How can mortgage brokers lead the financial literacy revolution?

As brokers we spend so much of our time educating our clients. Whether it’s the basic concepts of a loan, the actual process of lending, or what’s involved in the purchasing of a property, ultimately we invest a lot of time with clients explaining these concepts. Then we scrape bank statements, educate on living expenses and help clients qualify their financial position, whilst sometimes experiencing their frustrations at all of these “useless” questions. In the end, most clients don’t understand the importance of these questions and just want their loan to obtain their dream property!

Did you know, 1 in 3 adult Australians are financially illiterate?* 

Yup, you read correctly… 1 in 3!  As defined by the HILDA (Household, Income and Labour Dynamics) Survey, financial literacy is a person's ability to answer three main questions on the concepts of interest rates, inflation and diversification, and understand the associated impact to their finances!

So it begs the question, if 1 in 3 clients are financially illiterate, how can we, as Brokers, improve the financial literacy of our clients, the country and the generations to come?

Clever spending habits are not an inherent thought process - they are a learned behaviour. Often our clients have not had fantastic financial role models nor learned the basic fundamentals of financial knowledge. Sometimes they are just lazy. There’s lots of differing factors that impact their knowledge, and perhaps more alarming is the fact that financial literacy is the primary determinant in a range of enriched life outcomes; including wealth accumulation, retirement planning and women’s economic empowerment. In fact when strictly speaking about women, half are defined as financially illiterate. Read that part again.

It's not often a client attends a broker appointment with their living expenses fully documented and easily vetted – meaning Brokers invest vast amounts of time for uncertain outcomes, ultimately this equates to working for free in most cases.

This lack of financial knowledge about spending habits, cash flows and budgets has a significant follow on effect into our business processes. It drives up the time we need to spend with each client, to be comfortable they are knowledgeable enough to be in a position to borrow, and that our file is compliant. If you were to track the additional time spent as a result of full living expenses verification and explanation to clients with a lack of basic financial literacy, to those who arrive fully aware of their spending habits, with documented living expenses and an open position to answering “difficult” questions, you’d likely find the time cost would be double. That was my experience. Then add BID on top, and the resulting time spent on each application prior to lodgement has increased roughly 50-75% in the last 3 years.

With the impact of COVID wreaking havoc on most people’s cash flow, the pathway forward is financial knowledge built by a revolution in Financial Literacy.

Lead the Financial Literacy Revolution

Right now, Brokers can lead this Financial Literacy Revolution, facilitating education for their clients through an on