Although April was Financial Literacy Month, recent events remind us that the basics of financial literacy are essential no matter what the month. In a world of crypto and meme stocks, how can investment firms communicate the necessity of financial literacy?


Educate investors

The financial industry is constantly changing. And while it is exciting to talk about the new, shiny things, a return to basics is helpful for many investors—even those who think they know the market.

The FINRA Investor Foundation conducts a financial literacy study every three years. The study poses five questions to measure consumers’ knowledge about interest, compounding, inflation, diversification, and bond prices. On its most recent test in 2018, only 34% of those who took the test got four out of five questions correct, suggesting that most Americans are lagging in basic economic and financial principles.

Any of the topics listed above are all necessary ingredients to be financially knowledgeable. How can investment firms communicate the need for financial savviness in an environment that rewards (temporarily at least) wishful thinking?

Back to basics

As investors attempt to manage their assets, including retirement or paying off student debt, getting back to basics may help.

Why Interest Rates Matter

Credit cards, mortgages, student loans—interest rates impact more than just bank accounts. Are clients knowledgeable on the differences between fixed and variable rates? How about compounding?

Interest rates today are at historic lows—but they won’t stay there forever. Educating clients on factors affecting interest rates and movements—whether up or down—is vital knowledge.

What About Inflation?

The last period of high inflation experienced in the US or Europe was during the 1980s—before many millennials were born.  As inflation rises, do investors know the impact that has on not only the purchasing power of goods and services but also on investments such as equities and fixed income?

How Can Investment Professionals Help?

Sure, meme stocks, NFTs, and crypto are topics du jour, and they can have a place in a diversified portfolio. But before investors begin to look at alternative investments, a solid investment foundation is essential.

With 35% of Americans paying only the minimum on their credit card bills, 46% lacking savings for a rainy day, and 19% spending more than they earn, financial literacy is an issue the industry needs to tackle.

Investment professionals can begin with the building blocks of knowledge to enhance clients’ financial prowess by offering them clear, concise, and consistent investment materials. At Copylab, we specialize in helping asset managers create original and engaging content. Get in touch to find out more.