).159
The Investment Trends (2009) study also found that use of financial planners
tended to increase as people neared retirement. While just under a quarter of
pre-retirees with three to five years to retirement indicated that a financial
planner was their main financial adviser, this proportion increased to around
a third of those one to three years from retirement. 160
According to Roy Morgan (2010b) Single Source data, people with higher
socio-economic status are more likely to have met with a financial adviser
than those with lower socio-economic status: see Figure A2.3.
157
Excluding super and own home, and less any debt.

Base sample: 1085 Australians sourced via an online survey. Results from unpublished analysis conducted by Investment
Trends on data included in Investment Trends (2010).
159
Base sample: 1218 Australians aged 40 and over sourced via an online survey. Investment Trends (2009).
160
158
Page 115
Figure A2.3: Adviser use by socio-economic status (Roy Morgan

Research, 2010b, 12 months to December 2009)
100%
Percentage who met adviser
90%
80%
70%
60%
53%
45%
50%
40%
37%
35%
30%
30%
24%
20%
10%
8%
5%
7%
5%
4%
3%
0%
Total
AB Quintile
C Quintile
D Quintile
E Quintile
FG Quintile
Socio-economic status
Estimated percentage of Australians aged 14+ who have ever met an adviser (either from a bank, building society,
credit union or other financial institution)
Estimated percentage of Australians aged 14+ who have met an adviser (either from a bank, building society, credit
union or other financial institution) in the last 4 weeks
Source: Roy Morgan Research, 2010b.
A survey commissioned by FaHCSIA in 2009 found that people who had at

some point used the services of a financial planner for information, advice
or help with financial management issues were more likely to be:
male (28% had used a planner) than female (24%)
older (34% of those aged 50 to 64 and 30% of those aged 65 and over,
compared to 7% of those aged 18 to 24). 161
Research commissioned by ISN in early 2009 indicated that people who had
at some point consulted a financial planner/adviser were more likely to be:
male (64% had consulted a planner) than female (56%)
older (66% of people aged 50 and over had ever consulted a planner,
while 29% of those aged 18 to 24 had)
employed in a white-collar role (63%) than a blue-collar role (57%)
enjoying a higher household income (68% of those with household incomes

of $80,000 and over had consulted a planner, while 53% of those earning
under $40,000 had)
degree-educated (65% had consulted a planner, compared to 54% of

those having completed only primary/secondary school).162
161
The preceding question in the survey was about the hypothetical use of various information sources (including financial
planners) in the event of financial stress or hardship, which may have influenced respondents conception of the term
financial management issues, potentially resulting in the lower reported usage of financial planners. Base sample: 1400
Australians (data weighted to represent the Australian population). FaHCSIA (2009a, 2009c).
162
Page 116
According to the results of the Citibank Citi Fin-Q survey released in 2008,
women and over-40s were more likely to report using finance professionals
such as accountants, financial planners or bank officials when looking for
information on money matters than men and those aged under 40:
21% women compared to 15% of men
27% of over-40 year-olds compared with 30 to 39 year-olds (15%) and

18 to 29 year-olds (6%).163
According to the omnibus survey commissioned by the FPA in 2007, in

which 22% of Australians aged 16 and over reported that they currently use
the services of a financial planner, age affects the rates of use:
16 to 24 years (7%)
25 to 34 years (21%)
35 to 49 years (23%)
50 years and over (29%).164
According to the Understanding Money research released by the Financial Literacy

Foundation in 2007, in which 54% of Australians aged 18 and over said they had
used a financial adviser for information or advice, rates of use increased by income
and age. However, the age trend tapered slightly at the oldest age bracket:
18 to 29 years (30%)
30 to 44 years (57%)
45 to 54 years (63%)
55 to 64 years (69%)
65 years and over (66%).165
According to the national investor survey Roy Morgan Research conducted

for ASIC in 2007, investors who indicated that they had used a financial
adviser as a main source of information when making their last financial
decision were most likely to have been investing in managed funds or
SMSFs: see Table A2.2.
163
Citibank (2008).
FPA (2007).
165
FLF (2007a).
164
Page 117
Table A2.2:
Main information sources used by actual investors (ASIC, 2008b)*
Shares
Highinterest
savings
account
Term
deposits
Other direct
invest.
Total
Managed
invest.
SMSFs
Super
(extra
contrib.)
569
53
79
44
133
127
47
32
54
Financial
institution/
bank/building
society/ credit
union
18%
6%
6%
2%
4%
0%
53%
27%
13%
Friend/family
member
17%
15%
18%
24%
20%
15%
16%
8%
21%
Professional
financial adviser
15%
63%
34%
14%
9%
15%
6%
8%
15%
Daily newspapers
14%
6%
11%
4%
18%
33%
4%
9%
22%
Internet
11%
15%
10%
5%
12%
21%
10%
0%
12%
Financial
magazines
8%
11%
14%
0%
6%
18%
2%
9%
5%
Accountant
5%
6%
11%
7%
11%
5%
0%
0%
1%
Real estate agent
5%
0%
0%
0%
23%
0%
2%
0%
0%
Stockbroker
3%
0%
6%
0%
0%
14%
0%
0%
9%
TV investment
programs
3%
0%
0%
0%
1%
7%
3%
9%
9%
Workplace
colleagues
3%
4%
0%
14%
0%
1%
3%
0%
2%
Managed fund,
prospectus
3%
4%
6%
3%
1%
2%
1%
2%
14%
16%
0%
14%
14%
27%
17%
10%
15%
16%
Actual investors, n=
None, rely solely

on own judgement
*
Invest.
property
Figures in this table are vertical percentages.
Source: Selected extract from ASIC, 2008b, p. 48.
According to the Commonwealth Banks 2006 Lifestyle Aspirations survey,

44% of baby boomers (45 to 64 year-olds) had sought advice from a
financial planner.166
According to the 2005 ANZ survey, in which 34% of Australians aged 18
and over had used a financial planner/adviser:
respondents who were more likely to consult a financial planner or

adviser included:
those with higher savings excluding the home ($250,000 or more: 54%)
older respondents (60 to 69 years: 51%, 45 to 59 years: 40%)
166
Base sample: 370 Australians aged 4564. CBA (2006).
Page 118
homeowners (owned outright) (41%)

those with household incomes of $60,000$99,000 (40%)167
respondents who were least likely to consult a financial planner or

adviser included:
younger respondents (18 to 24 years: 13%)
those with no occupation (15%)
those in the lowest financial literacy levels (Quintile 1: 19% and Quintile
2: 29%)
renters (22%).
167
ANZ (2005).
Page 119
Why dont people use financial planners?
Key points
Overall, the most common reasons for not using a planner are:
a perception that professional advice is not necessary (e.g. because the
decision is simple or people prefer to do it themselves)
lack of trust in planners, including not knowing how to find a good one
cost issues, including concerns about:
planner fees
not having enough money to invest.
Many retirees and pre-retirees describing their experiences and motivations

in an ASIC (2010b) retirement study were worried that they might rely on an
expert who would then give bad advice. People who perceived this risk
managed it by avoiding formal financial advice.168
The issue of the cost of advice was raised in a 2009 survey of pre-retirees
and retirees by Investment Trends. Almost half (47%) of those respondents
who would seek advice on retirement plans did not expect to pay for this
advice. More directly, 26% of those who would have preferred to consult a
financial planner did not expect to pay for this advice.169
Qualitative research with low to middle income participants commissioned
by FaHCSIA in 2009 found that, while many participants were generally
aware of the services they could receive through accountants and financial
planners, few had accessed those services. Participants tended to perceive
the services as expensive and unaffordable.170
The quantitative phase of the above FaHCSIA study asked respondents
(from a broader base of the Australian population) to indicate the
circumstances in which they would seek information, advice or help from
financial planners. The results revealed a significant degree of uncertainty
about how planners could assist in financial management, with 29% of
respondents reporting that they couldnt say which circumstances might
lead them to use the services of planners.171
168
Base sample: 12 focus group discussions and 28 one-on-one in-depth interviews conducted with low to middle income
participants. ASIC (2010b).
169
170
Base sample: 12 focus group discussions and 28 one-on-one in-depth interviews conducted with low to middle income
participants. FaHCSIA (2009a, 2009b).
171
Base sample: 1400 Australians (data weighted to represent the Australian population). FaHCSIA (2009a, 2009c).
Page 120
A survey of Australians aged 18 and over commissioned by the ISN in 2009

found that people had significant lack of trust in planners, underpinned by
negative perceptions about the influence of commissions. More specifically:
few (15%) respondents believed that financial planners gave advice

only in the best interests of their clients (i.e. that commissions had no
impact)
males, white-collar workers, university-educated and employed

respondents were more likely to believe that commissions compromised
advice
approximately 8 out of 10 respondents believed that the law should

require planners to act only in the best interests of their clients.172
In 2008, ING Australia released the results of research suggesting that 59%
of surveyed advisers believe a client needs at least $100,000 of investable
assets to receive financial advice (down from 63% in 2007).173
In 2008, The Australia Institute released the results of six focus groups
conducted with Australians in which people were asked if they had ever sought
financial advice and how helpful the advice was. The results showed that:
Many participants did not trust financial advisers (mainly due to a

perception that advisers do not necessarily provide independent advice,
given their commission structure or other incentives to recommend one
or another product).
Participants had some concerns about how to choose a good financial

adviser. There was a great deal of uncertainty as to how ordinary people
might go about finding independent and appropriately qualified
advisers.174
In the omnibus survey commissioned by the FPA in 2007, those who said
they do not use a financial planner said it was because:
they do not need financial advice (56%)
they dont have enough money to make it worthwhile (39%)
it will cost too much (21%)
they dont know where to find a good planner (18%)
they believe financial planning is only relevant for retirement planning

(11%).175
172
173
ING (2008).
174
Fear (2008).
175
FPA (2007).
Page 121
In the national investor survey Roy Morgan Research conducted for ASIC in
2007, investors who indicated that they did not/would not use a financial
adviser as a main source of information had a wide range of reasons for not
doing so. Table A2.3 below summarises these reasons by investment type
but overall the top reasons were that they:
Table A2.3:
trusted their own decisions (17%)
did not trust advisers (12%)
felt it was not suitable for their situation (11%)
thought the fees were too high (10%).176
Reasons for not using a financial adviser (ASIC, 2008b)*
Shares
Highinterest
savings
account
Term
deposits
Other
direct
invest.
Total
Managed
invest.
SMSFs
Super
(extra
contrib.)
875
75
67
43
171
364
45
45
65
Trust my own decisions
17%
19%
19%
11%
23%
18%
8%
15%
17%
Do not trust advisers
12%
6%
9%
9%
12%
11%
10%
18%
28%
Not suitable for me/my situation
11%
7%
12%
12%
14%
7%
21%
6%
6%
Fees are too high
10%
4%
8%
9%
7%
8%
15%
13%
22%
Dont have enough money to

use one
8%
6%
4%
14%
2%
5%
15%
22%
2%
Advisers are biased
7%
5%
3%
4%
11%
8%
8%
4%
11%
Dont need one/never had the

need/havent had any
experience with them
6%
7%
1%
24%
5%
3%
8%
5%
3%
Had a bad experience with an

adviser
5%
9%
10%
0%
7%
6%
2%
5%
3%
Rely on family and friends
5%
13%
12%
2%
8%
4%
1%
2%
4%
Only if I have a lot of money
4%
3%
0%
7%
1%
2%
14%
3%
5%
Make you buy products which

are unsuitable
3%
2%
3%
3%
3%
3%
3%
5%
3%
They are not well-informed/

lack of knowledge or experience
3%
7%
7%
0%
2%
3%
2%
2%
1%
97%
92%
99%
100%
99%
93%
100%
99%
99%
Actual/hypothetical investors, n=
Total
*
Invest.
property
Yellow shadow indicates percentages that are at least 2% higher than the total investor result (i.e. these investors appear
to be more likely than total investors to nominate this reason). Figures in this table are vertical percentages.
Source: Selected extract from ASIC, 2008b, p. 56.
176
ASIC (2008b).
Page 122
In ASICs shadow shopping survey on superannuation advice (2006), the

anecdotal comments from survey participants and the compliance
assessment suggested that some consumers might find it difficult to find
good, compliant advice on simple issues [which] particularly applies
when consumers just need strategic advice about decisions within their
current fund (p. 47). The research found that some participants with small
amounts in super reported difficulty getting advice, but so too did a few
participants with large amounts in super in non-retail funds (p. 47).177
In 28 cases where a volunteer approached a planner for advice as part of
ASIC/ACAs survey on the quality of financial advice (2003), they did not succeed
in getting a full financial plan. There were a number of reasons for this, including:
177
178
some consumers had the impression that the planner was not interested
in them as a client, possibly because the planner was targeting a
different market segment (e.g. one volunteer of modest means was told
by all three planners they approached that there was nothing the planner
could offerthis was despite the consumer being very anxious to plan
for her retirement in five years time and having some spare cash flow)
some planners were too busy with other clients at the time they were
approached for advice
some planners gave verbal advice but would not do a formal plan.178
ASIC (2006).
ASIC & ACA (2003).
Page 123
Key terms
Term
Meaning in this document
401k retirement plan
A retirement saving plan offered by some employers in

the United States
ABS
Australian Bureau of Statistics
ACFT
Australasian Consumer Fraud Taskforce
ACR
Australian Capital Reserve Ltd (Administrators

Appointed)
APSC
Australian Public Service Commission
ARIA
Accessibility/Remoteness Index of Australia
ASFA
Association of Superannuation Funds of Australia
ASIC
Australian Securities and Investments Commission
ASX
Australian Securities Exchange
ATSI
Aboriginal and Torres Strait Islander
CBF
Commonwealth Bank Foundation
CFEB
UK Consumer Financial Education Body
CPA
Certified practicing accountant
DBP
Defined benefit plan
DCP
Defined contribution plan
FaHCSIA
Department of Families, Housing, Community Services

and Indigenous Affairs
FIDO
ASICs former consumer website: www.fido.gov.au,

replaced by ASICs new MoneySmart website
Fincorp
Fincorp Investments Limited (Administrators Appointed)
FINSIA
Financial Services Institute of Australasia
FLF
Financial Literacy Foundation
FLS
The Financial Literacy Score calculated in the ANZ

survey of adult financial literacy in Australia
FPA
Financial Planning Association
FSA
Financial Services Authority
HECS
Higher Education Contribution Scheme, a student loan

scheme
Page 124
Term
Meaning in this document
IFSA
Investment and Financial Services Association, now

called the Financial Services Council (FSC)
IGFE
International Gateway for Financial Education
INFE
International Network on Financial Education
LFS
ABS Labour Force Survey
MAS
Monetary Authority of Singapore
MCEECDYA
Ministerial Council for Education, Early Childhood

Development and Youth Affairs (previously MCEETYA)
MCEETYA
Ministerial Council on Education, Employment, Training

and Youth Affairs (now superseded by MCEECDYA)
MPHS
ABS Multi-Purpose Household Survey
MWS
Mercer Wealth Solutions
OECD
Organisation for Economic Co-operation and

Development
PDS
Product Disclosure Statement
SEIFA
ABS Socio-Economic Index for Areas
Single Source
database
A database of approximately 55,000 Australians aged

14+ interviewed annually by Roy Morgan Research
SMSF
Self-managed superannuation fund
Understanding Money
The website developed by the former Financial Literacy

Foundation: www.understandingmoney.gov.au, now
replaced by ASICs new MoneySmart website.
UUD
Unlisted, unrated debenture
WIRE
Womens Information and Referral Exchange Inc
Page 125
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REPORT 230

Financial literacy and

About this report

what people know and dont know

what people do, dont do and why, and

how to change behaviour.

REPORT 230: Financial literacy and behavioural change

About ASIC regulatory documents

explaining how ASIC interprets the law

describing the principles underlying ASICs approach

giving practical guidance (e.g. describing the steps of a process such

Information sheets: provide concise guidance on a specific process or

Australian Securities and Investments Commission March 2011

REPORT 230: Financial literacy and behavioural change

Background to the report ......................................................................6

What Australians know .......................................................................10

What people do ....................................................................................32

How to change behaviour ...................................................................48

Appendix 1: Detailed tables .......................................................................70

Australian Securities and Investments Commission March 2011

REPORT 230: Financial literacy and behavioural change

Australians have differing attitudes to financial matters and varying

Overall, people seem to be more knowledgeable and confident about

At a time when consumers are being asked to make more financial

Behavioural studies and ASICs own research identifies a range of related

Research in this area, particularly applied research in real financial

How to change behaviour

Although the financial literacy movement has gained momentum, there

Best-practice principles for program and evaluation techniques are still

In the interim, the established principles of social marketing, frequently

Australian Securities and Investments Commission March 2011

REPORT 230: Financial literacy and behavioural change

Figure 1: The financial literacy environment

Key social marketing

Target the people most

Promote single, doable

Identify and remove

Bring real benefits into

People are normal

Have fun with messages

Time factors and

Use media channels at

Over (and under)

Get commitments and

Use prompts for

Australian Securities and Investments Commission March 2011

REPORT 230: Financial literacy and behavioural change

Background to the report

what people know and dont know (see Section B)

what people do, dont do and why (see Section C)

how to change behaviour (see Section D).

who does and doesnt use a financial planner

why more people dont use financial planners.

Australian Securities and Investments Commission March 2011

REPORT 230: Financial literacy and behavioural change

The researchers mostly limited their information search to research

Section B was mainly limited to Australian sources while Sections C and D

For reasons of brevity, Section C focuses on a few core pieces of

Section D primarily focuses on finance-based and generic behavioural

What is financial literacy?