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Remarks at Joint News Conference on National Financial Capability Study

Chair Mary Jo White

U.S. Securities and Exchange Commission

Washington, D.C.

May 29, 2013

The FINRA Investor Education Foundation’s 2012 National Financial Capability Study provides a wealth of data regarding the financial knowledge, attitudes, and behaviors of Americans. It gives us a great sense of what Americans know, what they feel, and how they act when making investments and other financial decisions.

As Chair of the agency whose core mission is protecting investors and promoting capital formation, the results of this study remind us that we can do more to increase the financial capability of all Americans.

People who have limited knowledge of the financial system are less likely to enter the financial markets, and are unlikely to benefit from America’s economic growth. This reality makes it more difficult for entrepreneurs and dynamic companies to access the capital they need to thrive and create jobs.

Many Americans may needlessly struggle in retirement or miss the chance to purchase a home or graduate from college debt-free, simply because they were never exposed to the basics of finance. Others may suffer disproportionate losses when markets tumble because they failed to diversify their holdings, or see their net worth decline sharply because they engaged in high-risk investing strategies.

At the SEC, we passionately believe in the importance of improving Americans’ financial capability so that they can optimize the chance of reaching their personal savings and investing goals. For this to happen, more Americans should learn about the "magic" of compound interest, the virtue of diversification, and the value of planning for retirement.

Unfortunately, not all investors do what they should to be as informed as possible. For instance, few investors pick up the phone or go online to do a simple background check. It seems that we are almost more likely to go on Angie’s List to check out our plumber than we are to go onto the SEC’s website to investigate the background of an individual to whom we’re about to entrust our life savings. There is obviously something wrong with this picture.

There is some good news in the study: individuals owning stocks, bonds, mutual funds, or other securities (outside of retirement accounts) scored better than non-investors on the study’s financial literacy quiz.

On the other hand, the study found that even though they did better than non-investors, most investors still are not aware of the fundamental that market interest rates and bond prices move in opposite directions. In fact, only 43 percent of investors and 22 percent of non-investors knew that bond prices typically fall when interest rates rise. This kind of clear gap in investor knowledge is why the SEC’s Office of Investor Education and Advocacy recently created a series of investor bulletins on investing in bonds.

The study also indicates that despite a troubling lack of basic knowledge, Americans are now willing to take on more risk than they were in 2009. Higher risk investments can be an important part of an investor’s portfolio, but willingness to take on risk without a clear understanding of the potential consequences can lead to disastrous results.

Empowering Americans with the knowledge and the tools that they need to make sound financial decisions can also produce significant economic and social benefits. Individuals with both the opportunity and the ability to invest infuse the markets with vital capital resources that help both businesses and the economy grow stronger. These investments ensure that new and creative technologies have a chance to develop and flourish.

That is why our investor education and outreach efforts are so important.

At the SEC, our Office of Investor Education and Advocacy is creating a nationwide program focused on teaching individuals how to make better decisions about investing in our capital markets.

And, importantly, it also teaches them how to spot the securities frauds that we work so hard to uncover, investigate and punish.

In addition to educating investors at in-person events, our investor education office staff assists tens of thousands of investors every year with questions and complaints, produces a wide variety of print publications, issues investor alerts and bulletins on topical subjects, and even tweets.

We also created a website — — that is focused exclusively on investor education.

On, you can research public companies and other filers using our EDGAR database — you can find, for example, annual corporate filings, mutual fund prospectuses, and information on variable insurance products.

Less experienced investors can find out how to read these filings, using materials that explain the disclosures in more detail. Investors also can conduct those background checks on financial professionals with whom they’re considering working. We provide information aimed at investors with particular investment needs such as members of the military, students, teachers, and retirees.

While we don’t — and can’t — provide investment advice, we do offer analyses of different types of investments — the benefits and the risks of investment vehicles including stocks, bonds, mutual funds and REITs — all on

Informed investors are a critical pillar of our financial system and the economy as a whole. They are more likely to create wealth for themselves and their families — providing for themselves and for the next generation. And informed investors help make available the capital that fuels growth and contributes to a healthy and dynamic economy.

So I thank the FINRA Investor Education Foundation for its excellent and very important work.

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