Financial literacy is a nice-sounding concept.
But literacy requires two sides talking the same language, with clarity and full disclosure.
That isn't always the case in the financial services industry.
Too many consumers come to the table with unrealistic expectations, and inadequate or faulty knowledge.
And financial industry players often exploit that knowledge gap by being vague about what they're selling, and more importantly, how they're paid.
So, it's a disappointment that Ottawa's "Count me in, Canada" National Strategy for Financial Literacy, unveiled this week on Toronto, completely ignores the kind of concrete steps most likely to bridge the literacy gap.
The strategy, the product of months of consultations and years of talk, is a mere 13 pages in length, several of which are filled with white space and pictures. The document is short on specifics, and long on platitudes and good intentions.
"It's an ambitious plan that will empower Canadians to meet their financial challenges head on," according to the document, released by Minister of State for Finance Kevin Sorenson and Jane Rooney, Canada's Financial Literacy Leader.
The goal, Ottawa says, is to help Canadians manage money and debt wisely, save for the future and prevent fraud and abuse. But it offers scant details of how to achieve these lofty goals. The strategy talks a lot about education, but barely a word about regulation.
That's too bad. For years now, securities regulators have been pushing for clearer rules in two key areas – reforming mutual fund fees and mandating a "best interest" duty between financial advisers and their retail clients.
Both efforts have been vigorously resisted by the financial services industry, which insists new regulation is unnecessary.
The Canadian Securities Administrators, which represents the various provincial securities watchdogs, continues to study these measures after years of consultations. The Ontario Securities Commission has been talking about a "fair dealing model" for advisers and clients for more than a decade.
Mutual funds – the main investment vehicle for most Canadians – are a substantial area of murkiness. Investors typically purchase them through advisers, who earn a living by getting a percentage of imbedded and unseen fees. These may include sales charges and management expenses, which vary from fund to fund.
Many investors assume they are getting "free" financial advice. What they are really getting is advice from an agent, who may be highly influenced by unseen incentives to push certain funds over other lower-fee options.
Fees can eat up a substantial chunk of investor returns. In down markets, they compound losses.
Improved literacy can only do so much. Canadians can't be knowledgeable about what they can't readily see.
Investor advocates have long argued that imbedded mutual fund fees should be outlawed, as they are in Britain and Australia, or at least covered much clearer disclosure rules.
Canadian regulators say they are still studying the issue.
A broader solution to the same problem is to require financial advisers to act in the best interests of their clients, as Australia does. A similar fiduciary duty exists for other Canadian professions, including lawyers, accountants and portfolio managers.
The current requirement for financial advisers in Ontario is that they must act "fairly, honestly and in good faith" – a substantially lower bar.
In late 2013, the CSA issued a status report, acknowledging "substantial disagreement" over the idea of imposing a "best interest duty" on advisers and calling for "more work" on the issue. The idea is now gathering dust on the shelf.
Listed under "what we're doing," the government's well-meaning literacy strategy talks about such things as providing free advice to help Canadians manage their finances, developing innovative ways get people to do financial planning and making it easier to access government benefits. But the details are scant.
Yes, consumers have an obligation to be more knowledgeable about saving, borrowing and investing.
But the weight of responsibility should be tilted towards financial institutions, which hold considerably more power in the relationship.
Banks, brokers and mutual funds will never unilaterally do more to ensure consumers make better choices – even if they wanted to. The competitive pressure to generate revenue is too strong.
So, it's up to regulators to make them do the right thing.