We have much to celebrate in terms of what we have accomplished in teaching, training and empowering Canadians to make better financial decisions. Financial education has wound its way into high school curricula, and the interest in and supply of financial education appears to be at an all-time high.

And yet, to potentially annul all of these gains, I worry that the complexity of the financial landscape is beginning to overwhelm Canadians. Complexity is everywhere. The product landscape is getting more cluttered, consumers are called on to make increasingly difficult choices between products that are becoming sophisticated with time, simple processes like opening accounts or applying for loans still involve a lot of paperwork and time, and financial disclosures put out by financial institutions with every good intention of helping Canadians are becoming increasingly difficult to comprehend.

Financial literacy is invaluable and will help Canadians make better choices and improve financial wellness, but – in complex environments - only when it is accompanied by adequate consumer protection and with a financial landscape that is navigable to the average human.

To illustrate the levels of complexity, take the case of credit cards. Many financial institutions offer a large number of credit cards, and our banking regulations call for the display the terms and conditions of each card prior to actual choice. This has only resulted in a surfeit of information that many novice users feel overwhelmed by, and therefore either ignore or misapply. Financial institutions could capitalize on this complexity by narrowing down for customers the number of cards to actively consider. But this narrowing down typically happens on features that could be irrelevant for financial well-being (e.g., frequently flyer miles or other perks). Flooding people with a lot of complex information runs the risk of those very people seeking simpler (but perhaps irrelevant) information. The behavioural explanation is simple – when we give people too much information that they can’t process, they simply reject the information and look for simpler cues to make choices – cues such as “what are others like me choosing” or “what’s the easiest thing to do" (which, often is doing nothing, and that can be disastrous for long term outcomes).

It is a similar story with investment products, mortgages and loans, and other financial products. There is an abundance of choices, inadequate guidance on how to make those choices, copious and confusing information and disclosures, and therefore a feeling of inadequacy on the part of consumers resulting in an unwillingness to seek expert advice (or not wanting to be embarrassed by their lack of knowledge). Add to that the problem that most financial products require a nuanced understanding of compound interest, exponential growth, risk-return trade offs, and intertemporal choices. Finally, good financial decision-making not only involves making good choices, but also choosing when to make those choices. After all, selecting an excellent retirement portfolio is of little use of it is selected too close to retirement. The human brain was not designed to solve these complex dynamic problems.

A report by ASIC (Australian Securities and Investment Commission) acknowledged that the financial landscape is complex, and disclosures does nothing to solve in inherent complexity. As Nobel laureate Richard Thaler famously said, “people aren’t dumb, the world is hard.” And the harder the world gets, the less effective financial literacy will be. Unless we reduce the complexity of the financial world, literacy initiatives will always be fighting a losing battle.

A financially literate citizenry can only make better choices and have positive financial outcomes if they are playing in a fair and easy-to-comprehend marketplace. We need literacy but we also need consumer protection and simplicity of the financial landscape. The enhanced mandate of the FCAC (Financial Consumer Agency of Canada) via Bill C-86 to include consumer protection is a step in the right direction. And while I do not disagree that every Canadian needs additional financial literacy, I would also argue that every Canadian financial institution needs a dose of human literacy to make the marketplace human compliant.