EFAMA calls for greater financial literacy

de_franssuDe Franssu feels industry would need the support of national governments or Europe to introduce educational programmes... Industry leaders in European asset management are to set out how they think financial literacy can be improved. As Funds Europe went to press, Jean-Baptiste de Franssu, CEO of Invesco Europe, said a report would be published shortly by the European Fund and Asset Management Association (Efama).

Although other details were not forthcoming, de Franssu, who is president of Efama, feels the industry would need the support of national governments or Europe to introduce educational programmes rather than relying purely on the asset management industry’s own efforts (see interview, p34).

The creation of an educational foundation was the first recommendation given in a think tank report led by Invesco last year about the future of Ucits funds.

Calls for more financial literacy have been heard at least twice recently. A lack of member understanding of defined contribution (DC) pension schemes, along with poor investment returns, are the two most important challenges facing DC plans, according to research by Mercer, a pension fund consultancy, published this month.

Brian Henderson, senior investment consultant and a specialist in DC pensions at Mercer, said: “Beyond the effect of the credit crisis, research suggests that DC underperforms DB [defined benefit] for a number of reasons. A clear problem is members’ lack of financial knowledge and aversion to risk – leading to poor investment performance over the longer term.”

Meanwhile, a recent survey found that the best way to protect investors from rogue Ucits hedge funds would be through education, at least according to 44% of respondents canvassed by Alternative Decisions, a marketing firm.

In its Better Ucits Hedge Funds report, which surveyed distributors and other participants, the firms said the technical and distribution challenges of Ucits hedge funds warrant fund managers adopting new marketing techniques and understanding their education responsibilities.

A model that de Franssu is interested in is that of the Investment Company Institute, a national association of US investment companies, which has pioneered financial education through a dedicated foundation since 1989. But a key ingredient of its success is that it partners with government agencies and other nonprofit organisations to deliver investment education programmes to a variety of audiences.

The foundation has worked with the US Labor Department to deliver retirements savings summits and with the Securities and Exchange Commission (SEC) on savings and investment campaigns. Also, for several years when the SEC held ‘Investors Town Meetings’, the foundation sponsored a seminar on understanding mutual funds.

Other activities have included partnering with the Sifma Foundation to incorporate mutual funds into the Stock Market Game – a market simulation game aimed at students.

The ICI experience shows that partnerships are the best way to move the issue of financial literacy forward – and government support is critical. ©2010 funds europe

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