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Industry collaboration to address education challenge

18 March 2014 Jonathan Faurie
Jonathan Faurie, FAnews Journalist

Jonathan Faurie, FAnews Journalist

Knowledge is power. Having an educated view when it comes to saving and financial planning presents many benefits as it not only prevents households from falling on hard times, but it also allows families to plan into the future towards providing education for their children and aspiring towards a happy, comfortable retirement.

The harsh reality of this is that there is a dire need for this type of education to take place in South Africa. In an interview with FAnews, Barry O'Mahony (CFP), Founder of Veritas Wealth Management and 2013 Financial Planner of the Year points out that South Africans lack the very basics when it comes to basic savings principles.

"The level of education regarding basic saving is really bad. Stokvels are huge savings vehicles in this country, particularly among lower income earners, yet they are saving 7% through stokvel participation while paying off debts where interest rates are between 15% and 30%. There needs to be basic saving education introduced at a secondary school level. This is important," says O’Mahony.

Who takes responsibility?
Identifying the need for education is only half of the battle to resolve the challenge. The biggest part of this is establishing who ultimately takes responsibility for this education, and then to implement an effective system to carry this out. Would this be the responsibility of government or would it be the responsibility of industry regulators?

Taking the initiative is the key to resolving this problem. The Financial Planning Institute (FPI) and the Financial Services Board (FSB) have signed a Memorandum of Understanding (MoU) to collaborate on various consumer financial literacy projects that both organisations will be running throughout the course of the year 2014.

Taking steps towards a common purpose
The FSB and FPI’s collaboration is geared towards creating awareness on the rights and responsibilities of consumers, personal financial management, as well as the overall distribution of financial education; and to give credence to the Financial Services Board Act, 1990.

According to Lyndwill Clarke, FSB Head of Consumer Education, the FSB provides consumers with programmes and information that will put them in a position to make informed financial decisions so households can avoid debt and focus on building wealth.

"The partnership with FPI takes this approach one step further in that consumers will now not only be provided with information on how to conserve and preserve wealth, but also have access to expertise from FPI on how to nurture and grow it," said Clarke.

David Kop, CFP, Head: Membership and Corporate Relations at FPI, said, "We are indeed proud to join forces with the Financial Services Board (FSB) in a bid to make life better for more and more South Africans by helping them achieve their financial life goals.

The partnership is a symbolic gesture to endorse the importance of financial planning to all South Africans and drive awareness around available financial planning counsel to consumers as a way of improving and managing their finances, as many people still have the wrong perception that financial planning is the exclusive domain of the wealthy," says Kop.

Operating within existing structures
Consumer education is not new to both the FSB or the FPI. Both organisations have well established programmes which are geared towards this and have achieved relative success in the past. This is however one of the occasions where the parties have combined their structures to achieve a common goal.

"In line with our vision to promote professional financial planning among all South Africans, we believe that this partnership is ideal to ensure that all citizens are equipped with the specific financial knowledge, understanding and tools to transform their current situation into a self-sufficient and financially secure future. This is also a perfect platform for consumers to be introduced to a qualified Certified Financial Planner," concluded Kop. This is important in the current environment where the consumer is under significant pressure and will rely on expert advice in order to achieve financial stability and success.

With forthcoming industry financial education initiatives such as the Financial Planning Week and the FPI MYMONEY123 programme, joint partnerships such as this empower the industry to make headway in effectively driving the nation’s financial literacy and in assisting consumers to make sound financial decisions.

Targeting the right age group
There is no doubt that this is a step in the right direction. Not only will it improve education on an effective savings culture, but it may also open doors to interested parties pursuing a career in financial services, which is in dire need in the country.

It will be interesting to see at what level the fruits of this partnership is aimed at. O'Mahony feels that any education into effective saving needs to take place at secondary school level. This then will give students a good base when they enter into University, Technical Colleges or other Further Educational Training Colleges. What will be interesting to see, is if the objectives of the FSB-FPI collaboration will align with the objectives and goals set out by the Insurance Sector Education and Training authority.

Editor's Thoughts
The key to achieving the objectives of this collaboration will be patience. It will take a while to establish the fruits of the collaboration in the educational system, and it will take longer to see the first group of fully financially literate students as set out by the collaborations objectives. Please comment below, interact with us on Twitter at @fanews_online or email me your thoughts


Added by Andre Kotze, 18 Mar 2014
I think the first priority is to create an environment of responsibility. Students are paid by the govt to study at colleges-they receive the monthly allowances etc, but very few of them obtain their qualifications. Standards are lowered to get these students to pass. At present the students at Majuba College are on streike because they demand more money.The problem is that they demand everything, but do not take responsility for their actions etc. Students and parents must also make a contributions towards the costs of education-whether it is financially or work related. Students and parents must realise that hand outs cannot carry on indefinitely.
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Added by Garrick, 18 Mar 2014
Efforts would be a lot more productive if aimed more towards capping the obscene levels of credit offered. To name but two offending areas :

The credit card is a massive contributor to consumer 'distress'.

Shorten repayment terms on vehicle finance and eliminate residuals/balloon payments

Curtailing both of the above options would go a long way towards curtailing expenditure where affordability does not actually exist.
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