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 recommendation.

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 2012.

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 powers.

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 decision making.

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 Canada.

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;, 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 entrepreneurship skills.

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 important recommendations.

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 employers.

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 language.

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 self-assessment questionnaire.

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. Pigeon mentioned.

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 respective jurisdictions.

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 financial literacy.

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 counselling.

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 more informed?

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 issue.

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 taking place.

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 element.

I will leave that open. Maybe we can have multiple responses to the question.

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 share.

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 committee?

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 work on."

Senator L. Smith: Will any of your members be on the search committee?

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 government?

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 nationally.

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 financial literacy?

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 to them.

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 budget.

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 product.

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 categories.

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 that?

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 out too.


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.

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 share.

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 their mortgages.

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 recommendation:

. . . 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 advice.

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 stakeholders.

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 literacy.

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 accessible.

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 financial program.

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 happen.

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 presentation.

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 Bill C-28.

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 vulnerable Canadians.

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 Program.

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 labour market.

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 cent.

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 clients about.

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 comment.

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 decisions.

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 understanding.

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 as well.

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 incomes.

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 sense.

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 here today.

(The committee adjourned.)