Julie Jason: Helping tomorrow’s investors.
Do you have a child or grandchild who has been drawn to stock trading through the internet or an app?
While I’m a proponent of investing for all ages, I’m hardly a fan of kids entering the markets without training or supervision. If you feel the same way, you’ll want to know about a new resource, announced at the end of June by FINRA (the Financial Industry Regulatory Authority, which regulates brokerage firms), that I expect to be very helpful — both to you and to regulators (if you are willing to submit comments).
FINRA’s new initiative (tinyurl.com/ftz7by8) is a massive project that will have an impact on investors both young and not so young.
It’s a multiyear, multifaceted $30 million initiative, whose goal is to provide kids with information that can help them make good investment decisions and avoid mistakes.
That’s an incredibly worthwhile goal. This is FINRA’s ask for comments: “Given the recent influx of novice retail investors into U.S. securities markets coupled with rapid advancements in technology, FINRA requests comments from firms, investors, investor advocates, academics, investor and financial education providers (for-profit and nonprofit) and other stakeholders concerning effective ways to reach today’s investors. We are especially interested in comments pertaining to younger, novice investors and people who have yet to participate in investing outside an employer-sponsored retirement plan.”
FINRA is asking for comments on 10 questions, which you can see at tinyurl.com/3x7m67p9. You’ll find instructions on how to comment there as well. Here are a couple of examples for educators:
“Which methods of educating investors have worked best to increase investor knowledge among self-directed retail investors? Please describe the modes and channels used to reach people and the demographic characteristics of the target audience for such efforts. What should be FINRA’s role with regard to educating self-directed investors?”
“Does simulated trading help educate investors or potential investors about different aspects of investing, such as risk, diversification, costs and performance?”
In case you have not seen a simulator, take a look at a free one offered by the SIFMA Foundation called The Stock Market Game, which you can find at tinyurl.com/3yueuzkc. The SIFMA Foundation is a nonprofit organization focused on increasing understanding of the financial markets.
The comment period, which is now open and ends on Aug. 30, is the first phase of the project. The second is a comprehensive program “aimed at educating this rapidly-growing segment of novice retail investors who are leveraging advancements in technology to enter U.S. securities markets.” Retail investors are nonprofessionals who buy and sell securities or funds.
If you are interested in reading comments that have already been submitted, you can find them here: tinyurl.com/54f4rmc9.
Education is needed on all levels. FINRA Foundation’s most recent investor survey (tinyurl.com/wfcbj2tx) found some troubling trends, as investor knowledge in the United States was low among all investors, and many investors were confused about the various fees they pay for investing.
New investors had less investment knowledge than others. For example, in a separate study done by the FINRA Foundation with the research organization NORC at the University of Chicago (tinyurl.com/v9ed6xyy), new investors, when tested, on average answered only 1.4 out of 5 investment knowledge questions correctly.
As Robert Cook, president and CEO of FINRA and chair of the FINRA
Foundation, said, “It is critical that newer investors understand both the benefits and the risks of participating in the financial markets.” Who can disagree?
To stay up to date on this noteworthy cause, visit www.finrafoundation.org. Write to me at readers@juliejason.com with some of your suggestions, as well.
Julie Jason, JD, LLM, a personal money manager (Jackson, Grant of Stamford) and author, welcomes your questions/comments (readers@juliejason.com). Her awards include the 2020 Clarion Award, symbolizing excellence in clear, concise communications. Her latest book, a curated collection of Julie’s columns, is “Retire Securely: Insights on Money Management From an Award-Winning Financial Columnist.” To hear Julie speak, visit juliejason.com/events.