I read an important Letter to the Editor in The Charlotte Observer by Dr. Michael Sass, who is President of Catalyst Academy, a financial education non-profit. While I am very impressed with the mission of CATALYST and understand its importance, I do have an issue about one of his points in the letter. He writes: “Citizens should be investing only in financial products they fully understand…” However, in my experience, almost no average person understands much about the vehicles in which they invest.
The problem with so much focus on financial literacy (where the responsibility is on the client to understand information) is that it avoids what’s at the heart of the problem: Most financial information is written in a manner almost guaranteed to not be understood by most people who read it.
Although many people characterize this problem as one of the financial literacy, I know that having a Ph.D. did not prepare me to understand investment information. I do relatively well now because of the time and experience I have had helping clients create “understandable” content. But even I mostly shake my head when my investment firm sends information about stocks and bond, shareholder reports, or my statement (try to find those fees!).
What I’d prefer to see is a focus both on helping people understand financial information and choices, but also on pressuring financial institutions into making investment information understandable. One without the other keeps the status quo: both together can make a real difference for us all.
About the author: Deborah S. Bosley is the Owner and Principal at the Plain a Language Group. She is a board member at The Center for Plain Language.