Remarks at the NASD Foundation-Tuck School of Business Symposium on Marketing Investor Education

Mary L. Schapiro

Chairman and CEO, NASD

Hanover, New Hampshire
May 7, 2007

Thank you, Michael, for the kind introduction. It's a real pleasure to be here with all of you this evening.

First, let me thank Dean Hansen. The work Tuck does is so important to America's intellectual and economic vitality, and I am thrilled that our two organizations have teamed up on an issue as important as investor education. Without your commitment, and Tuck's participation, this symposium would not have been possible.

I'd also like to recognize our hard-working faculty leaders, Professors Punam Keller and Annamaria Lusardi, as well as Clark Callahan, executive director of Tuck Executive Education. Your work is very much appreciated.

Two of the NASD Foundation's Board members are on hand for the symposium. Both Bill Anthes and Elisse Walter dedicate their wisdom and expertise to ensuring that the Foundation achieves its mission. We are truly grateful for the leadership that they and the other Board members provide.

So, besides the good food and good company, what brought us all here tonight?

For me, it's the young couple just beginning to plan their financial future, but who don't know if they are making the right long-term decisions. It's also the employee starting her first full-time job after graduation. She has the advantage of time and the opportunity to put herself on a strong financial footing for the rest of her life if she makes the right choices now.

And it's the widower who worries whether he will have enough savings for his remaining years. He's the one who answers a call from a stranger promising to sell him financial security, but finds out too late that the stranger is a con artist, eager to steal his life savings.

We all know them. They are our parents and grandparents, neighbors and friends. They work hard and try to save. But they don't have all the answers and many times don't take the time to learn.

That's why this symposium is so important. Our task is not an easy one. We're up against some mighty foes: namely apathy, avoidance, ignorance and fear.

Despite this unfortunate reality, it's our responsibility to make financial education more interesting, more accessible and more effective. To make that happen we need to be part-time psychologists, part-time teachers and full-time marketers.

Tonight I'll discuss some of the things we are doing right and some of things we can do better.

I wish I could tell you there is one magic solution to make individuals take charge of their own financial well-being, but there isn't.

Getting people to save smart, and invest in ways that create wealth, requires a commitment on many fronts including listening very carefully to our audiences, understanding investor behavior, and building stronger partnerships.

Personally, I believe our goal should be nothing less than to provide every working American with the best messages, the best tools and the best tactics to help them build and maintain a secure financial future for themselves and their families.

It's not a task that can be completed by the end of the quarter or within the fiscal year — it's never-ending and always changing.

First and foremost, it requires sustained, strategic outreach. Marketers talk about the Rule of Repetition. It really comes down to this—people don't take action the first time they hear something. They need to hear it over and over. It takes five exposures to a message for someone to take action with even a well-known product, service or cause. Imagine how diligent we need to be with a concept like retirement savings or staying out of debt.

It will require ever-increasing exposure directed at those who are not focused on saving and investing, planning for retirement or protecting themselves from financial fraud.

An excellent example is the Better Business Bureau's "Get More Money Now" campaign, an NASD Foundation-supported project. The program's aim is to develop and disseminate resources to individuals who might not be inclined to seek investment advice.

It's a national campaign, with its own Web site, that provides easy-to-understand, simple tools in English and Spanish that make one point very clear: if you want more money, spend less and invest more. It also focuses on the fundamentals, such as establishing financial goals, how to handle credit and choosing basic investments.

And that's where we need to start - focusing on the fundamentals and making information easy to understand and relevant. We know all too well many people simply end up avoiding the issue of dealing with their own financial future. Some are too busy, others are too intimidated and many believe the future will take care of itself.

Albert Einstein once said, "I never think of the future - it comes soon enough." Today, unfortunately, too many Americans share that view when it comes to their own finances.

Now, I'm not sure what kind of financial planner Einstein was, but he's right about the future. The future will certainly come. The only question is how prepared will Americans be?

That's why our marketing and distribution efforts are so important. We need to help people stop avoiding the issue.

For this reason, we must be very proactive in our marketing efforts. Simply building a website, for example, and expecting visitors to appear won't achieve the goal. We have to both open the doors to financial health and lead people through them.

How do we do this?

Well, I think you start with a well-defined target audience. Then you do your homework about how best to meet that audience's financial needs.

This was the process we followed when we launched the NASD Foundation Military Financial Education Project. The outreach has allowed us to bring financial education directly to service-members, their spouses and families at home and abroad, and even aboard ship.

Before we rolled out a message strategy or any products or services, we talked to service-members and their families. We found out, for instance, that we needed to include information on the impact deployments can have on finances. We also found out we needed to talk about payday lending, which is a far bigger problem with military personnel than their civilian counterparts.

Then with the help of Harris Interactive, we tested our messages and content using focus groups.

The project uses a multifaceted approach to reaching service-members, and benefits from a variety of partners, including the SEC and other governmental bodies like DoD and the Federal Reserve, the Consumer Federation of America, AFCPE, the InCharge Education Foundation, as well as our ongoing partner, the National Endowment for Financial Education — all of which are represented here at this symposium.

On-base, off-base and via the Web, these partners help motivate families to take charge of their financial future, provide financial education programs tailored to the needs of service-members, and offer tools for their use.

But even when we reach targeted groups we run into another problem: I know you'll find this hard to believe, but some will actually find the topic of personal finance uninteresting or even irrelevant.

Again, there's no single solution—but creativity is key. It is imperative that we craft messages and identify strategies that will engage people and show them that investor education is relevant and important no matter which stage of life they are in.

We need to market our investor education programs in ways that are fun and entertaining. Investor education doesn't need to be dull, nor should you feel that same sense of dread as when you were a child and it was time to take your medicine.

But just like medicine, when it comes to financial education, the sooner you get it, the better off you will be.

That's why the NASD Foundation is sponsoring the Kidz Online project, "Mastering Money." This program is creating an interactive financial literacy web show composed of several educational episodes aimed at high school students.

Still in development, the videos will teach teens and young adults how to manage their money and how to invest, and will highlight advice from successful individuals who started investing when they were young.

Another great program is the InCharge Education Foundation's effort to create e-learning games for military service-members.

These approaches are critical to reaching and engaging target audiences. But we need to keep digging deeper.

We need to learn more about our audiences, including who and what influences them, how they shape their priorities, how they like to learn and when, and who they listen to and trust.

We learned a great deal about investor psychology from the work of Melodye Kleinman and her colleagues on investment fraud among seniors as part of our grant to WISE Senior Services. It helped us understand, at a very deep level, how a particular audience interprets and responds to messages and influence tactics.

We found that investment victims are more likely to listen to sale pitches and more likely to rely on their own experience and knowledge when making investment decisions.

We also found that investment victims were more optimistic about the future than non-victims. This represents a "wishful thinking" mentality that can be easily manipulated by a criminal.

This insight into investors' thinking is invaluable. We need to leverage everything we know about human behavior. Advances in behavioral finance and behavioral psychology hold great potential for furthering our cause.

One example is retirement. It is an alarming fact that half of all workers nearing retirement—people between the ages of 55 and 59—have $15,000 or less in a 401(k) type of plan or IRA.

According to the Commission on the Regulation of Capital Markets for the 21st Century, only about 75 percent of employees who are eligible to participate in 401(k) plans actually do so.

Why? Inertia appears to be the primary reason. It's very difficult to change people's behavior.

So NASD is working with AARP and The Retirement Security Project to encourage medium-sized employers to adopt automatic 401(k) features.

We've already published a brochure that highlights key automatic 401(k) features and identifies the benefits of these features to both employers and employees. The most important benefit is that more employees contribute. When we started our own automatic enrollment process in 1999 at NASD, we had a 78% participation rate. Today, our participation rate is 97%.

The more we understand about human psychology—and trust the research— the better we will be able to create tools, resources, and proactive programs that meet the needs of the public.

But if we want to further strengthen our ability to reach out, identify and engage the public we must build even stronger bonds among all of us here in this room. We need to initiate more partnerships among ourselves and with other organizations that might not have a direct role in financial education.

Such partnerships can help us reach new audiences or existing audiences more effectively. They can add brand awareness to our marketing efforts and compound the reach of our messages.

Recently we launched "Smart Investing @ your library," a partnership between the American Library Association and the NASD Foundation. This program will allow select public libraries to compete for grants to help bring high-quality, unbiased investor education to library patrons in communities across the country.

Another group spearheading many collaborative efforts is the National Endowment for Financial Education. They have worked tirelessly to partner with other organizations ranging from Jewish Women International to the National Council of La Raza.

But people, of course, are not all the same, so segmenting the market is crucial.

That means listening to what people have to say, appreciating the context in which they live their lives, assessing their needs and working together to help meet those goals.

In a world that is saturated with marketing noise and filled with temptations that are contrary to long-term financial health, we need to reach young people with messages about issues they might not yet fully understand or appreciate.

That will require creative initiatives that will make us all trend watchers, if not trendsetters.

This is particularly important with our younger audiences. If my daughters are any gauge, they're fearless about using the latest technology and already quite message-savvy consumers and information gatherers. Our challenge will be to remain vigilant and guard against allowing our communications vehicles and distribution mechanisms from becoming obsolete overnight.
The youth market is certainly a challenging one, but it is a critical segment of our society that we cannot ignore. So we especially appreciate all of you who are committed to working with students and recent graduates when time is still very much on their side.

Whether it's Baruch College's Young Investor Online Guide, the JumpStart Coalition's program to encourage financial curriculum in the K-12 educational experience, or the National Council on Economic Education's Financial Fitness for Life program, these tools help students understand the real world of earning and spending an income, saving, using credit and managing money.

And while reaching youth is important, we must reach older Americans, too. I don't need to rehearse the demographic data: America's getting older and staying that way for a longer period of time.

Investor education for those in retirement can be complex, but our messaging needs to be just the opposite. It should also take into account the role of intermediaries and caregivers, and recognize that retirement age now extends across different generations and can be segmented into more than one life-stage.

For older investors, the NASD Foundation has launched a pilot program focused on research, partnerships and outreach. We plan to test messages that will resonate with seniors and engage fraud fighters at the grassroots level. A key objective is to shape our public awareness campaigns so older investors will be able to distinguish legitimate professionals from the con artists.

In addition, we participated last year in the SEC's valuable Senior's Summit to examine how regulators and others can better coordinate efforts to protect older Americans from investment fraud and abusive sales practices.

But reaching the young and the old is only the beginning. We also need to reach groups that may have been overlooked in the past.

A wonderful example is the work of First Nations Development Institute, which has developed a Native American investor education curriculum. This curriculum, titled Building Native Communities: Investing for the Future, is designed to teach the basics of investing to an audience with a unique life experience, and is coupled with outreach efforts to ensure effective implementation.

The point is: we need to reach everybody, and to do so in ways that address their life experiences.

Those of you serving in government have an especially challenging task. There are strong pressures on you to reach all audiences in equal measure.

Whether you're with the Federal Reserve Board, a state treasurer's office, the Cooperative Extension Service, or other state or federal agency, you have the enormous challenge of marketing and distributing investor education to all interested citizens, not to mention all citizens who aren't so interested.

The fact is, government has a unique capacity to raise awareness about an issue and attract public attention. That ability needs to be exploited fully.

That's a tall order, and I'm willing to bet you'd like partners in the private sector to help achieve that task. Well, we need your help, too.

Collectively - government, non-profit, private sector - we need to establish and maintain a sense of urgency among the public.

As a group, our outreach efforts need to fuel public concern about the issues that fall under the broad umbrella of investor education. We need to inform target audiences about the interventions, strategies, resources, and everything else you're doing to make a difference in their lives and their financial well-being.

Professor Keller has prepared a number of thoughtful assignments and exercises for this symposium. If I may, I would like to add one more. During the next couple of days as you work together on challenging issues, I ask you to think carefully about a question I know has been on the mind of Bill Anthes, who always brings new ideas to the deliberations of the Foundations Board of Directors.

The question is this: What is the single most important action that we — the individuals and organizations represented at this symposium — should collectively take to ensure broad, sustained and effective engagement with Americans? I believe there's a place on your symposium feedback forms to share your thoughts about this.

Before I close and turn things over to Professor Keller, let me give you a quick update.

In the coming month or so, NASD and, consequently, the NASD Foundation, will soon have a new name and a new identity as a result of our merger with NYSE Regulation.

Rebranding an entire organization is never easy. Talk about marketing challenges! But I choose to look at this consolidation as another opportunity to educate the public on who we are, what we do, and why.

Because as more people realize what we do, they will look at us, as well as all of our partners here in this room, as a trusted resource they can turn to as they navigate their own personal financial road ahead.

And as they embark on that journey, we can remind them of an old saying about money: "The mint makes it first, it's up to you to make it last." And the best way to make Americans' money last longer is to make investor education in America more interesting, more accessible and more effective.

So keep up the good work — all of you are doing a tremendous job. Thank you for listening and thanks to Tuck and all of your organizations for making tonight possible. I hope you enjoy the symposium and return home energized and enlightened.