CFPB: Comparing Financial Education and Financial Marketing

Given the vast range of information that is available to American consumers when making their financial decisions, the Consumer Financial Protection Bureau (CFPB) conducted a study to develop a better understanding of the size and scope of the financial information field. CFPB released its findings yesterday in a report titled, “Navigating the Market: A comparison of spending on financial education and financial marketing.” The study revealed an enormous and potentially precarious disparity, finding that the financial service industry spends 25 times more on marketing efforts – about $17 billion annually –  than all sources spend on the direct provision of financial education – about $670 million annually. In other words, as a nation we spend about $2 per person per year on financial education while the finance industry spends about $54 per person per year on marketing financial products and services.

The report found that about three-quarters of the total amount spent on financial education came from private sources – mainly nonprofit organizations – with the remaining quarter coming from federal, state, and local sources.
 
Financial service providers spent about $5.5 billion of the total $17 billion on awareness advertising (traditional channels, such as TV, radio, newspapers), with half of that going to television advertising. The remaining $12 billion went to direct marketing (Internet, direct mail, magazine ads) with 44 percent spent on Internet display and search.

 The vast majority of the financial information available to the public is derived from sources that are trying to sell their products or services. In such a financial landscape, CFPB notes that it can be challenging for consumers to receive unbiased information in the process of financial decision-making. The report argues for making financial education and skill-building opportunities readily available for citizens at home, in the workplace, at libraries and other community centers. The CFPB itself is attempting to achieve this goal through the use of tools like “Ask CFPB” – an online interactive tool with hundreds of frequently asked financial questions.

The report is only a one-year snapshot, but these spending trends are likely to continue into the near future. “Navigating the Market” appears to be an early step in a long-term effort to bring some balance to the financial information marketplace.