SEC Staff - Study Regarding Financial Literacy Among Investors

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August 2012

The study identifies investor perceptions and preferences regarding a variety of investment disclosures. The study shows that investors prefer to receive investment disclosures before investing, rather than after, as occurs with many investment products purchased today. The study identifies information that investors find useful and relevant in helping them make informed investment decisions. This includes information about fees, investment objectives, performance, strategy, and risks of an investment product, as well as the professional background, disciplinary history, and conflicts of interest of a financial professional. Investors also favor investment disclosures presented in a visual format, using bullets, charts, and graphs.<ref>SEC Issues Financial Literacy Study Mandated by the Dodd-Frank Act. Securities and Exchange Commission. Retrieved on October 16, 2012.</ref>


The Dodd-Frank Act required the Securities and Exchange Commission (SEC) to conduct a study to identify:

  • the existing level of financial literacy among retail investors, i
  • methods to improve the timing, content, and format of disclosures to investors with respect to financial intermediaries, investment products, and investment services;
  • the most useful and understandable relevant information that retail investors need

to make informed financial decisions

  • methods to increase the transparency of expenses and conflicts of interests in transactions
  • the most effective existing private and public efforts to educate investors; and
  • a strategy to increase the financial literacy of investors in order to bring about a positive change in behavior.

Select Findings from the Study[edit]

  • Studies reviewed by the Library of Congress indicate that U.S. retail investors lack basic financial literacy. 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.
  • Based on the feedback of commenters and the results of the quantitative and qualitative research, the staff has identified:
    • methods to improve the timing, content, and format of disclosures;
    • useful and relevant information for investors to consider when either selecting a financial intermediary or purchasing an investment product; and
    • methods to improve the transparency of expenses and conflicts of interest.
  • Based on the feedback of commenters, the staff has identified the most effective existing public and private investor education efforts as including programs that are research-based, that are goal oriented and emphasize important investor education concepts, and that are easily accessible, delivered efficiently, and relevant to their target audience.
  • As a strategy to improve financial literacy, OIEA and other FLEC participants will work jointly and collaboratively to develop programs:
    • Targeting specific groups including young investors, lump sum payout recipients, investment trustees, the military, underserved populations, and the elderly;
    • Promoting the importance of checking the background of investment professionals;
    • Promoting as the primary federal government resource for investing information; and
    • Promoting awareness of the fees and costs of investing.

Related Documents: Financial Literacy Study, Investor Research Report, Investor Research Report Online Survey[edit]



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