Figuring out how to get people to make better financial decisions is increasingly coming under scrutiny by regulators and public authorities, with behavioural insights paving the way.
A recent report published by the International Organisation of Securities Commissions (IOSCO) and the Organisation for Economic Co-operation and Development’s International Network on Financial Education (OECD/INFE) examines new technology, the masses of information available to the public, and sophisticated financial products in terms of how we might navigate these for better financial decisions.
The report explains that, while many organisations offer educational programs, investors often don't make rational financial choices because the way humans are made makes this incredibly difficult at the best of times. Our biases - cognitive, social, psychological - can act as barriers to good financial decisions.
The report - The Application of Behavioural Insights to Financial Literacy and Investor Education Programmes and Initiatives - delves into behavioural sciences to develop more effective investor education and financial literacy programs. These programs are set to try to mitigate our behavioural biases.
The data on behavioural sciences includes empirical evidence from economics, psychology, social marketing and neuroscience, focussing on how we think and act. The researchers uses strategies found in literature that utilise behavioural insights to break down barriers to sound financial decision-making.
The report offers regulators and policy-makers some practical advice on how to apply these insights, for example, understanding a problem fully before providing a solution; remember to include contextual elements when people make decisions; conduct small-scale field tests before putting a larger initiative out into the world; and share knowledge between organisations.