Ireland roundtable: Creating a storm in financial literacy

Funds Europe’s expert panel of Irish funds leaders want to see greater efforts to raise financial education standards in Ireland so people are not only led by influencers.

Participants
Tara Doyle, partner and head of asset management and investment funds, Matheson
Lisa Harlow, CEO, Vanguard Group Ireland
Adrian Mulryan, CEO, Invesco Ireland
Furio Pietribiasi, CEO, Mediolanum International Funds
Ken Somerville, head of fund services, Ireland, US Bank
Fearghal Woods, head of security services, Ireland, JP Morgan

Ireland 20,000 funds industry staff may well appreciate the value of owning investment funds, but what about the rest of its 5.3 million people? Funds Europe’s panel of some of Ireland’s funds leaders considered whether there was enough work being done to promote funds and to distinguish the average mutual fund from “vulture funds”.

The Council of Irish Funds – the governing body within Irish Funds, the trade body – is playing its part, said Adrian Mulryan, the CEO of Invesco Ireland, with a big focus on communication strategy and ensuring that the citizens of the state are aware not only of the importance of the funds industry but of the benefits that the industry creates for every citizen and “not just for a particular cohort”, largely meaning the wealthy.

“Ireland is very effective at communicating storm warnings – but we are very poor at financial literacy and warning people that a lack of financial literacy can cause more damage than the wind”

However, that messaging has been hard to get through and what is needed is a widespread initiative to improve the country’s financial literacy rates, said Fearghal Woods, head of security services, Ireland, JP Morgan.

“People do associate mutual funds with vulture funds but that goes back to financial literacy. If you understand it, you’ll be able to differentiate it and if you can differentiate it, you can make informed decisions about your investments. That financial literacy is not available to everyone yet so that makes the messaging even harder.”

As Mulryan said: “Ireland is very effective at communicating storm warnings – but we are very poor at financial literacy and warning people that a lack of financial literacy can cause more damage than the wind.”

Distribution problem

Efforts are underway at least. In February this year, the current government introduced the country’s first national financial literacy strategy for the next five years.

The problem though, said Furio Pietribiasi, CEO, Mediolanum International Funds, is the distribution framework.

“In Ireland, funds are distributed by a few wealth managers who do not focus on retail clients. Banks, which hold retail clients’ money, lack the expertise to distribute financial products and there is little emphasis on educating clients or providing financial planning services, except for some independent financial adviser networks, which are very few considering the Irish population.

“The reality is that when you begin educating the public about investment funds, you must also ensure the quality of the distribution model across the country.”

Consumer protection is important, but consumer access is also critical, added Lisa Harlow, CEO, Vanguard Group Ireland. “We’re here to help people create wealth, to save, to retire well and to help them fund the things that are important to them. But that only happens if they can participate.

“We know that here in Ireland, participation in capital markets is low. The country sits on massive cash balances. That’s the same in Europe. We see that in Germany. They save a lot of money, but they don’t invest. The idea is to create a thought process to improve participation. Financial literacy increases when you participate.”

Mediolanum has almost two million retail clients and Pietribiasi agrees that financial literacy will be more important than tax or accessibility when it comes to increasing participation.

“I can give examples of countries where low taxes have not increased participation. The reality is that you need financial literacy first. The barrier is not cost, it is understanding. If people do not understand why they should invest and how they can extract value from investing their money in capital markets, they will never do it.”

TikTok influencers

What fascinates Invesco’s Mulryan is that some in the younger generation of investors are now getting their financial advice through TikTok and online finfluencers.

“From an Irish perspective, we are unique in that we had a very successful product in the SSIA. The whole country became financially-literate overnight. And we took all of that energy and we stopped.

“So how do we recreate that energy and the appetite to invest. It’s about communication about returns and the upside of returns. Right now, Europeans are very good savers but they’re leaving money behind, and it is incumbent on us to educate them. I see the education as the driving licence. The problem is that we have no car.”

There is also the sheer size of the financial literacy gap, said Ken Somerville, head of fund services, Ireland, US Bank.

“The breadth is very diverse. It’s not just investing where there’s a gap in understanding or literacy. It is national and it covers pensions and inheritance planning. Like it or not, teenagers are getting their information from social media and we have to bridge the gap between what children are taught at school in terms of financial matters and what they get from their phones because currently, that gap is huge.”

Everyone in the market appreciates financial literacy’s importance, said Harlow. But it is also very difficult to achieve. “We have been talking about it forever but it is about putting together all the different factors that encourage engagement. We have auto enrolment here and there is a whole digital market with Youtubers and TikTokers talking about their investment portfolios.

“We have to recognise that these different threads have to be pulled together and we all have a role to play. We have to ensure we have robust financial literacy packages from our organisations. Irish Funds is working with schools in Ireland to develop a program and that’s really important. But there are people, the parents, that need help now, so we have to create this ecosystem of things that encourage engagement, energy and interest because it is not just one thing.”