Financial products and services have been rapidly evolving, rendering the industry more complex, but the public has failed to keep up. People’s lack of knowledge has led to disorder in the markets and a distrust of the financial players, as well as fraud. Regulators mete out stiff penalties to those profiting from consumer ignorance, but people need to become better educated about financial services.
Taiwanese have a high level of education, but the nation scores low on financial literacy, with relatively poor skills in managing personal finances, budgeting and investing. Media reports tell about young people who cannot manage their finances well enough to pay back their student loans, people plagued by credit card debt through ignorance about revolving interest rates and older people placing pensions into whatever insurance policy their sales agent recommends.
Being financially literate means having the knowledge to make essential financial decisions, but a lack of financial education among Taiwanese continues to land cases of financial fraud in the headlines, whether they involve people purchasing investment-linked insurance policies and derivatives, investing in bitcoin and other cryptocurrencies, or buying shares in fraudulent, unlisted companies.
The “Taiwan Financial Lives” survey released on Oct. 30 last year by the Taiwan Academy of Banking and Finance found that 37 percent of respondents felt they only had “a little understanding” of financial services and products, while 36 percent felt they “completely” did not understand. Describing their overall financial literacy, 32.2 percent believed theirs to be “low,” while 45.5 percent said theirs was “extremely low.”
While more Taiwanese are embracing the diversity of wealth management tools and products available, they are finding that simply leveraging their knowledge and life experience to navigate the financial industry is not enough — financial literacy is key.
A survey released in June last year by HSBC Bank found that only 20 percent of Taiwanese parents believed that their financial knowledge was sufficient to answer their children’s questions. More than half of Taiwanese teachers polled said that they had never integrated financial education into the classroom curriculum due to a lack of knowledge about finances, poorly designed finance courses and little experience teaching financial education.
The Financial Supervisory Commission last month said it would tighten regulations covering relationships between bank customers and wealth managers from Jan. 1, after incidents in which managers misused access to client accounts and defrauded clients to meet sales targets increased over the past two years. This is the second time since 2019 that the commission has toughened its stance on such relationships in an attempt to curb fraud.
However, many people continue to chase blindly after high returns without an understanding of the risks involved, which comes back to a lack of financial literacy. To improve the public’s financial knowledge, the government should follow in the footsteps of the US, the UK, Australia and Japan, who have implemented national financial literacy strategies.
The commission has urged the Taiwan Financial Services Roundtable to design courses to improve people’s financial literacy. The government and academic institutions could also cooperate on multiple levels, such as establishing a working group to coordinate financial education resources across ministries, and to establish a financial curriculum for elementary schools through high schools, and even for universities.
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