Presented by Ken Georgetti on Thursday, 13 May 2010

(Check Against Delivery)

On behalf of the 3.2 million members of the Canadian Labour Congress (CLC), we want to thank you for giving us the opportunity to appear before you to speak on the importance of financial literacy and its relationship to the financial well-being and the economic security of Canadians.

As you may have heard throughout your consultation from representatives of labour organizations and workers, the Canadian labour movement plays a significant role promoting financial literacy and financial well-being of Canadian workers.

So, we are not surprised when we hear that most Canadians do not see themselves as being knowledgeable on financial issues. They are told repeatedly by banks, trust and mutual fund companies that they are not smart enough to understand such complex issues and they need professional help to get them through it.

The labour movement, on the other hand, has negotiated contracts that provide resources for members to increase their financial literacy, in areas such as retirement planning and security, benefit plan administration, how to read financial statements and how to represent the interests of members as pension trustees or advisers.

Our work in these areas makes us believe that union members are generally more financially literate than the general population.

One of our financial initiatives includes a number of union trusteed pension plans establishing Concert Properties to construct affordable union built housing which has grown to a multi-million dollar company.

We have set up successful labour sponsored venture capital funds which conduct seminars and workshops to increase financial understanding.

We founded the Shareholder Association for Research and Education – SHARE – which advocates for shareholder action, and the Columbia Institute – which fosters innovative community leadership and research.

The International Trade Union Confederation which represents unions in over 150 countries has a Committee on Workers’ Capital which I chair, to consider how pension funds in different countries can be mobilized for shareholder action.

Your consultation document correctly notes that Canada's personal saving rate has dropped dramatically in the last 30 years. This is not due to "financial illiteracy" but to a stagnation of wages during the same period.

Today, more than 35% of the workforce work in “non- standard” jobs – part-time, temporary, contract, or self-employment. For those in the middle-income class who work full-time year round, median income has been stagnant for 30 years.

Most Canadians aren’t saving enough simply because they can't afford to save more and are going into debt to pay for rising housing prices and rising education costs. The flip side of stagnant wages is record high debts.

A more financially literate population may be a good thing. We can work on improving financial literacy through a government sponsored advertising campaign, increase access to information through the internet and websites, or even add more warnings and cautions on financial products. However, on its own, increased financial literacy does not deal with the basic problem. Low and middle-class earners simply cannot afford to save.

The median earnings of the bottom 20% decreased by 20.6% between 1980 and 2005 and the earnings of the top 20% increased by 16.4% during the same period, while the earnings of the middle-income remained the same (0.1%).

Improving financial literacy may help the well-to-do, but for 80% of our population, it simply is not an answer.

For the financial industry, we understand that a government sponsored financial literacy action plan is a smart way to get free advertising using government resources and capacity, but it is certainly not the solution we need.

When selling financial products, "financial advisers" face a conflict of interest between making profits for their companies and the needs of their clients. Unlike pension plan trustees and pension fund managers who are required to look after the best interests of the plan members, there is no fiduciary responsibility to the clients of a mutual fund manager to ensure their interests are paramount.

The task force should recognize that the financial industry cannot regulate itself and provide the financial literacy needed by Canadians to make the right choice. The government should put in place effective ways to guarantee that savings are managed in the interests of the client.

Self-regulation, publicly sponsored advertisement campaigns and websites are not the solution. They may make it appear that the government, the industry and financiers are doing something to help people make better decisions. But, it is simply window dressing and will make no appreciable difference in the financial well-being or the assurance of retirement income security for most of the population.

Instead, we need real reforms. Reforms grounded in the reality of the lives of working families. Grounded in the problems they face on a daily basis.

We need improvements to the CPP/QPP so that people do not need to depend on the vagaries of the international financial system or the luck of the draw in the stock market for financial security.

We also need to establish in law a fiduciary responsibility for financial advisers to remove the basic conflict of interest inherent in the system. It works for large pension plans, so why not for every Canadian consulting a financial adviser?

In conclusion, we urge you to listen to the strong representation made by the labour movement to expand public saving vehicles and to better regulate the private financial industry.

Thank you for your attention.