Presented by ASIC Chairman and IOSCO Chair, Greg Medcraft at the International Forum of Investor Education and International Organization of Securities Commissions Global Investor Education Conference, Toronto, 21 June 2013
Introduction
Good afternoon, ladies and gentlemen.
I would like to talk about ASIC’s initiatives in Australia, to improve people’s financial wellbeing through investor education and behavioural change. We have designed dynamic investor education tools and programs for all stages of life.
Today, I would like to cover:
- financial education for children and youth
- programs for people in their working years
- programs to meet the needs of pre-retirees and retirees.
However, before I begin, it’s worth noting IOSCO’s actions in this space. IOSCO has convened a new Committee on Retail Investors. It’s charged with conducting IOSCO’s policy work on retail investor education and financial literacy. The Committee will also be a forum to share experiences and develop approaches on investor education and financial literacy.
Coordinating our approach to investor education is important, and IOSCO is well placed to undertake this role. But let’s take a step back, and think about the big picture.
Why is investor education fundamental to an efficient and effective financial market?
There are three essential components to having a financial market that is efficient and effective. You can think of it as a three-legged stool. You need:
- a robust regulatory framework that is enforced effectively
- a competitive financial services industry that offers quality products and services, and finally
- investors who feel confident when participating in the market, and are able to make sensible and informed financial decisions.
If one of the legs is missing, the stool will fall over – the market won’t be efficient and it won’t deliver benefits for the community. And how do we ensure that investors are confident and informed when they participate in the financial markets? Through investor education.
I hope this puts into context how important investor education is. It forms one of the three pillars of our financial markets. It’s in the interests of industry, regulators and government to have effective investor education programs. In fact, ASIC’s first strategic priority is to ensure financial consumers and investors are confident and informed.
Investor education should not be a mere afterthought that complements our activities as a regulator. We need to think of the big picture (the three-legged stool) and ensure investor education gets the focus it deserves.
In Australia, we are very aware of this. We set a high priority on our financial education work. To give you a bit more context, ASIC has been given national responsibility for financial literacy since 2008.
We have developed an Australian Financial Literacy Strategy, which is a collaborative effort that leverages off partnerships between many agencies and organisations. Our strategy is to improve the financial knowledge and skills of Australians; but, more importantly, to change their behaviour.
Doing this is a long-term initiative that requires a sustained commitment. When allocating resources, it’s important to consider:
- what will create broad-based generational improvements
- which groups in society need the most assistance
- what issues are causing the greatest problems.
At ASIC, we’ve based our work on extensive research about what Australians know and don’t know about financial matters, and how they behave. People do not naturally behave like calculators or economic robots; they behave like people. And people have limited time, personal quirks and are driven by emotion. Simply providing information, even if it improves knowledge, is unlikely to change most people’s behaviour.
So we have to identify and adopt techniques that maximise the probability of behavioural change. We’ve found the key is to motivate people to take action, and then give them practical steps they can easily take.
I’d like to take you through some of our initiatives for each stage in life.