1. Investor Education: Adapting to a Changing World
IFIE Asia Chapter Interim Meeting and Asia Securities Forum
September 21, 2015—Seoul, Korea

2. Regulation and education Confidence and capability Adapting to change
What I’ll Cover
Who we are
Regulation and education
Confidence and capability
Adapting to change

3. Who Are FINRA & the FINRA Foundation?
FINRA—Financial Industry Regulatory Authority:
Independent, non-governmental regulator
Mission: investor protection & market integrity
Deter misconduct by enforcing the rules
Detect and prevent wrongdoing in the U.S. markets
Discipline those who break the rules
FINRA Foundation
Support research and outreach to build financial capability for all Americans

4. FINRA Investor Education Foundation
Established: December 2003
Mission: to provide underserved Americans with the knowledge, skills and tools necessary for financial success throughout life
Funding:
Fines for specific programs and permanent endowment
Cash from FINRA
Disgorgements 3

5. Regulation and Investor Education

6. Why Regulators Make Good Educators
Education is aligned with regulatory mission:
FINRA: Provide investor protection and promote market integrity
SEC: Protect investors, facilitate capital formation and maintain integrity of the securities markets
CFTC: Foster open, transparent, competitive, and financially sound markets; avoid systemic risk, and protect the market users from fraud, manipulation, and abusive practices 5

7. Why Regulators Make Good Educators
Understand securities industry and investing public
Provide unbiased information/don’t sell securities products
Utilize trained staff—and capable of training others
Positioned for partnership 6

8. Why Regulators Make Good Educators
We see/detect problems
Examinations
Market surveillance
Fraud detection
Calls and s from investors and industry 7

9. Why Regulators Make Good Educators
We can create unique resources and tools 8

10. The Balancing Act Can’t give investment advice Can discuss:
Key concepts (diversification, risk/reward relationship)
Questions to ask
Red flags
Tips
Can direct investors to tools/resources that help them plan and avoid problems 9

11. Confidence and Capability

12. Confidence Indicators Come in Different Forms
Risk-based
Analyzes the buying and selling patterns of institutional investors. The greater the percentage allocation to equities, the higher risk appetite or confidence.
Investor Sentiment
Bullish, Bearish, Neutral
Source: AAII

13. More Valuable...Measuring Retirement Confidence
Employee Benefit Research Institute
22% percent are very confident they have enough money to live comfortably in retirement.
44% of workers without a retirement plan are not at all confident about having enough money for a comfortable retirement
Cerulli Associates
85% of households with formal retirement plan feel confident in knowing what assets they will need to retire comfortably, compared to 49% of households that have not completed any formal retirement income plan.
Gives us information we can work with: Both reports note that retirement plans and retirement planning contribute to confidence.

14. Very Valuable…Measuring Financial Capability
National Financial Capability Study (NFCS)
Objective: Seek empirical evidence of combined effect of knowledge, skills and attitudes on consumer behavior

15. NFCS Key Components Making Ends Meet Planning Ahead
Managing Financial Products
Financial Knowledge and Decision-Making

16. Turning Research Into Education

17. Adapting to Change

18. Adapting to Change Social Marketing
Brain Research/Psychology/ Behavioral Economics
Data Collection and Analysis
Employer-Employee Outreach
Community Involvement
An Aging Nation 17

19. Adapting to Change Social Marketing
“Social marketing is the application of commercial marketing technologies to the analysis, planning, execution, and evaluation of programs designed to influence the voluntary behavior of target audiences in order to improve their personal welfare and that of society.”
― Alan R. Andreasen, Marketing Social Change 18

20. Social Marketing: The Process
Six key steps:
Listening
Planning
Pre-testing
Implementation
Monitoring
Re-examining & revising

21. Strategic Partnerships are Key to Success
Value TO the Strategic Partner
Value OF the Strategic Partner
Strategic Partners
Important to
Meeting your goals
Satisfied by
Your Capabilities
Source: Professor Punam Anand Keller

22. Adapting to Change Brain Research, Psychology and Behavioral Economics
Commitment to staying on top of complex fields of study
Working with experts outside of regulatory sphere 21

23. Behavioral Economics:
Adapting to Change
Brain Research, Psychology and Behavioral Economics
Neuroscience:
Future Self
Psychology:
Biases
Behavioral Economics:
Nudges 22

24. Adapting to Change Data collection
2015 National Financial Capability Study: New questions reflect changes in the financial, economic and technological landscape.
Does your household have a budget?
New questions related to:
Student loans
Use of prepaid debit cards
Use of mobile phones for in-person financial transactions 23

25. Adapting to Change Data analysis
Mine for clues about how to reach various target audiences 24

26. Adapting to Change Data analysis
Mine for clues about power of financial literacy
Taxable
Only Retirement
No Accounts
Full Sample
Shows “High Financial Literacy”
60%
40%
21%
39%
Answered Bond Question Correctly
42%
26%
18%
28%
Sought Advice on Saving or Investing
55%
25%
11%
29%
Tolerance for Risk (mean ratings on a scale from 1 to 10)
5.8
4.4
4.2
4.8
Participated in Financial Education
19%
14% 25

27. Adapting to Change
Employer-Employee Outreach 26

28. Employer-Employee Outreach27

29. Adapting to Change
Community involvement
Involving the community

30. Adapting to Change An Aging Nation MIT AgeLab researchers ask:
How do older adults learn, trust, adopt and use new technology and related services?
What is the optimal design of everyday ‘things’ and places to facilitate use as well as to excite and delight across the lifespan?
How does the framing of information, formation of social networks and trust in ‘experts’ impact the decision-making process of a consumer, patient or client? 29

31. Adapting to Change An Aging Nation Provide access Listen and respond
Work together: regulation, investor education, partners
Innovate! 30

32. Investor Education: Adapting to a Changing World
IFIE Asia Chapter Interim Meeting and Asia Securities Forum
September 21, 2015—Seoul, Korea