Proceedings of the Standing Senate Committee on
Banking, Trade and Commerce
Issue 30 - Evidence - February 13, 2013
OTTAWA, Wednesday, February 13, 2013
The Standing Senate Committee on Banking, Trade and Commerce, to which
was referred Bill C-28, An Act to amend the Financial Consumer Agency of
Canada Act, met this day at 4:16 p.m. to give consideration to the bill.
Senator Irving Gerstein (Chair) in the chair.
The Chair: Honourable senators, this afternoon, our committee will
hold its third meeting to study Bill C-28, the proposed financial literacy
leader act, An Act to amend the Financial Consumer Agency of Canada Act.
As background for our audience, in December 2010, after having examined
the issue over an 18-month period, the Task Force on Financial Literacy
issued its report. The first of its 30 recommendations was the appointment
of a financial literacy leader. The first recommendation stated, in fact,
that the task force recommends that the Government of Canada appoint an
individual directly accountable to the Minister of Finance to serve as a
dedicated national leader. This financial literacy leader should have the
mandate to work collaboratively with stakeholders to oversee the national
strategy, implement the recommendations and champion financial literacy on
behalf of all Canadians. Bill C- 28 will implement this first
Today, we will have two one-hour sessions with a panel of witnesses in
each session. Each individual or organization will give a five-minute
opening statement, and then we will have time for questions.
On our first panel, we are pleased to welcome Evelyn Jacks, President of
Knowledge Bureau, a provider of customized tax and wealth management
accreditation programs for professional advisers and institutional clients.
She was also a member of the Task Force on Financial Literacy. Also
appearing are Robin Walsh, Vice President of Strategy and Communications,
and Marion Wrobel, Vice President of Policy and Operations from the Canadian
Bankers Association, representing the banking industry in Canada; Marc-André
Pigeon, Director of Financial Services Sector, and Kevin Dorse, Manager of
Advocacy from the Credit Union Central of Canada, representing the credit
unions; Bernard Brun, Director of Government Relations for Desjardins, the
largest cooperative financial group in Canada; and Leslie Byrnes, Vice
President of Distribution and Pensions from the Canadian Life and Health
Insurance Association Inc., representing the insurance sector.
We will begin with five-minute opening comments. Ms. Jacks, I will call
on you to start us off, please.
Evelyn Jacks, President, Knowledge Bureau: Good afternoon, ladies
and gentlemen. It is my pleasure to be here, and I would like to thank you
very much for the opportunity to comment on Bill C-28.
I am in favour of the bill as it stands in terms of its legislative
framework and, in particular, the mandate for the financial literacy leader,
which is anticipated to be a five-year renewable term.
My comments today will make reference to two documents. The first is the
Task Force on Financial Literacy report, the national strategy that we
developed in that report and the 30 guidelines therein.
The second is a more recent report than even that one, and that is the
High-level Principles on National Strategies for Financial Education,
which was developed by the OECD International Network on Financial
Education. It comprised representation from over 100 economies and was
endorsed by the G20 leaders at their recent summit in Los Cabos in June
Finally, I bring perspective from private enterprise in that I run a
national post-secondary educational institute that is the educational home
to approximately 4,500 tax and financial advisers who work primarily with
individual taxpayers and investors representing likely hundreds of thousands
of people. We also publish financial consumer books, most importantly, with
significant authors who have reached millions of people across the country.
There are three issues I would like to speak to today. The first is the
authority that is required by the financial literacy leader as you
contemplate the structure of this bill. The second is an issue of urgency
and why we have an issue of urgency today in Canada and around the world.
The third issue is to give some perspective, perhaps, on some of the skills
that will be required by this leader.
I will now speak to the issue of authority. This financial literacy
leader will need the authority to initiate and implement the national
strategy and to work perhaps not just with national guidance from a variety
of significant stakeholders but also with international guidance. Because
this job is really too big for one person, this person will require the
authority to collaborate with relevant stakeholders at the highest policy
levels and may, in fact, require influence as it relates to enforcement
The reporting structure, therefore, for this financial literacy leader is
important in that a holistic approach to improving financial literacy for
Canadians will encompass consumer empowerment, regulation, protection and
fair market practices. It is likely that the FCAC is an appropriate home for
this leader. However, one concern may be the reporting structure in that we
will have two leaders here as the bill anticipates, one reporting to
another, and perhaps the mandates of the commissioner and the FCAC will
require some revisiting.
Second, I would like to speak to urgency and specifically what success
looks like for a financial literacy leader. In today's post-financial-crisis
environment, there is definitely a shift to self-reliance from government
and private sector alike, particularly as it relates to the responsibility
for retirement savings by Canadians. If two words describe success, perhaps
those two words are "national self-reliance." Specifically, I would like
to speak to the definition of "financial literacy," which we found had
broad acceptance as we travelled across the country, as "having the
knowledge, the skills and the confidence to make responsible financial
decisions." Knowledge and skill is one thing but behavioural finance,
having the confidence to make those responsible decisions, is another thing.
In fact, we are hoping that Canadians can avoid random decision making, to
the responsibility side, and rather have an opportunity for responsible
That requires teachable moments in every aspect of life. After all,
Canadians who want to make responsible decisions need to have literacy and
numeracy skills, which we on the task force found appallingly low in our
country. Financial literacy is a subset of that. In addition, as both
private enterprise and government move forward using the Internet to deliver
services and information, Canadians also need technology skills. This
financial literacy leader will need to have a fair measure of each.
Technology is both a blessing and a curse. For example, if we are tying
Canadians into something as important as tax compliance but we are not
sending out tax returns to individuals, then we need to have a situation
where follow-up and teachable moments become a part of that delivery. As a
financial institution, government is a reality for many Canadians who are
counting on, for example, refundable tax credits. Therefore, government and
the private sector alike must ensure that Canadians understand. Competent
decision making also requires a switch from present orientation to future
orientation. Savers in Canada apparently save only 3.5 per cent in terms of
their savings rate, which is quite different from the eighties when those
saving rates were 20 per cent.
In conclusion, who is a financial literacy leader? It is probably someone
who is an expert generalist and collaborator and, as the OECD said in their
report, someone who is a resourceful and competent authority. Hopefully, the
legislation and this bill will give that person such authority. Leadership,
after all, is about the follower.
The Chair: Mr. Walsh, please proceed.
Robin Walsh, Vice President, Strategy and Communications, Canadian
Bankers Association: We are pleased to be here today to represent the
Canadian Bankers Association and our 54 members, which include domestic
banks, foreign bank subsidiaries and foreign bank branches operating in
Financial literacy is important to the CBA and our members because
financially literate Canadians are a vital part of a sound banking system,
and a sound banking system is a cornerstone of a sound national economy. As
Ms. Jacks mentioned, the Task Force on Financial Literacy defined
"financial literacy" as "having the knowledge, skills and confidence to
make responsible financial decisions," and we agree with that definition.
Banks know that Canadians who make healthy, long-term financial decisions
not only help to build their own financial security but also are good for
the Canadian economy as a whole. At the same time, a lack of knowledge and
understanding of the risks and benefits of financial products and services
can lead to problems both for individuals and the broader economy.
The CBA and its members have been dedicated to boosting financial
literacy levels for many years. For example, the CBA has brought financial
literacy to young Canadians through our high school seminar program called
Your Money, which has taught more than 215,000 senior high school students
about budgeting, borrowing, saving, investing and protecting themselves from
financial fraud. It is a non-commercial seminar that uses bankers from the
local community who go into the classroom and share their expertise to teach
young Canadians about responsible money management. We developed the program
in collaboration with the federal financial consumer regulator, the FCAC.
Banks are also active in financial literacy every day during their
interactions with millions of Canadians who turn to banks for products,
services and advice to help them save, plan for retirement, start businesses
and buy homes. Banks work hard to provide Canadians with a wealth of
educational material, advice, information tools and services geared to
helping them make the best financial choices. Banks in Canada are also
leaders in supporting financial literacy activities and initiatives in
communities across Canada. I will give you a few examples of the programs
and partnerships that the banks lead or support: Momentum Community Economic
Development Society, a Calgary- based money management program that delivers
workshops to help individuals take control of their personal finances;
www.clearfacts.ca, a website dedicated to providing information for
families, homeowners, students and business owners; and Junior Achievement,
a program in schools that teaches money management, business and
Banks and the CBA also provide the public with information on fraud to
raise awareness about how various types of fraud are committed, what banks
do to protect customers, and how consumers can protect themselves from being
victimized. In addition, for more than 40 years, banks have been strong
supporters of not-for-profit counselling agencies and the good work they do
to help Canadians learn better money management skills.
The banking industry recognizes that strengthening the financial literacy
of Canadians requires the involvement of many other players, including
government. The federal government has taken a leadership role with its task
force and with Bill C-28, which includes the creation of a financial
literacy leader. Indeed, in our submission to the task force, we made
several recommendations that we think will be undertaken by the financial
literacy leader's office.
First, we recommended that a national strategy for financial literacy be
established that includes research into the financial literacy needs of
Canadians. This will help to determine what actions may be required and to
measure progress going forward. We also recommended that a national strategy
make teaching financial education in the public school system mandatory. We
believe that it would be appropriate for the financial literacy leader to
work with all levels of government to ensure that all young Canadians get a
strong foundation in financial education before they graduate from high
school. In addition, we suggested that the federal government create and
promote a single portal for all financial literacy activities and
organizations. This would help facilitate sharing of best practices, foster
collaboration among organizations, and give Canadians a one-stop location to
help them find resources in their community.
In conclusion, the CBA and our members strongly support the establishment
of a financial literacy leader for Canada. We look forward to working with
the leader once appointed.
The Chair: Mr. Pigeon, please proceed.
Marc-André Pigeon, Director, Financial Services Sector, Credit Union
Central of Canada: Honourable senators, I am the Director of Financial
Sector Policy for Credit Union Central of Canada, the national trade
association for Canadian credit unions. With me today is Mr. Kevin Dorse,
Manager of Advocacy at CUCC.
Credit Union Central of Canada represents, through our members, 357
credit unions and caisses populaire outside of Quebec that serve about 5.3
million members and hold more than $149 billion in assets.
We welcome this opportunity to contribute to your study on Bill C-28,
which seeks to create the position of financial literacy leader within the
Financial Consumer Agency of Canada.
Financial literacy is not something new, novel or fashionable for credit
unions; it is part of their core mission and has been from the start. When
Alphonse Desjardins, Father Moses Coady and their contemporaries created the
first credit unions in Canada, they set out to create more than just a
savings and lending institution — they also wanted to help farmers, fishers,
labourers and the community in general to better understand fundamental
principles of money management. The ultimate goal, as always, was to help
people improve their quality of life through better financial management.
As you may know, cooperatives try to run their businesses in accordance
with seven internationally-recognized principles. Principle 5 states that
financial cooperatives should strive to provide their members with
"education, training and information." The practical effect of this
principle is that credit unions large and small offer their members programs
aimed at helping them better understand their financial choices. In fact, we
like to say that each of Canada's 357 credit unions is a laboratory for
innovation and financial education. The reason we like to say that is
because each credit union develops its financial literacy approach in a way
that is responsive to the needs of its local member owners. I will give you
examples of the kinds of things we do out there across Canada.
Before joining Credit Union Central of Canada, I worked as a senior
project leader with the federal Task Force on Financial Literacy and had the
good fortune of working with Ms. Jacks. In that capacity, I accompanied the
task force on its consultation tour in many parts of the country. In most of
those places we heard about the remarkable things that credit unions were
doing to improve the financial capacities of their members. I learned, for
example, how credit unions provide financial services and education to
immigrants and lower-income individuals, how they recruit young people to
help educate their peers about financial matters, or how credit unions
incentivize savings for low-income individuals by matching or contributing
$3 for every $1 saved and then pairing that with financial education.
Bill C-28 appears to draw inspiration from the research and
recommendations of the task force's final report, which drew its inspiration
from these kinds of meetings with Canadians across country. The task force's
final report also motivated us to undertake a study to help credit unions
sort through the maze of financial literacy programs to see what kinds of
programs work best for our members. We took to heart the task force's
concern about the multiplicity of financial literacy programs. The fruit of
our research efforts was consolidated in a brief entitled Financial
Literacy: What's Best and What's Next? I believe a translated copy of
that brief has been made available to the committee.
With bill C-28, the government has begun to implement the recommendations
of the Task Force on Financial Literacy. We welcome this.
One of these recommendations was to establish an advisory council on
financial literacy, both as a forum for collaboration and to provide ongoing
advice to the financial literacy leader on the implementation and evolution
of the national strategy. We feel that this is in fact one of the most
We also note that Bill C-28 proposes to amend the Financial Consumer
Agency of Canada Act so as to require that the FCAC collaborate and
coordinate its activities with stakeholders.
Anticipating the creation of a stakeholder advisory council, we are
asking that credit unions be represented so that the full diversity of views
can be at the table in the formation of a national strategy. The credit
union system is prepared to help parliamentarians, the government and the
proposed financial literacy leader in this. Should such an advisory council
be formed, Credit Union Central of Canada will be prepared to provide the
names of suitable experts and practitioners in financial literacy from the
credit union system.
Mr. Chair, we want to thank you for the opportunity to share our thoughts
with you and the committee today about Bill C-28. We know it is an issue of
deep importance to this government and to this committee, which I know from
personal experience has a long history with this topic.
As I hope is clear, promoting financial literacy is also core to the
mission of credit unions. Credit unions look forward for the opportunity to
share expertise and experience that will help shape the future national
strategy on financial literacy.
I and my colleague Mr. Dorse would be happy to respond to any questions
you may have.
The Chair: Mr. Brun, please.
Bernard Brun, Director, Government Relations, Desjardins Group:
Honourable Senators, we wish to thank you for inviting us to appear before
your committee, since the issue of financial literacy is particularly
important for financial co-operatives in the co-operative sector and
especially so for the Desjardins Group.
So we are pleased to be here today to share our comments on Bill C-28,
which creates the position of financial literacy leader.
First, let us recall that the Desjardins Group, with its $200 billion in
assets, is in fact the largest co-operative financial group in Canada and
eighth in the world. Supported by its network of caisses and subsidiaries,
the Desjardins Group offers a wide range of financial products, including
banking, life and health insurance, property and casualty insurance,
securities, and so on.
In 2012, the Desjardins Group was also honoured to be named best
corporate citizen in Canada and to have been ranked among Canada's top 100
At Desjardins, the value and importance of financial literacy are a top
priority. In fact, financial education has been a cornerstone of the group's
mission, values and vision. This is why we were very pleased to participate
in the Task Force on Financial Literacy and to submit a brief. We were also
very pleased to note that a number of our recommendations were included in
the task force report.
As I mentioned earlier, financial education is at the cornerstone of the
Desjardins Group's mission. We firmly believe it is essential to provide our
members and clients with the tools they need to more effectively manage
their personal finances in order to help them grow savings and avoid taking
on too much debt.
It is worth recalling that Desjardins was the first financial institution
to raise the minimum credit card payment in Canada.
We are convinced that one of the first foundations to be acquired is to
adopt good savings habits. Our financial education initiatives are tailored
to all age groups and involve all aspects of personal finance.
We just have to remember that, in 1907, very shortly after Alphonse
Desjardins created the group, he also established the school caisse program
to teach children about saving. That service, which still exists today, is
available in close to 1,100 primary schools, as well as 350 caisses. We also
provide many educational programs at other levels of the educational system,
and we contribute significantly to student financial assistance.
To reach as many individuals as possible, various websites of Desjardins
and our subsidiaries provide a wide range of information in a variety of
forms. Our aim is to provide easy-to-understand information written in plain
In 2011, we reaffirmed our commitment to financial education by launching
an ambitious program called "Co- opme," which is specifically dedicated to
financial and co-operative education. This online program encourages
visitors to take responsibility for their personal finances.
For those who are interested, a personal financial index was also
created. If you visit the Co-opme website, you will be able to complete a
We believe it is vitally important to support vulnerable client groups.
We also believe that people will be able to make better savings and
investment choices, as well as avoid falling victim to fraud, if they have a
good understanding of financial issues. For example, the In Charge of Your
Life and Your Property program is designed specifically for seniors to help
protect them against abuse and fraud.
Another example: mutual assistance funds, in partnership with budget
consulting organizations, offer budget management advisory services and
tide-over loans. In total, for the Desjardins Group, we are talking about
recurring investments in financial and co-operative education in the order
of $40 million a year.
As a result, the Desjardin Group is very pleased to support Bill C-28,
which creates the position of financial literacy leader. This person will be
able to effectively coordinate financial literacy efforts. We feel that it
is a very important position.
Having said that, we believe it is essential that a bilingual individual
fills the position of financial literacy leader. We are very interested in
being part of a potential advisory council on financial literacy, as Mr.
Finally, I would like to point out that, as you know, financial literacy
is a very broad field that affects education and all segments of the
population. It is also covered by various jurisdictions.
We therefore urge the government to reconcile programs and to ensure a
cohesive approach with its provincial counterparts, in compliance with their
I wish to wrap up by once again affirming the Desjardins Group's
commitment to financial education and literacy. We will continue to be
actively involved in building financial literacy since we know that
responsible financial decisions contribute to growth and sustainable
prosperity for our society.
Leslie Byrnes, Vice President, Distribution and Pensions, Canadian
Life and Health Insurance Association Inc.: Mr. Chair, members of the
committee, I am very pleased to be here today on behalf of the Canadian Life
and Health Insurance Association to share our views on Bill C-28.
The CLHIA is a voluntary association whose member companies account for
some 99 per cent of the country's life and health insurance business. The
industry provides a wide range of financial security products, such as life
insurance, annuities and supplementary health insurance to almost 27 million
Canadians. These products are brought into Canadian communities, workplaces
and homes through a network of over 80,000 financial advisers licensed to
sell life and health insurance products.
Let me commend the government for introducing Bill C-28. It builds on the
important work of the national Task Force on Financial Literacy. As an
industry, we are committed to supporting and contributing to the work of the
new financial literacy leader as he or she coordinates financial literacy
efforts across the country. We believe that the establishment of an advisory
council, as recommended by the task force, will be a valuable and necessary
resource to the leader.
In these brief remarks I would like to focus on two things: first, to
reinforce the need for the initiatives identified in the task force report;
and, second, to highlight those facets within the life and health insurance
industry where we believe we can make a meaningful contribution to advancing
The research cited in the task force report highlighted a couple of
significant trends, the first being a deterioration in the financial
robustness of Canadian households, with household debt to disposal income
rising from 90 per cent to 140 per cent over the past 20 years; and the
second being a rather surprising naïveté in the ability to meet financial
objectives without apparently needing to take much action.
The StatsCan 2009 Canadian Financial Capabilities Survey found that 70
per cent of Canadians were pretty confident they would have a satisfactory
retirement income, yet only 40 per cent of them knew what that translated
into in dollars and cents in terms of what they needed to do to save. This
underscores the need to foster greater financial literacy among Canadians to
help them make informed decisions about their own financial matters.
The life and health insurance industry already makes a contribution to
financial literacy, and we believe we can do more going forward. Consider,
for instance, that our products are designed to foster greater
self-sufficiency among Canadians to protect against health expenses through
supplementary health and dental insurance plans, to protect families and
dependents when a breadwinner dies prematurely, and to provide tools for
Canadians to save for retirement, whether at the workplace or privately.
Many of these products and client relationships are very long lived,
often lasting for decades. The industry's advisers are uniquely positioned
to work on a one-to-one basis to help consumers understand their own
financial objectives and how they can be achieved.
As an industry, we also provide education and information through the
workplace. For instance, when a new group benefit or group retirement plan
is introduced, insurers often work with employers to provide brochures,
lunch and learn sessions, online tools and, as needed, one-on-one
One recommendation in the task force report that has already been
implemented, at least at the federal level, is the introduction of pooled
registered pension plans. These will certainly contribute to the objective
of greater financial self- sufficiency in retirement by providing access to
a pension plan at work. Given the range of educational resources that
insurers will bring to PRPPs, as they do for existing pension plans, this
should also contribute to increased financial literacy.
As an industry, we have a wealth of good information about life and
health insurance, wealth accumulation and pensions. We also have excellent
channels to reach consumers through advisors, through the workplace and
online. We are working to build on those strengths and we are focusing on
specific task force recommendations on delivering education information at
teachable moments, making materials as clear as possible, and promoting the
role and benefits of professional financial advice.
CLHIA has a comprehensive family of consumer materials. When the
financial literacy leader moves forward with a national website, as
recommended in the task force report, we have materials that can be made
immediately available. We stand ready to contribute in any way we can and
look forward to the working with the financial literacy leader once he or
she is named.
Thank you for the chance to appear before the committee today.
The Chair: Thank you for your opening remarks. Our first question
will be from Senator Maltais, who will be followed by Senator Harb.
Senator Maltais: Thank you, Mr. Chair. Welcome, everyone. I am
particularly pleased to see that financial co- operatives such as Desjardins
are here today to show their support, although they are not covered under
the bank charter. This shows that you care about your members.
I would like to point out that, in another life, when I was the president
of an international organization called the Forum Francophone des Affaires,
we presented the Business Woman of la Francophonie award to your president
in 2008. Your institution truly deserved it.
In my first speech in the Senate, I invited financial co-operatives to
join us and I am very happy to see you here today. You have made a great
contribution to our committees. That is important. Everyone around the table
who participated understood that financial literacy means preparing for the
future. The government is not reinventing the wheel. It is learning from the
experience of others and it is looking to the future.
I think two factors are important. The first one is young people. You
talked about the school caisse program. I used to be a member. You also said
that it is important to tell young people what they are getting into when
they buy a cell phone, a car or anything else, so that they do not have any
big surprises when they get the bill and end up not paying it or giving it
to their parents, which might affect their record. That is a priority for
the government. Bill C-28 places considerable emphasis on that.
Seniors make up the other group. We need to pay close attention to them
because they did not grow up in the electronic age. They do not understand
how to play on computers. That is hard to do when you are 85. Using debit
cards is a challenge for them. I see this on a daily basis. Do you agree
with the idea that seniors must get more protection and young people must be
Mr. Brun: You have really hit the nail on the head. No one should
be left behind. In terms of financial literacy, we need to cover all
segments of the population. That is what we are trying to do with young
people and seniors, specifically in terms of potential abuse and
exploitation. With the technology of financial products, which are
increasingly sophisticated, I think all segments of the population should
have access to programs. But that is also sort of the goal when we talk
about a financial literacy leader. That person must ensure a degree of
cohesion so that nothing falls by the wayside, nothing is left out. We
talked about working with the other governments to cover all aspects of the
Senator Maltais: My question was very short, after all.
The Chair: Excellent question, and we compliment you — very
precise and to the point.
Senator Harb is next.
Senator Harb: Thank you for a comprehensive presentation. Now that
Bill C-28 will become a reality and we will have a leader, it will provide
an opportunity and a challenge for the bankers in the Desjardins Group as
well as the cooperative. You have already done quite a bit of literacy in
the schools and throughout the communities. Will you be working proactively
with this liaison office in order to coordinate so we do not duplicate the
literacy we are providing? Will you think about that and do that once the
position is appointed?
Mr. Walsh: As I said in my remarks, I think one of the key roles
for the financial literacy leader is to pull together a lot of the
organizations. You have quite a variety here at the table today who are all
doing tremendous work in financial literacy, and we do not always know about
everybody else's programs. We in the banks know what we and some of the
other organizations are doing because some of our members are supporting and
funding those. It is important we do that as a collaborative, coordinated
effort. That is why I talked about the single portal where Canadians who are
interested as individuals or communities can find out who is working in
their community on an issue related to seniors or youth and what programs
are out there. It is a great way to promote the good work that is already
Mr. Pigeon: I want to say we have already been engaged in that
process with the Financial Consumer Agency of Canada. We shared with them
the brief we shared with you to say, "We have sifted through the programs
and here is what we think is best." We commissioned a fair bit of research
by academics that we share with FCAC, and I imagine the advisory council
will be involved in that process as well. It is an excellent point, and all
of us are committed to doing that.
Senator L. Smith: To follow up on Senator Harb's question, you are
a significant group with much expertise. People brand their own products and
create their own programs to help sell or develop financial literacy, et
cetera. "Silos" are a concept in many of our studies that we run into when
so many people have good intentions. How do you eliminate the silo effect?
If you have, from the credit perspective, something that the leader projects
and the advisory committee supports — and I am not sure if everyone will be
on an advisory and how big your advisory committee will be — how can the
silo effect be eliminated? How do you get people to fall in line? People
have to promote their own products, too, because it is a competitive
I will leave that open. Maybe we can have multiple responses to the
Ms. Jacks: We found on the task force travels that people were
remarkably willing to share the good work that they were doing. In fact,
some incredibly good work is happening in Canada and in various regions. In
an era where there is social media and a bigger appetite in terms of this
ability to share knowledge, we might find that Canadians are more willing to
In addition to speaking to the comments on the structure of the advisory
council, it will be very important to be specific. The task force did
recommend a structure for the advisory council that was inclusive of as many
sectors as Canadians represent, and that that advisory council is inclusive
of the people who want to participate. Certainly there will have to be rules
around things like copyright and how far authors, in particular, wish to
share their copyright. A respect around that will have to be developed then.
My sense is that the issue of sharing will not be an issue for Canadians.
Senator L. Smith: How many companies will be on the advisory
Ms. Jacks: The terms of reference for that kind of structure will
have to be developed by the leader and the advisory council. We are already
setting this up in my home province of Manitoba, and we have a co-leadership
there, seven councils and terms of reference for each. I can tell you it is
quite an exciting leadership where people have been prepared to share and
bring structure and inclusiveness to the project.
Senator L. Smith: I am not worried about the sharing. I am
concerned from a numbers perspective. When you get into jurisdictional
issues between the provinces and the centre, it will require tremendous
versatility — polyvalence des gens — to be able to do this.
Mr. Walsh: To give an example of some of the collaboration we are
already doing, someone mentioned the FCAC. They have a year-long
curriculum-based program called "The City," and we have our program. Often
we find that teachers see our program, like it and find it is a good
seminar, but they are looking for something for the year. We tell them about
the FCAC program. The FCAC also runs into teachers who say they do not have
time to put it into the whole curriculum, and they ask is there is something
else and the FCAC points to our program. There is no turf war. The ultimate
goal is to ensure that young people in high school get exposed to learning
how to budget, prevent financial fraud and all the other things that are
taught in the program in the schools.
I think there will be an openness to get together. Every time I have been
in one of these forums where we are talking financial literacy, I think
people are already sharing best practices and finding out ways to say, "I
will promote your program because you are focusing on something we do not
Senator L. Smith: Will any of your members be on the search
Mr. Walsh: That is a question for the government at this stage.
Senator L. Smith: I saw the 30 recommendations, but have you made
recommendations as to the composition of a search committee to assist the
Ms. Jacks: We have not yet.
Mr. Pigeon: There were suggestions in the final report. They
mentioned types of organizations, financial services, teachers, educators
and volunteer groups. There were some suggestions in the final report
hinting on a direction, but that is a useful suggestion for us to take back.
In the credit union system, I have come to learn that we are a microcosm
for the federation. We have a local, provincial and regional structure.
There is big and small, rural and urban, east and west. We have all the
tensions that the federation has within our system, and sometimes that makes
consensus building challenging, but on this file, we have had remarkable
success in getting people to line up behind the work we are doing
I would expect the same spirit to pervade whatever efforts are happening
federally across our organizations.
Senator Ringuette: I am surprised you are all talking about the
great news of the advisory council, and there is nothing in Bill C-28 that
provides for such a council. It seems at the moment that we are dealing only
with the head of whatever will be coming down.
Mr. Brun, you told the committee that the Desjardins Group invests
millions of dollars in financial education every year. I would also like the
other organizations, including the Canadian Bankers Association, the
Knowledge Bureau, the Canadian Life and Health Insurance Association, and
the Credit Union Central of Canada, to provide us with an idea of the money
they invest every year in financial education programs.
Mr. Brun: Let me clarify something. By financial education, we
meant both financial and co-operative education. It covered everything.
Senator Ringuette: Yes, because that is what is in your mandate.
Mr. Brun: Precisely.
Mr. Walsh: We at the Canadian Bankers Association do not track
what we invest in financial literacy. It is built into our mandate at the
CBA. Therefore, I do not have a dollar figure I can give you; I am sorry.
Senator Ringuette: Can you consult with your members and ask them
if they can provide the committee with that yearly investment amount in
Mr. Walsh: I believe they do not track it. From what I have seen,
they do not track actual expenditures on financial literacy. Again, it is
probably a challenge to come up with a hard number.
Senator Ringuette: Then I challenge you to challenge your members.
Mr. Walsh: If I may, there are two points to make. In addition to
the programs that they support in communities across the country, many
bankers participate in the programs and I am not sure that is accounted for.
As I said in my opening remarks, the one point that would be challenging or
difficult to put a figure on is the statistic on actual work that banks do
every day with their millions of customers in providing advice and counsel
Senator Ringuette: I still challenge you, Mr. Walsh. If the
Desjardins Group, which is widespread across Quebec, can come here and say
they are investing $14 million a year on financial education and cooperative
education, then your well-financed members could do a little research and
provide the committee with that information.
Ms. Jacks, could you answer that question, please?
Ms. Jacks: Yes. As an educational institute, our primary
contribution is the hours that we spend to deliver education through media
and in the community teaching financial literacy. I can speak for most of
our faculty members who regularly give their time to explain difficult
concepts. In addition, graduates of our program, as I mentioned, are
financial advisers and speak in their communities, write articles and
clarify difficult concepts, understanding that they are in a private world,
i.e. they are for-profit centres.
Senator Ringuette: What is it specifically with regard to the
Knowledge Bureau — your business?
Ms. Jacks: I cannot give you a figure today on what we spend on
financial literacy. Our business is the education of advisers to financial
literacy. I can tell you what our budget is, but it would not be specific to
a targeted area. Our budget is approximately $2 million.
Senator Ringuette: It is $2 million to do what?
Ms. Jacks: It is to deliver our educational programs.
Senator Ringuette: I will ask the Canadian Life and Health
Insurance Association Inc.
Ms. Byrnes: We would not have a specific breakdown. It is probably
important to point out that some of the work we do is just in the course of
our committee work and our standard development, which may be focused on
things like fostering clearer communication in documents and supporting
things like that. Those are things that would be developed. That is just
part of our overall budget. We work with the industry to develop standards
in many different areas. We would not have a discreet financial literacy
In fact, many things we have done over the years have not necessarily
been under the financial literacy terminology that we are using now. We
develop consumer publications, foster standards for clear and crisp
explanations in consumer documents, and that sort of thing. That is the sort
of thing we do at the association level. In addition, many of our members
have a wide range of initiatives that support clear communication and
education for consumers.
Senator Ringuette: They do that for their products. We are looking
at how to deliver financial literacy, notwithstanding the marketing of one's
Ms. Byrnes: There are two aspects. A number of companies have
information on their websites, as the CLHIA has, that is not specific to
their products. For example, do you need to understand insurance, how to
determine your needs for insurance, or how to save for retirement?
Senator Ringuette: I will ask Mr. Pigeon.
Mr. Pigeon: That is a difficult question for us since we are
decentralized and autonomous; we operate locally. Some credit co-ops have
school caisse programs, whereas others offer rebates for some financial
education opportunities, but it is very difficult to place everything into
For instance, five years ago, a credit co-op in British Columbia
developed an application that alerts its members when they go over their
expense limit. It is not easy to count that as financial literacy, but it
has a significant impact on how our members manage their finances.
It is a considerable challenge, especially for us, because we are often
small groups. We are already subject to a lot of regulatory constraints, so
a requirement like that would make our lives more difficult.
Senator Patterson: I was encouraged to hear the unanimous support
from the presenters for the bill and their eagerness to apply the
initiatives being taken toward this new effort. I noted, however, Ms. Jacks'
caution that the new financial literacy leader will have to have clout, I
believe was the term she used, to ensure collaboration. Senator Smith talked
about the dangers of the silo effect.
Could you elaborate, please? You said there were some potential reporting
relationship issues that involve the FCAC and the financial literacy leader.
How would you recommend that to be clarified? Who would be responsible for
Ms. Jacks: It is an important issue that probably needs to be
dealt with up front. As I understand the bill, it will be a reporting
relationship from the financial literacy leader to the commissioner of the
FCAC, and the commissioner will report to the Minister of Finance and the
government. My understanding of that relationship and my caution is that if
we want the financial literacy leader to have clout, it must be clear that
the mandate is one with authority. It may require a revisiting of the
mandate of the FCAC to encompass the broad scope that the financial literacy
leader will need to have in order to undertake his or her work. Likely, it
would be prudent to explore that relationship at the outset to understand
whether this bill, as it is currently anticipated, will not create any
obstacles toward the greater good.
Senator Patterson: The role of providing clarification and
direction would come from the Minister of Finance in the ability to give
written directions to the FCAC as outlined in this bill?
Ms. Jacks: I would think so.
Senator Massicotte: I think we all agree with and fully support
the bill. The financial literacy of Canadians is important. And it takes a
lot more than appointing someone. We need to provide support to that person,
to follow up, to create a committee. We will eventually need to talk about
the motivation of people in our society to save.
I always compare this to losing weight. For most of us, it is very
important and our health depends on it, but it is hard to do. Saving money
is not always pleasant. We have to put off buying something. The third
challenge has to do with the formula that I wanted to talk to you about.
Financial product providers also need to make more of an effort to be very
clear in the way they present financial offers.
I think you all see some rather complex and complicated financial
products on a daily basis, be it at Desjardins, at the banks or on the
market. I am sure that Canadians do not really know what they are getting
into. Your consultants and those who sell financial products have their own
motivations. They are pressured to perform, to sell. There is also the
selfish interest of your executives and shareholders who are there to make
more profit. There is natural conflict.
We all agree with your panel on literacy but the real question is: what
will you do to simplify your products and make them clearer so that clients
actually understand what commitment they are making without much difficulty?
Three or four years ago, I was surprised, and so was the committee, that
Desjardins was the second biggest seller of hedge funds. Your clients were
stuck with them for years. I think you no longer have them. There are tons
of examples of misunderstandings, triggered in part by your consultants. You
agree with literacy but I think you have a long way to go.
Mr. Brun: Thank you for your question. I will not get into the
hedge funds issue, since I do not have any details on that. It would be
interesting to explore it further. I noticed that you mentioned
shareholders. Let me remind you that we do not have shareholders. Perhaps
our basic structure allows for more freedom. With members, you have one vote
per member. An individual cannot have 100,000 shares and 100,000 votes. The
co-op structure protects us against that. People are protected.
We have to look at the company's mission. If the mission is not to
generate profit, you are in a better position. The products are designed
with the members in mind. Desjardins has grown by offering a whole range of
products and financial services. At one point, members needed insurance
services and investment products. Credit cards came much later.
The key is to do things by worrying less about the money to be made and
more about the members' needs. Other institutions are sensitive to their
clients' needs. We need to keep that in mind and the regulators must watch
The Chair: I believe Mr. Wrobel has a comment to make. Then we
must move on to our final questioner.
Marion Wrobel, Vice President, Policy and Operations, Canadian Bankers
Association: I think a basic premise in banking is that we want to have
customers who are satisfied with the products that we sell. It is therefore
important that they understand what they are getting and that their
expectations are met. We deal with customers in bank branches at all levels
of income and from all walks of life. Some of the products are fairly
complex. "Know your customer" is important in that regard. Disclosure is
very important so that the customer again understands the product.
We also have a lot of much simpler, more standardized savings and credit
products available to customers that can be delivered there. If customers
walk into a bank branch and are not fully aware of what the products are,
what they do and what the risks associated with them are, that is exactly
where they ask those questions and get those answers from their bankers.
The Chair: Our final question for this panel will come from
Senator Moore: Thank you, witnesses, for being here.
Ms. Byrnes, I was interested in page 2 of your report where you state a
couple of trends, the first being the deterioration of financial robustness
of Canadian households: household debt to disposable income is rising from
90 to 148 per cent, and the Bank of Canada is saying it is over 160 per cent
and cautioning Canadians against that.
With respect to historical financial literacy in terms of buying a house,
the principle is that taxes should equal no more than 25 or 30 per cent of
your disposable income. Regarding the 148 per cent that you cite, what part
of that was related to household purchases, principal, interest and taxes?
Ms. Byrnes: I cannot tell you that off the top of my head. I took
that statistic out of the task force report, but I can get that information
for you and report back to you.
Senator Moore: I would be interested in that because I am thinking
of all the many, many mortgages that went on 40-year amortization periods
with no equity and low interest rates. I do not know what will happen. I
hope they do not go underwater when interest rates go up, which is the only
way they can go. When those mortgages were being issued by your respective
bodies, were you cautioning Canadian borrowers on that?
Mr. Wrobel: The concern that the senator raised is one that we
have heard from the Minister of Finance and the governor. It is a concern we
The metric that was cited — household debt to personal disposable income
— is but one metric. There are a number of ways to look at that to get a
more comprehensive view. You should look at the household balance sheets as
well. Over the last 20 years we have seen that household balance sheets in
terms of assets to net income have grown. They are at the highest level
today than they have been over 20 years.
The biggest driver of household debt is mortgages. You are absolutely
right. In many respects that is driven by the long-term decline in interest
rates. You recall what interest rates were like in the early 1990s. Anyone
who took out a mortgage in the 1980s remembers double-digit interest rates.
Right now mortgage interest rates are 3, 4, 5 per cent. You are absolutely
right, senator, that they have nowhere to go but up.
How do lenders protect themselves and protect their borrowers in that
situation? One way is to ensure that borrowers have the capacity to handle
an interest rate that is higher than the rate that is actually being charged
to them. Right now, borrowers who want to take out a mortgage have to
qualify, for example, at a 5-year fixed rate, even though they may be
getting a 3-year rate or a variable mortgage that is substantially less.
That is one way we are doing that.
Another way is by verifying income. That is an important part of ensuring
that homeowners can pay the mortgage. We verify the value of the property
that they are buying. There are a number of prudential measures that
Canadian banks take to ensure that homeowners and borrowers can actually pay
I think a testament to that is the fact that the arrears rate of
mortgages in Canada is somewhere in the neighbourhood of 33 basis points. It
has been fairly constant over the past 20 or 25 years, whether we have had
high rates of inflation, low rates of inflation, or high interest rates or
low interest rates.
There are worries, of course, and I think public policy-makers are taking
steps to address those concerns. However, as long as you have a banking or
lending system that is prudent in lending to households that can pay back
and can afford those mortgages, I think that is the biggest safeguard.
Senator Moore: Thank you for that. I was thinking about the
renewals of these mortgages. That is where the rubber will hit the road,
because if rates are up at that time, then some tough decisions, and
prudential considerations, will have to be adhered to.
Mr. Wrobel: You are right.
The Chair: Witnesses, you have been a most informative panel. On
behalf of all members of the Senate Banking Committee, I thank you.
Members of the committee, on the second panel we are pleased to welcome
Greg Pollock, President and Chief Executive Officer of Advocis, the largest
voluntary association of financial advisors and planners in Canada. Mr.
Pollock was also a member of the Task Force on Financial Literacy. We also
welcome Mack Rogers, Program Manager, Community Literacy and Learners, ABC
Life Literacy Canada. This non-profit organization inspires Canadians to
increase their literacy skills. Next we welcome Adam Fair, Acting Director
of Social and Enterprise Development Innovations. This organization helps
those serving low-income Canadians by providing training and program support
for practitioners. Finally, we welcome Zachary Dayler, National Director,
Canadian Alliance of Student Associations. This organization is the advocate
for post-secondary students.
We will begin with your five-minute opening comments.
Greg Pollock, President and Chief Executive Officer, Advocis:
Thank you, Mr. Chair and honourable members of the committee. On behalf of
Advocis, the Financial Advisors Association of Canada, I am grateful for the
opportunity to address you regarding Bill C-28, a bill to establish the
position of financial literacy leader.
The goal of improving the financial literacy of Canadians is important to
Advocis. We strongly believe that through appropriate partnership between
government and the private and not-for-profit sectors we can achieve higher
financial literacy levels in Canada. It was an honour for me to serve on the
Task Force on Financial Literacy appointed by Finance Minister Jim Flaherty.
In our December 2010 report, the task force found that Canadians require
financial literacy throughout all stages of their lives. Important life
events such as joining a pension plan, seeking financial advice, considering
the purchase of a financial product or determining one's eligibility for
benefits from a government program are all important teachable moments. It
is particularly valuable for consumers to have professional financial advice
to help them deal with those important life events.
Advocis has been focusing its financial literacy initiatives on the key
. . . that the Government of Canada, in partnership with
stakeholders, provide tools to help Canadians become better informed
about the role and benefits of professional financial advice, as well as
how to choose a financial practitioner.
Financial advisers play a fundamental role in raising the financial
literacy of their clients. They help Canadians to prepare themselves for
important events and needs throughout their lives and to become more
financially self- sufficient. More and better financial advice will improve
the financial literacy of consumers.
Our members help Canadians to save and plan for their future and to
protect the savings they have accumulated through comprehensive planning and
a wide range of life and health insurance and investment solutions.
Canadians who receive financial advice accumulate significantly more
financial wealth, are better protected, and are better prepared for
retirement and unexpected events than people who do not receive financial
The financial security and independence of middle-class Canadian
households is vitally important, since people will become less reliant on
the government for their future financial needs, such as retirement income,
long-term care and disability. This ultimately helps the government to deal
with the mounting fiscal pressures of an aging population.
We commend the government for taking a leadership role in establishing
increased financial literacy as a public policy objective. Advocis supports
Bill C-28, to establish the financial literacy leader. This bill sends a
strong message to Canadians that the government is serious about assisting
them in raising their financial literacy.
The Financial Consumer Agency of Canada is naturally suited to oversee
the activities of the financial literacy leader, as the agency's mandate is
to protect and to inform consumers of financial products and services. The
agency has already established education programs and tools for Canadians.
However, it is important for the financial literacy leader to have the
ability to act independently in order to consult, create and deliver new and
innovative programs in partnership with key stakeholders.
Under amendment 5, the leader will act under the instruction of the
commissioner. The bill is aimed at giving this individual the latitude to
lead financial literacy, so it is our hope that the reporting and governance
structure of this new office will allow the financial literacy leader to act
independently, with the first order of business being the establishment of a
national advisory council on financial literacy comprised of key
Advocis recognizes that achieving greater financial literacy will require
significant resources. Advocis supports the inclusion of a mechanism for an
assessment for financial literacy that will allow the commissioner an option
to levy a fee to financial institutions to cover a portion of financial
literacy initiative costs in order to sustain improvements in the financial
literacy of Canadians. Should that become necessary, any assessment should
be developed fairly and with prior consultation with the institutions
directly affected as well as the national advisory council on financial
With the increasing requirement placed on individuals to assume greater
responsibility for their future financial security, the need to save and
invest for various life events will require an increased level of financial
sophistication. It is unrealistic to expect every Canadian to achieve the
level of sophistication required to evaluate the increasingly complex
financial products and services on the market. This means that financial
experts that provide tailored analysis to consumers must be easily
This is in combination with the continued emphasis on improving the level
of financial literacy of Canadians and will help the government achieve its
public policy objective of increased financial self-reliance and the
reduction in financial fraud.
We encourage the government to continue to work closely with groups such
as Advocis to ensure that Canadians increase their financial literacy by
becoming better informed about the role and benefits of professional
financial advice, as well as how to choose a financial adviser.
The government, along with the support of the Financial Consumer Agency
of Canada and the new financial literacy leader, should develop a specific
action plan with an adviser group aimed at increasing access to professional
financial advice for Canadians, better integrating the communications
efforts of government and advisers to help protect vulnerable populations,
especially seniors, and providing Canadians with education on the value of
good financial advice.
One again, thank you for the opportunity to provide you with my comments
on this important initiative. We look forward to working with the government
to achieving the shared goal of increasing financial literacy for Canadians.
Mack Rogers, Program Manager, Community Literacy and Learners, ABC
Life Literacy Canada: Nearly 50 per cent of Canadians struggle with the
simple tasks involving math and numbers. Thirty-five per cent of Canadians
do not have any savings or investments. Only one third of Canadian youth
recently surveyed, ages 10 to 17, say their parents regularly talk to them
about money and finances.
I am Mack Rogers, Program Manager, Community Literacy and Learners at ABC
Life Literacy Canada. I am pleased to represent ABC in response to the
request from the Standing Senate Committee on Banking, Trade and Commerce to
address Bill C-28, An Act to amend the Financial Consumer Agency of Canada
Act to establish a financial literacy leader in Canada.
At ABC we envision a Canada where everyone has the skills they need to
live a fully engaged life. We mobilize and inspire Canadians to improve
their literacy in essential skills through lifelong learning. We believe
financial literacy is a critical life capacity.
When we work with adult learners through our financial literacy program
Money Matters, we hear interesting stories from everyday Canadians. I would
like to read a few of the statements we have heard.
Joanne from Hamilton says, "If you save as little as $5 a week, it can
make a big difference in your life."
"I now think about managing my money, and I can tell the difference
between needs and wants!" That was Asif from Kitchener.
"My family needs me to understand this stuff better, and now I do."
That was one of our learners in Toronto.
"Banking is not as scary as I used to think. Now I can talk to bankers
better." That was from Ally in Halifax.
Money Matters, generously funded in part by the Government of Canada, has
been a tremendous success in the adult learner community. More than 900
learners in 45 learning centres across Canada have already taken this free
What makes this workshop unique, though, is the partnership with TD Bank
Group. TD loans its staff as volunteer tutors who visit the learning centres
to deliver the program. Here they build meaningful relationships with their
learners. It is here, on the ground, that financial literacy really makes
its biggest impact.
Already our adult learners have logged over 7,000 hours in the classroom
with Money Matters, and we expect to more than double that in the next six
to eight months. Financial literacy is part of the spectrum of essential
skills all Canadians need to thrive.
The financial literacy leader has the potential to strengthen skills of
all Canadians. Through leadership and collaboration with groups like the
Financial Consumer Agency of Canada and ABC Life Literacy, the financial
literacy leader will strengthen the financial literacy of all Canadians by
bringing together the organizations engaged in financial literacy, as well
as promoting this life literacy capacity.
In 2003, the international adult literacy survey found that 42 per cent
of the Canadian population has a reading comprehension below that of a high
school graduate. That is the recognized standard for dealing with demands of
everyday life in our complex world. In numeracy, 49 per cent of the
population scored below this number. Financial literacy is a combination of
many types of literacy, but the two most important are prose literacy as
well as numeracy.
ABC was an active participant in the inaugural 2011 Financial Literacy
Month, providing Canadians with tools and resources they needed to increase
their financial literacy. ABC also created an innovative social hub where
Canadians can share financial literacy tips and pledge better financial
literacy habits for themselves and their families.
We at ABC know that financial literacy programs have a positive impact on
the individual adult learner. Every day we witness the life impacts of
increased financial literacy, from starting RESPs for young Canadians to
building financial plans for the aged. Learners experience growth and
empowerment at all levels of financial literacy.
These are real-life experiences for individual Canadians and communities
all across our country. It is these messages we want Canadians to
understand, talk about and share. It is this learning that will help improve
daily life, and we are confident a financial literacy leader will make this
To wrap up, Bill C-28, An Act to amend the Financial Consumer Agency of
Canada Act, is an important foundational step in helping Canadians achieve a
higher standard of financial literacy. It builds on the recommendations from
the Task Force on Financial Literacy delivered in 2011.
As a contributor to the task force process, ABC believes that our voice
and the voices of our clients were heard. We support the recommendation
wholeheartedly. As members of the Financial Literacy Action Group, or FLAG,
we have compiled a suggested financial literacy action plan and a suggested
role of the new financial literacy leader brief that is included in the
I would like to take the time to highlight one or two of the many
important recommendations included in the brief. First, I would like to
stress that the financial literacy leader must be an office of collaboration
and sharing. They must work to identify experts in the field and share
information widely to support financial literacy training to all Canadians.
Second, the office of the financial literacy leader must promote
financial literacy to the broader public. We believe the strongest method to
reach Canadians is through popular social media and a strong web presence.
We recommend the establishment of a centre for financial literacy that
houses research, resources and guidance for all Canadians. We at ABC believe
that the FCAC is a strong organization to house this individual.
The FCAC's strong commitment and leadership during Financial Literacy
Month and their ongoing development of financial literacy programs and
initiatives reflect the recommendations set forth by the task force. We
believe that the more support we give to financial literacy and the FCAC,
the more we empower Canadians to increase their financial literacy. It is
for these reasons that ABC wholeheartedly endorses the amendment proposed in
The Chair: Thank you very much, Mr. Rogers.
Mr. Fair, please.
Adam Fair, Acting Director, Social and Enterprise Development
Innovations (SEDI): My name is Adam Fair and I am the Acting Director of
the Canadian Centre for Financial Literacy, a division of Social and
Enterprise Development Innovations. Thank you for the opportunity to speak
to you today about this critical issue of financial literacy in Bill C-28.
I would like to begin by thanking the Government of Canada for taking
leadership on the topic. SEDI has worked closely for over a decade with a
range of federal departments and agencies, including Finance, FCAC, HRSDC
and CIC, to help make financial education more accessible to Canadians. If
fact, the first Canadian symposium on financial literacy was co-hosted by
FCAC, the Policy Research Initiative and SEDI in June 2005.
FCAC has shown tremendous leadership in promoting and developing
financial literacy of Canadians over the last decade. We believe they are
well placed to lead a comprehensive national strategy to improve the social
and financial outcomes of Canadians through financial literacy initiatives.
We are a member of the Financial Literacy Action Group, or FLAG, and
fully endorse the document jointly submitted to this committee. The document
presents suggestions on the role of the financial literacy leader, as well
as options for the creation of a financial literacy action plan.
To begin, SEDI's mission is to expand economic opportunity for Canadians
living in poverty through program and policy innovation. We work with
business, government and community organizations right across the country to
turn transformative ideas into large-scale opportunities for Canadians.
SEDI's long-standing interest in the issue of financial literacy led us
to launch the Canadian Centre for Financial Literacy in 2009. The purpose of
the centre is to help build a sustainable national system of financial
literacy education and supports for low-income Canadians.
SEDI also administers the TD Financial Literacy Grant Fund,which was
established to provide $11.5 million in grants to community organizations
over five years. This fund is scheduled to sunset in 2015.
Why does financial literacy matter for low-income Canadians? For people
with low income and few or no assets, poor financial choices can plunge a
family into crisis, close the door on future opportunities and generate
negative consequences for the balance of their lives. Taken in aggregate,
these impacts also have a negative impact on the larger economy.
We know from Canada's national survey on financial capability that
low-income and vulnerable Canadians are not necessarily less financially
literate than other people, but they face real challenges when it comes to
getting accurate financial information and advice that fits their lives and
meets their needs. On this basis, community financial literacy programs play
a critical role in translating basic financial information and advice and
adapting it to respond more directly to the life context and needs of
It is important to note what financial literacy cannot do. Financial
literacy is not a panacea. It cannot replace good regulation, investment in
human capital, sustainable social programs and effective tax and transfer
systems, nor can it fix problem markets, poor regulation or bad luck.
Financial literacy on its own cannot do away with poverty, but it is
impossible to imagine a response to poverty that could reasonably do away
with the need for some financial information and guidance.
I would like to leave you with a few ideas. From SEDI's perspective, the
key question new financial literacy needs to address is how to collectively
build a sustainable system of high quality, relevant and accessible
financial literacy supports for Canadians in a period of fiscal austerity
and many competing public pressures.
Here are a few ideas we think will help. First, identify government
programs where financial literacy can help support the larger policy
objective and build it in. Make financial literacy education an eligible
program activity or even, where appropriate, a mandatory requirement with
the funding to match.
Here are some excellent examples of where federal departments and
agencies have already begun this work. Citizenship and Immigration Canada
has made financial literacy an eligible expenditure under its settlement
program. Status of Women Canada has identified financial literacy as an
important way to improve women and girls' economic security and prosperity.
Human Resources and Skills Development Canada has been supporting community
agencies across the country to provide financial literacy information,
education and support to low-income families with the goal of helping them
save for their kids' education, RSPs and access the Canada Learning Bond.
We would challenge each agency to reflect on how financial literacy could
help to accomplish their policy and program objectives and to find strategic
opportunities to build these it into current policy and funding frameworks.
Second, leverage the capacity and infrastructure of the community sector
to ensure quality financial education and supports are available to all
low-income Canadians. The CCFL has been able to train over 1,500 front-line
staff to provide financial literacy education across the country in over 500
community organizations, thanks to the generous support of funders, notably
TD Bank, which is the founding sponsor of the CCFL.
Many of the personnel we have trained, however, are doing the work off
the sides of their desks. The TD Financial Literacy Grant Fund that we
administer has been helping to provide seed funding for financial literacy
programs across the country, but this funding will run out in 2015. Without
this continued funding support to community agencies, we believe we will
lose the only real infrastructure that has been built to help low-income
Canadians to improve financial literacy, and we will have lost an
opportunity to leverage this vital asset.
Financial literacy is only one of the key pillars of financial
resilience, and we need to start thinking about how to put the others in
place. At SEDI, we believe we should be striving for a country where there
is not only equal access to high-quality financial information and education
but also neutral, high-quality financial counselling where Canadians have
access to supports that help them access government benefits and tax credits
they are entitled to; where Canadians have access to safe, affordable
financial products and services; where Canadians are protected in the
financial environment from frauds, scams and unethical financial practices
that create financial and emotional distress for victims and social costs
for society; where all Canadians, especially low-income Canadians, have
opportunities to build their savings and assets to improve their economic
well-being through investments in post-secondary education, starting a
business, buying a home or preparing for retirement.
No one sector can realize this vision on its own. It will require strong
leadership and commitment from all sectors. We believe the passage of Bill
C-28 and the appointment of the financial literacy leader who can start
bringing all these sectors together around this vision is a great step
forward. We look forward to working closely with them as we have with FCAC
and our other federal partners in getting this work under way.
Zachary Dayler, National Director, Canadian Alliance of Student
Associations: On behalf of the Canadian Alliance of Student
Associations, an alliance of over 300,000 students across Canada, we would
like to thank the committee for asking CASA here today to discuss the
important and complex issue of financial literacy.
Financial literacy is a delicate topic. It is not sufficient simply to
teach people about budgeting or how to save; rather, it is crucial to
support positive and healthy habits for all, regardless of age. The reality
in 2011 is that our national savings rate was near a historical low at 5 per
cent. This is among the lowest in OECD countries today. A major fact of this
discussion should be focused on the way in which investing in better,
clearer and accessible resources can help reduce the debt loads of students
while helping them prepare for the future.
I believe students understand the costs of pursuing an education and are
frustratingly aware that the costs are increasing, but our economy and
labour market have forced our students into a tough financial situation. For
many, the transitional phase between youth and adulthood is the first time
they have had to handle the ins and outs of financial products, whether they
are obtained through a private lender or through the Canada Student Loans
To gain a better understanding of the problem, CASA conducted a survey
involving over 20,000 students. We posed a series of questions regarding
financial aid and the understanding of financial matters. The results gave
an excellent portrayal of the state of student aid literacy as well as some
intriguing results about how different sources of information help or hinder
students' navigation of the ins and outs of managing their finances. What
CASA learned in our study was that students are poorly informed about the
details of government financial aid systems. Three quarters of them failed
our financial aid literacy survey, and more than half of upper-year
government loan recipients failed to answer correctly.
The issue seems to have two sides — pre-loan and post-loan. As an
example, a large number of students were unaware that aid might be available
to them. This was the case for 29 per cent of students who both did not take
out loans or grants and were unaware that grants for low-income students
were available for non-loan recipients.
On the other hand, many students who had taken out loans demonstrated
that they did not know basic details about repayment. They were confused
about repayment dates, interest rate accrual and will come to find out they
owe more money than they had expected.
The potential impacts of this illiteracy are far-ranging and detrimental.
For some students, the lack of knowledge will make their repayment process
more painful than necessary. For others, financial illiteracy has shut them
out of the government financial aid system altogether, and even more
concerning, that has dissuaded many from pursuing further education.
Post-secondary education is now a necessary step to achieve success in our
The problem lies in part with the sources of financial aid information
that students are turning to. A quarter of students use only friends and
family for their financial advice, yet in our survey, CASA found these are
the most uninformed sources for financial advice.
Misinformation was found to be even more widespread, as high school
guidance counsellors did not perform much better.
The most informative sources were federal and provincial government
websites, but these were only accessed by 40 per cent of the borrowers, and
even then the government website improved survey scores by a mere 6 per
How can we begin to address this problem? The Task Force on Financial
Literacy recommends some positive steps. First, the Government of Canada, in
partnership with the provincial and territorial governments, integrates a
financial literacy component into the Canada Student Loan Program for
students receiving funding. Second, the Government of Canada makes financial
literacy training programs for young Canadians eligible for funding to the
Youth Employment Strategy. Third, the Government of Canada and the private
sector initiate financial literacy awards and competitions for youth,
students and workforces in Canada.
The government and private banks over time have supported a system that
is unsupportive of those accessing it. Interest continues to accrue, but
students, evidently, are uninformed and the tools at their disposal are
ineffective at best. Little do young Canadians know that when they sign on
the dotted line many of them have committed to over a decade of uncertainty
and financial challenges that will impact their overall contribution to the
Canadian economy and financial well-being. Without the proper support and
resources, we are setting up those in the knowledge economy to fail.
The Chair: Our first question will come from Senator Smith.
Senator L. Smith: You folks are the second group that has spoken
with us today. We are all sold on the literacy concepts, but is there, in
that financial literacy issue, another issue of self-policing for financial
institutions? When I look at my three children, they all suddenly acquired
credit cards when they became university students. The balance on the first
credit card was $1,000; by second year, it was $3,000; and by the time of
graduation, it was $5,000; and, surprise: "Dad, my credit card is used up;
I used it as a line of credit." We have to teach people to be more
financially literate, but what about the enthusiasm of the financial
institutions that are selling their products?
Perhaps Mr. Pollock can help me with that. It seems you are the closest
to that. I think Senator Massicotte had that question in his mind, which did
not have a chance to be answered, and Senator Moore also. What obligations
do the financial institutions have in terms of self-governance to ensure
there is no abuse?
Mr. Pollock: I would be happy to comment on that. Mr. Dayler may
want to comment from the point of view of students. We travelled across the
country. The task force received 300 submissions, approximately 160
deputations, many from student organizations, and we heard time and again
that during frosh week, the first week of school, all the credit card
companies were there promoting their cards at 30 per cent. You will see in
the report that we did not make a recommendation around controlling or
regulating companies with respect to those issues. We talked about plain
language and felt as a group that if we educate youth and begin early, in
the primary years and then through secondary school, there will be a lot
more intelligent analysis going on among young people when it comes to being
faced with those options.
Where does regulation stop at the end of day? We could have lots of
regulation out there for sure, but at some point we have to educate the
population about how to make responsible decisions, and it is not
responsible to borrow money at interest rates of 21, 22, 23, 26 per cent. I
would not recommend that to my children or my friends. That is not what
should be happening, and we need to work with the Canadian population on
that type of issue.
Senator L. Smith: The other side, of course, is that we went
through the crunch and interest rates went down to the point they are at
now. Adults are getting mortgages of $200,000 or $300,000 at two, three or
four points. When the market goes up two points, it goes from three to five
or six, perhaps double digits. Many people have no clue, and they are 40,
50, 60 years old.
Mr. Pollock: Absolutely. That is a major point. I have three young
adult children and I pointed that out to them. If you are taking a $300,000
mortgage, yes, you can make the payment today, as you say, at 3 per cent,
but when it doubles to 6 per cent, can you make that payment? The answer is
no. What will happen to all those individuals out there?
There is too much debt in the country. I heard 140 per cent. We are now
over 160 per cent, and that is way too much debt. I realize two thirds of
that is mortgage debt, but when those interest rates go up, that will hurt
the Canadian population. Certainly that is what our members speak to their
Senator L. Smith: I hope it is part of the task force and the
educational process and that the banks are forthright enough to ensure they
put that into the training.
Mr. Pollock: I do not speak on behalf of the banks, so I cannot
Mr. Dayler: We almost need every Canadian to be his or her own
financial literacy leader. When it comes to young people and students, the
assessment of credit cards on campus is true and scary, but you have a lot
of young people buying into — and I do mean buying into — a narrative. "I
will go to school, get a job and it will all work out." Their parents are
saying, "If you cannot live with debt, how will you ever have a house?" I
think that is a little bit of backwards thinking. It takes from those
banking institutions that extra step of responsibility of clearly outlining
the commitments and what repayment is. I know the Canada Student Loans
Program is in the process of taking steps towards that. That is positive,
and I would encourage every bank loaning money to a student to have a
serious component of "this is what is you are getting into."
A young person can walk into a bank and within 20 minutes, more or less,
walk out with $20,000, potentially, in a student line of credit. We need to
ensure there are things to help educate them along the way.
Mr. Fair: I have a couple of quick points. Financial literacy is
not a point in time; it is a lifelong journey, and one of the challenges is
to figure out how a decision made as a student will impact me and
potentially harm my ability to acquire a mortgage later on in life.
The British Columbia Securities Commission did a simple survey of
students who were in university and their expectations of when they would
get jobs and pay off their mortgages and make a six-figure salary, and it
was way out of the ballpark. That is what they are using to make their
Like Mr. Dayler said, there is a narrative that we all believe, and
newcomers to Canada believe the narrative as well, that you do the right
thing, you go to school, you will get the good job, you will pay it off and
everything will happen like the previous generations. We are seeing that
that is not happening for everybody. Many people are getting into real
trouble and not seeing how the consequences of decisions today will ripple
through the rest of their lives.
Mr. Rogers: It is not the big-ticket items. We find with our
learners, the low-literacy learners, that the biggest problem is cellphones.
We have people who do not understand the implications of not paying a
cellphone bill and the constant push from cellphone company to cellphone
company. These are small things, but they add up and affect their credit
scores and their ability to do things later in life because of this lack of
Senator Ringuette: Thank you to all. Your comments and suggestions
are most welcome. I think I saw some of you earlier sitting in the back. I
questioned the financial institutions in regard to the financial
contribution that they make to volunteer groups that provide unbiased
financial literacy, and I was very happy when the Desjardins Group had that
answer in their statement from the start.
I have two questions. What should the priority target group for financial
literacy be? There must be a priority for everyone, but there must be a
particular focus in order to be efficient in sending the message and
achieving a certain objective.
Second, in the work you already do in regard to financial literacy, given
the billions of dollars of marketing in Canada to promote credit cards and
their use, do you find that there is a balance with any efforts they make at
providing opportunities for financial literacy, such as money to volunteer
groups to provide an unbiased learning of financial products?
Mr. Rogers: To your first point, obviously I have a bit of bias.
Low-literacy learners struggle severely in financial literacy because the
documentation behind any financial product is extremely complex. Yes, there
have been some changes, and thank you to the FCAC with the information box,
which is a simplified version, but still the language is not what we in
literacy would call clear language. It is not fully understandable. That
would be my number one priority.
Number two, as for the financial institutions, I cannot speak to the
money they invest in financial literacy, but I can say that the work we see
with the volunteers, particularly from TD Bank when they come in, is
unbiased. It is fantastic; they are strong teachers. Yes, they may use their
products and services as examples because they are most familiar to them,
but they work with our learners with their institutions to try to find the
best solutions for that individual learner. Our instruction when they come
in is that they are no longer an advocate for their bank. They are an
advocate for the learner, and they take that to heart.
I can say that the bankers are doing a great job in the field. That is
not just with our program; it is with the United Way and many other programs
Mr. Fair: Although it is not a homogenous group, priority really
needs to be given to low-income Canadians. Obviously there is a natural
place for financial literacy in schools, but we have found that there is
already a lot of decent financial literacy information and a strong network
of financial advice and advisors for people who have middle and high
For those with low incomes, we have found that because of the nature and
the challenges of their situations, there is a huge gap in the market. There
is often information that is not relevant to their lives; there are products
that are not relevant to their situation. They go into banks and are
introduced to products that are not relevant for them. It is not necessarily
even the fault of the financial institutions because this is really complex,
and no one has really taken the time to figure out what the unique
challenges of people living on the margins are. How can we support these
individuals to make better choices, and how can we ensure that they do not
get into trouble? We are interested in focusing on how we can support those
with the lowest income.
The analogy I sometimes give is that when we work on legislation to
support people with disabilities, often we might have legislation that will
widen the hallways and create elevators. Those are useful things for all of
us. If we simplify the language and provide better information for
low-income people, they are also useful for people with middle and high
incomes. What is happening now is that a lot of middle-income people may
fall down into the low-income bracket. There are also those supports to help
them up quickly. We think that that is a big priority.
The interesting thing about financial institutions — and you brought up
one aspect — is that they promote products. That is a well-documented issue.
If someone wants a credit card, they know where the bank is; they should go.
I have seen them in the subways of downtown Toronto; it does not really make
In terms of funding, though, they have been one of the most generous
supporters, on the ground, of community work. There has not been a lot of
funding. We are still waiting for a lot of support because people have
identified this as really important work. Financial institutions — TD, RBC,
BMO, CIBC — have all been partners to fund our work, but they have not said,
"You have to say this or that or push our products." They have been
supportive but have let us do the work that we need to do. There is a real
opportunity to reach out to financial institutions and bring them to the
table and say, "Can we talk to you about how you can be supportive? Here
are some areas where we think there are some problems, or the way you are
doing business is challenging for different Canadians. Let us achieve the
same goal." I think that message will resonate.
Mr. Dayler: I would simply add to the first question that we are
pretty much in agreement on the low-income group of folks, especially young
people. Start the training in those habits early and hopefully that will
carry through. I cannot say much more on that.
In terms of financial institutions, we have to ensure that the resources
being invested are clear. That is the biggest thing, I think, for young
people. It is challenge to go in and get a lump sum of money from a private
lender and not necessarily have a discussion about how much of that you are
putting away for your tuition or for your books and rent. "It is a lump
sum, here you go; I hope it works out for you. We will follow up when we
send you the note to collect." That is a challenge. We are saying, "Here
you go, and we will follow up when we need you." That is something that
needs to be addressed.
It was great to hear the previous panel all comment on the different
products and services that they provided. Who will begin to walk into
something like that and know which product or service they need? We hope
that a financial literacy leader would coordinate that in some kind of plain
language that is not intimidating. I will underline that "intimidating"
component. I think it is tough for someone to go into a situation already
stressed out about their finances and then think that they need to know the
world of economics to be able to go through it. It has to be plain language
and to the point.
Senator Ringuette: Mr. Pollock, you seem to want to add thing?
Mr. Pollock: We spent a lot of time on this at the task force. We
met for 18 months and this question was constantly there. Our priority was
probably the student population. However, education is a provincial
jurisdiction. We felt that vulnerable populations might be another place to
start, and so we looked at Aboriginal communities and new immigrants. We
looked at those living in poverty. I would focus a lot of attention on that
if I were coming in as the financial literacy leader.
Senator Ringuette: The second question?
Mr. Pollock: On the second question, I have witnessed a lot of
work that various financial institutions have done. In fact, Mr. Fair spoke
about some of the work that TD has done. I have been to the SEDI Awards
night, where you see people who have come through programs sponsored by
these financial institutions and who have become fully independent because
of the work those programs have done. It is absolutely amazing work. I am
not trying to promote any one company over another, but even one of the
credit card companies has done some phenomenal work in terms of video games
that they have developed. I am sure their brand is on it. However, these are
amazing learning devices that I have witnessed. I am a former educator, so I
found them to be very useful.
The Chair: That concludes our questions. I must say that you have
been a most exceptional panel. I say exceptional because it was most
informative and very inspiring. I am sure I speak on behalf of all of the
members of our committee in saying that we encourage you to continue the
very good and fine work that you are doing throughout Canada. On behalf of
all of the members of the committee, we thank you very much for appearing