Jeff Judy

Jeff's Thoughts - July 9, 2008

Financial Literacy, Part II:
Confidence, Comfort, Conversation

In a recent issue of Jeff's Thoughts (June 11), I suggested that the phrase "financial literacy" may be bandied about a little too loosely. There are many campaigns promoting "financial literacy" that treat this as a single, broad concept: either you are literate, or you're not.

I proposed that just as our standards for reading literacy might vary with the age of the reader, our definition of financial literacy needs to be more flexible, and often, more specific. But how do you assess a customer's or prospect's financial literacy?

Most of the financial literacy material I see reminds me of, say, a certification test: an examination of knowledge and skills that you either pass, or you don't. One day, a customer is financially illiterate. At some later point, after much reading, perhaps, that person is suddenly financially literate. There are few attempts to break that knowledge and skills down into smaller bundles of information, or to organize those bundles into a meaningful sequence.

Couldn't we be more effective talking about "degree of literacy", or "level of financial knowledge"? I certainly think we would help more customers if we stopped making "financial literacy" the goal, and started making the next step forward our target. And to do that, we have to define the level a customer is at, and what the next step should be.

Now, it is all too easy to make wildly inaccurate assumptions about who knows what, and what they are comfortable with. Older people don't always know more about financial matters than younger people. Business people don't automatically understand financial matters better than the average consumer. But older customers, and business customers, have more to lose, in terms of pride, from asking those "stupid questions." (See "For Example . . ." below for a great report on military personnel who struggle with just these issues.)

The best way to assess financial literacy-- best for you, best for the customer -- is through conversation, through personal interaction. In particular, look for their "comfort zone" in financial conversations. Look for the "seam" in your customer's financial understanding, the point where you leave their comfort zone and enter scarier territory. Pay attention when they seem to avoid a topic, and take the time to separate customers who really don't need or want your product from those who are afraid to talk about it with you.

Don't get me wrong, all those web sites and programs and pamphlets can be truly helpful. But this is too important to leave entirely to generic materials. Making the personal effort to help individuals is a lot harder than sending them to a web site to take an online quiz, but it is not only more effective, it has other benefits for you and the bank.

After all, when prospects discover that they do need a product or service, when they realize how managing their finances and banking relationships differently could help them achieve their personal goals, where do you want them to be? At a generic web site? Or connected to your bank, by phone, e-mail, your own web site, or at your desk?

When you patiently help people move up the literacy scale step by step, rather than in leaps and bounds, you give them the confidence to have real conversations about your role in their financial success. Let them keep their pride and their dignity as you work with them, and you may capture some very loyal customers!