Behaviourally Informed Policies – CVM Financial Education and Investor Behavior Conference Rio de Janeiro - 07/12/2015
SECURITIES REGULATION OBJECTIVES* AND INVESTOR PROTECTION** Ensuring that The markets are reduction fair, efficient The protection of investors of systemic and risk transparent Regulation Supervision Education** Behaviourally Informed Public Policies and Interventions *Objectives and Principles of Securities Regulation. IOSCO. **Investor Education in Canada: Towards A Better Framework. Caroline Cakebread.
LEGAL MANDATE Investor protection Protect investors against (i) irregular issuance of securities, (ii) illegal acts of administrators, (iii) insider traders Prevent or discourage modalities of fraud or manipulation Ensure fair trade practices and a proper disclosure Supervision and enforcement Permanent oversight of activities and services in the market place Investigative proceedings and imposition of penalties Promote market development Balance between market initiatives and investor protection Foster the formation of savings through securities markets A consistent financial education policy
INVESTOR AND FINANCIAL EDUCATION Objectives: Raise population awareness about long-term savings and investment opportunities, as well as its risks and advantages Sustainable expansion of market boundaries Dissemination of a long-term investment culture Point of attention: Increase of life expectancy requires profound changes in population habits concerning savings and investments Lack of a long-term savings culture may trigger a high social risk Need to properly comprehend investors ’ attitudes and behaviours Key decision following the 1 st edition of Annual International Conference of Investor Education and Financial Behaviour, in Rio (2013) Set up of a Behavioural Sciences Advisory Panel – NEC
Antecedents > Schools FE Evaluation Dimensions: Cognitive, Attitudinal and Behavioral Financial Literacy Test > financial proficiency scale. • Behavioral Questionnaire: to measure actual financial behaviors and • future financial attitudes and behaviors (intention to save) > 2 scales: (1) Autonomy scale for financial matters (tridimensional)**: • Reflexive Autonomy • “Think before acting” Emotional Autonomy • Autonomy in the face of others • Ability to make decisions independently Functional Autonomy and to follow through on these decisions with actions *APPLICATION OF THE CAED AUTONOMY SCALE TO ASSESS THE IMPACT OF FINANCIAL EDUCATION . Micarello, Hilda; Melo, Manuel Palacios, Burgos, Marcelo B. **NOOM, M. J., Dekovic, M., y Meeus, W. (2001). Conceptual analysis and Measurement of Adolescent Autonomy. Journal of Youth and Adolescence, 30, 5, 577-595.
Impact Evaluation Dimensions: Cognitive, Attitudinal and Behavioral Behavioral Questionnaire (cont.): (2) Intention to save: theoretical model > Theory of Planned Behavior (TPB). • TPB was i ntroduced in 1967 (Theory of Reasoned Behavior - TRB), motivated by the fact the then existing attitude theories could not predict behavior . Objective: PREDICT and UNDERSTAND human behavior . Subject areas: weight loss, alcoholism, consumer behavior, voting, financial services etc. Combines several cognitive predictor variables. • Attitudes towards • “In my opinion, saving money is future behavior …” Subjective norms • “My family/friends has the Intention Behavior and expectations habit of saving…” Perception of controlling one`s • “I believe I can save …” behavior *Predicting and Changing Behavior – The reasoned action approach. Fishbein, M.; Ajzen, I. (2010)
RESULTS The impact of the pilot project on student’s financial knowledge was statistically significant. Significant increases on financial autonomy scores and intention to save were found. Students improved their savings and spending behaviors (making a list of expenses, % of income saved etc.). The FE in schools program has the potential to increase national saving rates.
Building the 2023 CVM: 2023
BEHAVIOURAL SCIENCES ADVISORY PANEL - NEC Interdisciplinary, independent advisory committee created in early 2014 Economic, social, neuroscience, cognitive psychology experts (professors and senior researchers), working on a voluntary basis NEC aims to help CVM to apply behavioural economic insights to improve the effectiveness of educational projects and public policies Main attributions: Review and endorse CVM projects Advise CVM on scientific matters Provide guidance to the CVM ’ s Office of Investor Protection and Assistance (SOI) In order to support NEC activities, the Board of Commissioners set up a Behavioural Sciences Unit (COP) at the Office of Investor Protection and Assistance.
INVESTOR PROTECTION AND EDUCATION SOI Educational Center** Office of Investor Protection and Assistance ** To be implemented in 2016 GOIs COE COP Investor Financial Education Behavioural Sciences Unit Assistance Units Unit Provide Financial education * Implemented in 2014 guidance to investors and projects and programs answer to consultations and complaints SOI – Superintendência de Proteção e Orientação aos Investidores GOI – Gerência de Orientação aos Investidores COE – Coordenação de Educação Financeira COP – Coordenação de Estudos Comportamentais e Pesquisa
BEHAVIOURAL SCIENCES UNIT - COP Use of Publication Demand Planning Execution findings / Disclosure Definition of Draft of project, Mostly through Educational Annual International scope, objectives, with technical agreements, programs Conference target audience support of NEC, partnerships if necessary Rule-making (i.e., Blog (Penso, Logo crowdfunding Invisto?) research) Facebook profile Budget constraint Optimization of available resources, tools and data Simple, bold and efficient measures
BEHAVIOURAL SCIENCES UNIT - COP Evolving into a full scale “ Nudge Unit ” , using cognitive insights on behalf of investors Objectives : Comprehend investors ’ decision-making process Develop methodologies and proceedings to estimulate formation of savings and its investment in securities Evaluate the impact of educational, guidance and assistance actions Subsidize financial education programs and rule-making process Methodologies being considered: Investors surveys Small-scale tests Randomized controlled trials Adaptation of successful initiatives in other markets to Brazilian market characteristics Use of behavioural insights
2015 C OMPLETED PROJECTS TOP Programme Crowdfunding Survey Publication
TOP PROGRAMME About TOP Programme: Qualification program (in its 16 th edition – since 2006) focused on university professors who teach financial market-related subjects Taught by representatives from the CVM, ANBIMA, BM&FBOVESPA, CETIP and other SRO´s embracing topics like: Capital Markets regulation, stock market functioning, clearing, listing segments, market intermediaries, IPO ’ s, follow-ons, tender offers/takeovers, stock analysis, governance, derivatives, fixed- income instruments, mutual funds etc. O BJECTIVES Evaluate possible changes in the risk profile and perception of investment decisions of the group of university professors who attended the TOP Programme Assess the efficacy of TOP Programme in the creation of knowledge Observe eventual relations between personality traits and risk/investment profiles M ETHODOLOGY Quantitative survey with the 39 university professors who attended the last TOP Programme edition , before, during and after the Five-Day course (July, 2015) Target audience of knowledge multipliers Study carried out at very low cost , using an existing CVM educational program
TOP PROGRAMME I NVESTMENT PERCEPTION (F INDINGS ) Participants were asked, before and after the Programme, about their impressions on each investment product (i.e., safety, risk-return, liquidity) Main perception indicates that there was a preference for saving accounts due to (i) low-risk, (ii) simplicity to understand and to invest in, and (iii) low initial investment amount However, the Programme achieved some positive results, clarifying aspects of securities: Consider stocks as a Consider REIT’s as Consider fixed income mutual funds as highly highly liquid easily understood liquid investments investment investments 10 18 22 15 12 3 Before After Before After Before After
TOP PROGRAMME S ELF - REPORTED KNOWLEDGE (F INDINGS ) The Programme improved the overall self-reported knowledge of investment products, especially securities Overall averages Before = 3,37 After = 3,67
TOP PROGRAMME L EVEL OF INTEREST IN SECURITIES (F INDINGS ) The Programme also generated more interest in securities (i.e., mutual funds, derivatives, REIT), reducing the level of interest in simple savings account: 27,4% If you had R$ 1 million, how would you distribute this amount among 26,6% the investment products? (average of all respondents) Before 17,0% 16,1% After 10,8% 10,4% 10,3% 8,7% 7,8% 8,0% 7,0% 6,9% 6,5% 5,0% 4,3% 4,2% 4,0% 3,4% 3,3% 3,2% 2,3% 1,5% 1,4% 1,4% 1,0% 0,7% 0,3% 0,3% 0,1% 0,0%
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