Call for literacy boost among retail investors
A committee set up by the International Organisation of Securities Commissions (IOSCO) found investors in many jurisdictions had unsatisfactory knowledge about basic financial concepts such as compound interest, inflation and portfolio and risk diversification.
The finding comes as IOSCO releases its strategic framework report for its Committee on Retail Investors (C8) on retail investor education and financial literacy.
The C8 found there is a gap between what investors think they know about the features of investment products and services and what they actually know.
Investors do not fully appreciate the risks of a product they have invested in, especially when it is complex, and they do not fully understand the effects of fees on long-term returns.
The C8 said financial literacy resources and materials should be targeted, easily understood and accessible.
"Understanding what information is relevant to various segments of retail investors and their preferred methods of delivery is crucial for the success of investor education and financial literacy programs," the report said.
The C8 also recommends delivery mechanisms that are interactive, like online resources and mobile applications so investors can get solid results they can use.
The C8 is focusing on investors and their investment knowledge and understanding, financial skills and capability, and program design, delivery and measurement.
Once education and literacy programs are put in place, their success rate should be monitored to see whether resources are being used effectively to meet the goals of the programs, the report said.
AUTHOR
Malavika Santhebennur
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