Investor education focuses on issues relevant to the education and information needs of individuals who participate, or are considering participating, in the financial markets. In addition, investor education can also help investors better assess the relevance and suitability of investment advice.
Objectives of Investor Education Program
- Enable investors to understand and manage risk
- Expanding outreach of financial services and products
- Participation in financial markets with esteemed confidence
- Reduce investors vulnerability to fraudulent schemes
- Informed financial and retirement planning
- Protecting investors by educating them on their rights
Importance of Investor Education
Regulators across the globe have adopted investor education as a key strategy to enhance investor protection, promote investor confidence and foster investor engagement in financial planning and decision-making. The need for investor education came under the spot light after global financial crisis in 2008 as investors were exposed to complex products posing multiple risks.
A cross jurisdiction study was conducted by the SECP in 2012 to see standing of Pakistan vis-a-vis comparable countries. The study concluded that Pakistan lagged in a number of indicators clearly pointing to the fact that greater emphasis needs to be put on financial literacy, saving and investment culture, and market outreach.
Objectives of Investor Education Program
Pakistan's capital market, non-bank financial and insurance sectors have immense potential; however, statistics clearly indicate low level of investor penetration due to lack of investor confidence and awareness about non-banking financial sector.
Main theme of the Investor Education Program will be financial planning, budgeting, market setup and operations, product features and risks, rights and obligations of user and providers of financial products, and dispute resolution. It is expected that the program, apart from creating awareness, would help the investors to take prudent measures before entering into a contractual agreement with a financial services provider, educate investors on strategies to mitigate risks associated with various investment products, engender investor confidence, and lead to an effective investor protection regime.
The program covers capital market, insurance sector, and NBFC sector including the investment banks, asset management companies, unit trusts and private pension. In addition to these regulated sectors, information would be provided on company registration and entrepreneurship.
Under the program, education would be imparted through digital means – web portal, SMS and social media – and physical interaction via seminars and investor days. Web portal is envisioned to play a pivotal role in the overall IEP as it would act as a single point learning resource for existing and potential users of financial products offered in capital market, mutual fund, pension fund and insurance industry and company registration.
Following are the primary objectives of a well-structured and efficiently implemented Investor Education Program:
- Protecting investors by educating them on their rights and responsibilities
- Empowering with knowledge to evaluate different financial products and make informed decisions
- Enable investors to understand and manage risk
- Reduce investors vulnerability to fraudulent schemes
- Expanding outreach of financial services and products
- Informed financial and retirement planning
- Participation in financial markets with esteemed confidence
Modes of Education
Investor Web portal is envisioned to play a pivotal role in the overall IEP as it would act as a single point learning resource for existing and potential users of financial products offered in capital market, mutual fund, pension fund, insurance industry and company registration.
Apart from that, education would be imparted through:
- Media (electronic, print and social)
- Educational Material in the form of guides, publications, booklets and articles, etc.
- Seminars
Details of Seminar
The seminars will be conducted in all 4 provinces of Pakistan to expand outreach of the program as far as possible. We have allocated the three stock exchanges (Karachi, Lahore and Islamabad) invarious geographical areasof Pakistan where they will be responsible for conducting seminars. The three stock exchanges will only be responsible for those areas which are allotted to them, while all other stakeholders will provide assistance throughout all areas. As per the program we plan on holding one seminar every week across every region which would be 3 seminars per week in total.
Material for the seminars has been drafted in accordance with 3 different difficulty levels (basic, intermediate and advanced). The level of difficulty will depend on the segment of population being targeted as well as the region in which the seminar is being conducted.
To effectively implement the program we will use a large pool of Resource Persons that will support us in conducting seminars, through acting as presenters. The Resource persons have been identified across various cities and include members or officials of all stakeholders identified above, members of various professional associations (Institute of Charted Accountants, Cost and Management Accountants, CFA Institute, etc.) and personnel from various corporates.
For adequate outreach, we have created linkages with various institutions within Pakistan to provide us with physical, financial, logistical assistance as well as human resource. The program, in its first stage is planned for 3 years, after which we will make modifications to the program based on our experience.
Segmentation
Under the program we have created three different target audiences:
University Students
The Program will target university students, with the aim to develop financial literacy for life-long saving and investing habits at an early age. The program will focus on providing an understanding over various financial products, informing students on the structure of the capital markets and how they function, specifically highlighting the role of key market players including the SECP in Pakistan.
General Investors
The segment will target individual investors such as “white collar workers” along with various participants from the corporate sector as well as business community, with a view to enhance financial capability of this target segment through educating potential and existing investors on their rights, responsibilities, risks and rewards, analysis associated with investment in the capital market, insurance and retirement planning.
Grey Investors
Various studies show that individuals who are close to the retirement age are significantly less financially educated than younger people. People at or close to the retirement ages have a life time of savings and thus are looking for suitable investments matching with their risk profile. Program activities catering this segment of population aim to increase financial capability of grey investors and provide them with various avenues of investment.
Note: For the second year we plan to introduce a 4thsegment which will target lower income individuals across Pakistan
