The broader context
The days of the defined-benefit pension plan from a lifelong employer are gone for the most part. Now, employers expect people to save for their retirement. Just as more people need to invest, though, investment options have become increasingly complex. Complexity can increase risk, and many ordinary people find their money in investments that are just not suitable for them.
The rise of complicated and incredibly speculative products like cryptocurrency has only made the issue worse. Meanwhile, “Reddit stocks” like GameStop are casting more uncertainty into the mix. At the same time, self-directed trading platforms are sending notifications to investors with deals and promotions to incentivize trading. Retail investors are being pushed into trading, which is not necessarily appropriate for everyone. These developments, grounded in behavioural economics, should give governments and regulators a moment of pause.
More investor education?
Yes, investor education helps. The outreach and engagement efforts of securities regulators and self-regulatory bodies such as the Investment Industry Regulatory Organization of Canada and the Mutual Fund Dealers Association of Canada are noteworthy. The OSC’s Investor Office, for example, offers multi-lingual written resources and an interactive scam-spotter tool and meets with ordinary investors across the province.
But investor education on its own is not enough. The bad actors are…