On the occasion of its 30th anniversary, the Association of the Luxembourg Fund Industry (ALFI) declared its commitment to work alongside stakeholders in Luxembourg to enable citizens to better understand and manage personal finances, in a context of rapid technological, economic and societal change. A dedicated session at the ALFI Global Distribution Conference provided an opportunity for representatives from the government, education, finance, business and the media to explore ways of closing the financial education gap in the Grand Duchy.
As part of the national financial education strategy coordinated by the financial regulator Commission de Surveillance du Secteur Financier (CSSF), ALFI announced its financial and technical support for the “Fit for Life” awareness-raising programme in schools, led by Jonk Entrepreneuren with the Luxembourg association of economics and social science teachers CNPSES. ALFI also unveiled the new version of its investor education website www.understandinginvesting.org.
ALFI’s chairman Denise Voss said: “Today we celebrate thirty years of working together to make Luxembourg the world’s leading centre for cross-border investment funds. For the continued growth of our industry and for the benefit of society and the economy it’s essential to have well-informed citizens who understand the risks and opportunities of investing and who are capable of managing their personal finances. In these times of economic and social challenges financial education can help individuals protect their own financial interests and plan for the medium to long term, especially for their pensions.”
88% of people polled expect initiatives from policy makers
The Quest survey, conducted on behalf of ALFI in August 2018 among a representative sample of the adult population residing in Luxembourg, reveals a significant gap between stated beliefs and actual practices in personal financial management. While 86% consider that they are in control of their personal finances, 51% do not know their tax rate and 42% do not know how much they contribute to social security. Only 16% actively read articles and publications regarding personal finance.
The good news is that 83% of respondents state that they pay their bills on time, and 73% say they have set aside a reserve for unforeseen events. Only one third however follows a household budget.
Luxembourg residents recognise that they suffer from a lack of financial education. Four in ten consider that the education they received from their parents on this subject was lacking. According to 86% of respondents, the financial education they received during school was insufficient. Though they are aware of these shortcomings, only 26% use a financial advisor.
Looking ahead, 88% of people polled believe that policy makers should step up efforts to improve the financial education of the population and 86% believe that it will be necessary to increase financial education in schools. The vast majority would also like to improve adult education levels, although 43% of respondents say this is the responsibility of each individual.
According to Quest CEO Carlo Kissen: “It’s very human! As citizens, everyone claims to attach considerable importance to financial education, but as individuals we do not make the necessary effort to undergo training and to keep informed. And we ask political decision-makers to take action.
We can draw a parallel between financial and physical health: we would like to stay in shape, but we don’t want to go on a diet or to the gym. The challenge is therefore about motivation; it will take a leap in awareness to change behaviour – at school, in the media, at work, at home...”
Financial education: shared responsibility for investor protection
As part of its 2020 Ambition, ALFI made investor protection a top priority. Accordingly, ALFI supports its members in the adoption of best professional practices and promotes educational initiatives targeting the general public.
Once again this year, the ALFI Global Distribution Conference brought together more than 700 professionals from all over the world on 25 and 26 September. Aiming to improve the distribution of investment funds across borders and give individual investors access to the best financial products, the conference speakers debated the evolving state of the industry, in terms of regulation, technological innovation, quality of service and investor information.
On this occasion, ALFI unveiled a new version of its website www.understandinginvesting.org, now available in English, French and German. The website aims to help individuals understand the potential value but also the risks associated with any investment, ask the right questions before and when investing, master financial vocabulary, learn how to actively seek professional advice and, ultimately, become informed investors.
The closing event of ALFI’s 30th anniversary celebration promoted the cause of financial education in Luxembourg, with the participation of key stakeholders.
Claude Marx, Director General of financial regulator Commission de Surveillance du Secteur Financier, explained the national strategy for financial education coordinated by the CSSF. He explained how the relevant public and private stakeholders work together. Under the mandate given by the government, the CSSF supports existing initiatives and suggests and encourages new ones, such as the mandatory participation in financial education courses in primary and secondary schools or initiatives to assist with personal budget management through games or smartphone apps.
Simon Ramos, Partner at Deloitte and co-chair of the ALFI Investor Forum, says: “Investor education is an essential topic for ALFI and its members. I believe that educating investors is about allowing the capital to flow in a healthy way in the real economy instead of being kept in a bank account. The industry has an important role to play in making sure that the existing information about fund products is made available to investors in a language they understand.”
Jella Benner-Heinacher, President of Better Finance, the European Federation of Investors and Financial Services Users, stressed the importance of investor education for citizens to be able to exercise their responsibilities, for themselves and their families – as well as to defend their interests in relations with both policy-makers and financial partners. She also presented some good practices of investor education she has observed in Europe.
Marc Muller, an Economics and Social Sciences teacher and the Chairman of the CNPSES association, confirmed the almost total absence of teaching on money and sound personal finance management practices in school curricula. These specific learnings should, he said, be part of a mandatory course in high school on Citizens in their Economic and Social Environment, an essential part of general knowledge nowadays. The civic dimension of an economics and social science course would enable the country to train future citizens capable of understanding the State’s budget and policies, the mechanisms and constraints of business, as well as the management of their families’ budgets and assets.
Stéphanie Damgé, Director of Jonk Entrepreneuren, presented the work of her NGO in schools through the Fit for Life programme. In her view, financial education plays an essential role in preparing young people to lead independent lives, choosing a career that suits them and carrying out the personal or entrepreneurial projects that are close to their hearts.
Denise Voss called upon all fund industry players to step up their support to financial and investor education initiatives and presented, on behalf of ALFI, a cheque for €25,000 to Jonk Entrepreneuren, along with a pledge to assist the Fit for Life programme in the coming years.
Nathalie Reuter, a journalist at RTL, moderated the debate.
A selection of photos of the 30th anniversary celebration can be downloaded on this link (copyright ALFI).
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