The Consumer Financial Protection Bureau has noted a “staggering” gap between dollars spent on consumer education for financial products, and marketing for those same products.
A recent study analyzing the amount of money spent on education versus marketing for consumers found that financial education programs are “significantly” outspent by financial marketing.
“We found that for every $25 spent on financial marketing, only $1 is spent on financial education,” said Richard Cordray, the bureau’s director, in prepared remarks. “That means the majority of information consumers receive about financial products comes from a company trying to sell them something – which can make it quite a challenge for consumers to find unbiased information.”
The year-long study examined financial education spending in the U.S. and found that the financial services industry spends about $17 billion each year marketing financial products and services to consumers, while only $670 million is spent to educate consumers about financial products.
Nonprofits, local, state, and federal governments, and financial institutions all contribute to these education efforts, about three-quarters of which come from private sources with the public sector supplying the remainder.
Financial institutions spend around $12 billion a year to market specific products directly to consumers, with another $5.5 billion spent annually on “awareness advertising,” where ads are put out with a generally promotional message but don’t market a specific product. The majority of direct marketing takes place through online ads, with mailers and television ads the other two most common forms.
“This tells us that consumers are seeing financial marketing everywhere they turn—online, in their mailbox, and in their family room on the television,” said Corday in his remarks. “This is truly a barrage of marketing. By contrast, very little of the money spent on financial education efforts is put towards any type of advertising. It is truly a David and Goliath scenario, which highlights the importance of providing high-quality sources of unbiased financial information to consumers.”
Financial educators should enhance efforts to identify and promote innovative, scalable methods for providing financial education to consumers, the study concludes. Access the CFPB study here.
Written by Alyssa Gerace