The Securities and Exchange Commission issued a financial literacy study Thursday confirming earlier studies that U.S. retail investors lack basic financial literacy.

The SEC study was mandated by the Dodd-Frank Wall Street Reform and Consumer Protection Act and directed the SEC, among other things, to identify the existing level of financial literacy among retail investors, including subgroups of investors.

Studies reviewed by the Library of Congress indicate that U.S. retail investors lack basic financial literacy,” said the SEC. “The studies demonstrate that investors have a weak grasp of elementary financial concepts and lack critical knowledge of ways to avoid investment fraud. Surveys also demonstrate that certain subgroups, including women, African-Americans, Hispanics, the oldest segment of the elderly population, and those who are poorly educated, have an even greater lack of investment knowledge than the average general population.”

The SEC sought comments on the most effective private and public efforts to educate investors. Many of the commenters indicated that they provide resources or run programs focused on educating investors. A number of them stated that their investor education efforts included initiatives targeting specific audiences, such as seniors, members of the military, or students.

Other commenters identified programs targeting traditionally underserved populations or more discrete groups. A few commenters noted that their investor education efforts are intended for general audiences.

Many commenters stated that financial education should start at an early age. Several commenters agreed that financial education should be incorporated in school curricula. Some commenters argued that financial education should be taught to students starting in elementary school, while other commenters maintained that schools should begin teaching financial education in middle school or high school.

Many commenters expressed views on important content areas for investor education programs. A number of commenters indicated that investor education programs should teach basic financial concepts, including risk, diversification and compound interest. Several commenters noted that investor education programs should explain specific investment products and strategies. Some commenters stated that programs should educate individuals about investor protection, including how securities regulators protect investors and what steps individuals can take to avoid investment fraud. A few commenters suggested that investor education programs should help individuals understand how emotions influence investing decisions.

Many commenters stated that effective investor education programs should be accessible to their target audiences, including that these programs should be easy to use and easy to find.

Commenters also noted that investor education materials should be easy to understand through the widespread use of plain language, and that program content should be culturally sensitive to any target audience. Some commenters also indicated that investor programs should be affordable to participants. One commenter noted that their focus on supporting community-based initiatives contributes to increasing effectiveness.

The Dodd-Frank Act also directed the SEC to identify methods for improving the timing, content and format of disclosures to investors with respect to financial intermediaries, investment products and investment services.

As for the timing of disclosures, the SEC found that retail investors prefer to receive disclosures before making a decision on whether to engage a financial intermediary or purchase an investment product or service. With respect to financial intermediaries, investors consider information about fees, disciplinary history, investment strategy and conflicts of interest to be absolutely essential. As for investment product disclosures, investors favor summary documents containing key information about the investment product.

Investor preferences are mixed with respect to the method of delivery, the SEC noted. Some investors prefer to receive certain documents in hard-copy, while others favor online disclosure. With respect to the format of disclosure documents, investors prefer that disclosures be written in clear, concise, understandable language, using bullet points, tables, charts and/or graphs.

Investors also favor “layered” disclosures and, wherever possible, the use of a summary document containing key information about an investment product or service.

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