The government needs to do more to improve the level of financial literacy in the community as part of its financial advice reform package, says financial data analytics company Your Financial Wellness. The company’s chief executive Alex Hassall said he welcomed the government’s announcement that it would take steps to try and broaden access to financial planning services but warned that it would not be effective unless the current low levels of financial literacy were addressed at the same time. Hassall said: “As consumers, what we don’t understand we don’t fully value, and this is especially true with financial advice. We want informed consumers who see the value of financial advice and seek it out. “In order for that to happen we need investment and commitment to lifting financial literacy across all age groups.” Earlier this year, Your Financial Wellness released the results of a consumer survey, which found that the average “wellness index score” fell 11 per cent from 6.4 in 2021 to 5.7 now. Index scores were based on responses to nine questions about current financial conditions, future prospects, savings and money management behaviour.  Forty-three per cent of respondents reported “high or overwhelming” financial stress, compared with 27 per cent in 2021.  Hassall said one of the big underlying problems is poor financial literacy. Only 20 per cent of respondents could correctly answer three financial literacy questions.  This finding is in line with a University of Newcastle survey commissioned by Greater Bank last year, which found that only a quarter of respondents were able to correctly answer all five financial literacy questions, which covered interest rates, inflation, diversification, risk and the time value of money. And the most recent edition of the Melbourne Institute’s Household, Income and Labour Dynamics in Australia (HILDA) Survey, published in December, reported that people of all ages scored lower in a financial literacy test, compared with results in 2016. Hassall said: “This lack of financial knowledge leads to higher financial stress and difficulty making sound financial decisions.” There was no mention of financial literacy in the announcement by the Minister for Financial services Stephen Jones on Tuesday, which detailed the government’s response to the Quality of Advice Review. Jones said planned reforms will streamline the regulatory framework governing the financial planning industry, replacing “unwieldy” statements of advice, fee disclosure, consumer consent requirements and “legalistic” safe harbour provisions.  They will make retirement income advice more accessible by allowing superannuation funds to expand their advice services. Jones said the government would consult further before making any decision on the review recommendation that regulations be made more flexible to allow banks and life insurance companies to offer simple and incidental advice. Hassall said: “While we see better access and better tailored financial advice as being beneficial to financial wellbeing, these reforms can really only achieve their purpose through a more financially literate population that is better informed and more interested and invested in improving their financial circumstances.” The previous government launched a National Financial Capability Strategy in February 2022 but had not done much about it when it lost the election