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“Knowledge is the best protection”

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The first part of the survey of Germans’ financial literacy competencies was reminiscent of the PISA test – only it was for adults: 99% of the participants were able to divide 1,000 euros by five correctly, 56% were able to calculate compound interest and 21% correctly answered all the financial knowledge questions – from zero interest rates and inflation to risk diversification. Men did slightly better than women. However, the study not only provides insight about Germans’ financial knowledge, but also about consumers’ financial attitudes. For example, 33% of the participants tend to ignore the small print unless something goes wrong. And 50% doubt that their money would be safe in a bank if it were to fail.

At a glance:Financial literacy competencies of adults in Germany 2019

Two market research institutes commissioned by BaFin surveyed 1,003 individuals between the ages of 18 and 79 about their financial knowledge, their attitudes towards money, their financial behaviour and their financial wellbeing, but also about problems they might have encountered and their trust in the financial system.

This was the German supervisors’ contribution to a global survey coordinated by the International Network on Financial Education (INFE) of the Organisation of Economic Co-operation and Development (OECD).

BaFin has made the detailed results of its representative “Survey of Adult Financial Literacy Competencies in Germany 2019” available online.

Mr Bock, now that BaFin has assessed the Germans’ financial literacy competencies, how do you classify the results?

What is positive is the fact that eight in ten participants understand the connection between risk and return. In other words, they know that high interest rates entail a high level of risk; they are less likely to fall for promises of sky-high interest. But it will still be a challenge to educate even more people, making sure they at least have a basic knowledge of something as elementary as annual interest. Beyond the individual survey results, this still holds true: knowledge is still the best protection against wrong decisions.

How do consumers obtain information?

The study shows that three-quarters of adults look at information from several companies before investing. One-quarter of the participants look at information from only one provider, however. And this, of course, means they have no way of comparing information. Consumers who content themselves with one offer should nevertheless – no, especially in such a case – look closely at the contents of the contract, read it through and, if they have any doubts, ask questions until they are clear on every point. This advice applies to all consumers, of course. I know that can sometimes be tiresome. But the good thing is that consumers are allowed to bother providers. The other way round would be far more critical.

How does BaFin contribute to consumer education?

Our work begins long before the consumer makes an actual decision to invest. We make comprehensive information available on all the channels at our disposal. Take the BaFin website, for example: we have a page specially dedicated to consumers. It features information about certain financial products as well as warnings about dubious providers. Our website also provides brochures on various topics that we hand out at trade shows and investor fairs – some even in simple language. One target group is particularly important to us: senior citizens. In the past months, we have been using “digital meet-ups” to inform them about safe travel, direct investments and digitalisation. And last but not least: we regularly publish articles for consumers in BaFinJournal, addressing topics such as the opportunities and risks of certain financial products – our most recent focus was on factor certificates.

What is the benefit of providing comprehensive information if consumers then neglect to read the small print?

According to the survey, one-third read the small print in full or at least to a large extent. But I admit: this is not exactly a fantastic achievement. At any rate, I would not recommend that anybody ignore the small print. We would do better with the approach of making the small print a big deal. The important thing is for consumers to understand the legal consequences of their own contracts. Concluding a contract means entering into obligations, and entitlements have conditions. The consumer must be clear on both points. Certain statutory information, such as key information documents or key investor information, is brief and concise; it describes the most important characteristics and risks of the product. And even if surprising terms among the general terms and conditions could be invalid, this should not be interpreted as a free pass not to read them at all.

How would you say things look for the complaints culture in Germany?

The study shows that consumers, though they have problems now and then, hardly ever make official complaints. For example, a customer might discover transactions on their account that they do not recognise. Some consumers have experienced a situation like this before and probably wondered what they should do. In such a case, I advise people to contact their bank and clarify the matter. The same applies to insurance policies. If that does not work, there are ombudspersons and dispute resolution entities. BaFin itself has an arbitration board which deals with disputes consumers have with credit and financial services institutions or asset management companies if there is no recognised private dispute resolution entity responsible for the case. Consumer centres are also a source of support. Ultimately, though, it might also be necessary to engage a lawyer and have your rights enforced in court.

At BaFin, we always keep an eye on customers as a whole – on consumers’ collective interests. When customers call our consumer helpline, for example, or file a complaint with us by other means – as approximately 17,000 people did in 2019 – we investigate whether there has been an irregularity at the respective company. If so, we pursue the matter. But we will only do so if the company is subject to our supervision.

Probably the most surprising finding is that 50% of the participants doubt their money will be safe in a bank if the bank becomes insolvent. Is that even a matter of faith?

No. The guarantee schemes in place in Germany guarantee deposits of up to 100,000 euros if a bank becomes insolvent. That is not a matter of faith, but rather a question of awareness of the deposit guarantee scheme. Comprehensive and clear information on this subject is available in our brochure dealing with banks or insurers in difficulties.

Interview by Sören Maak-Heß, Division for Speeches and Publications

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