The study surveyed over 1,000 people who use at least one financial service such as baking, insurance or medical aid.
Before the test, 75 per cent of those who took the quiz admitted to understanding financial terms such as: equity, hedge fund, overdraft or electronic transfer fund. However when they were asked to pair terms with definitions results showed that just under 58 per cent of them understood the terms.
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“Over draft was quite a surprise to me. Even debit card, a lot of people struggled to define the difference between debit and credit cards,” said Henk Pretorius, CEO of Columinate.
Pretorius says one of the main issues is that many people are over confident in what they think they know.
“I think most people struggle with investment terminology but I think the scariest statistic there was was that people also struggle with banking terminology and short term insurance,” he said.
The survey was done to make customers aware of their lack of knowledge of the industry. As well as to inform financial service companies that their customers don’t really know what they are signing up for.
“These things have very real implications. If you think about someone who doesn’t understand an overdraft going into their overdraft that has a very real implication on their bank balance.”
Financial advisors need to provide clear information to their clients but the owness is also upon the customer to read and understand policy agreements to understand what they are covered for.