Thomas J Wolfe Comment On Special Notice – 6/30/21
1) What is the single most neglected area in the field of investor education? How might this area be developed? ANSWER: While the barrier of entry to investment markets is lower than ever with online low cost trading platforms, etc. - the technical knowledge required to make informed corporate investment decisions, creates a huge barrier to the average investor. A single most neglected area is difficult to pinpoint. Beyond the most high-level general information like stock price, market cap, and the latest PR releases or media headline to capture some incomplete short-term sentiment, the rest is too abstract and wide-reaching to comprehend completely (unless you count a google search as decision-making level comprehension) without a degree in Accounting, or some type of Corporate Finance professional training. Apart from the complexity, it’s nearly impossible for the average investor to find objectively true information. Without access to expensive lawyers, most investors are left with Facebook Groups and other public forums to learn investing fundamentals (E.g. types of securities, how companies report financials with corresponding forms, legal restrictions, etc.). Accounting and Finance professionals, on the other hand, lack access to meaningful understanding of more practical “lower level” business or deal-making knowledge only gained through “on the ground” experience. Key variables to evaluate like company pitches, go-to-market plans, scalability, technology decisions, evaluating talent, market fit, specialization - are often too “low level” for technically sound Accounting and Finance professionals to comprehend. There are very few tools existing that break down the corporate jargon enough to make it accessible. One tool that has personally allowed me to develop my financial investment knowledge is called Leyline.io. The modules are simple enough for me to understand as someone without a legal or financial background, and short enough to fit into my schedule (each module was no longer than 1 hour each), as someone who invests “on the side”. Leyline is the only tool I have seen that also covers the “lower level” practical business side too, like how to evaluate a company pitch deck - as well as the retrospective investment deal tracking seen in the mainstream online trading platforms. -------- 2) Which methods of educating investors have worked best to increase investor knowledge among self-directed retail investors? Please describe the modes and channels used to reach people and the demographic characteristics of the target audience for such efforts. What should be FINRA’s role with regard to educating self-directed investors? ANSWER: Because of the lack of practical, usable tools available to the average investor - I believe most average investors use Facebook Groups and other public forums like Yahoo! Finance groups, to source knowledge about certain target companies or sectors. The target audience for such methods are people who don’t have access to private investment advisory firms, and those without Financial and Corporate Finance training. Demographics may be: Ages 25-50, working people. I believe FINRA can play a role through a marketplace or other means of exposing innovative tools which make investing more practical for self-directed investors. ----- 4) What types of effective educational interventions have the highest potential to influence the behavior of investors, particularly newer investors? What are the costs of implementing such interventions? ANSWER: New investors and younger investors in particular, are more likely to adapt technological tools (as proven by adoption of online trading platforms). Costs may include development, marketing, and support. ------ 5) What metrics do you use to track the results of educational interventions? To what extent do these results change over time? ANSWER: The extent of participation in the investment markets (are they comfortable enough with their knowledge to actually make decisions?). The total $ amount invested over time. Profit / loss over time. The results should change significantly as the investor learns and adjusts while growing investment knowledge. ------ 6) What experience and evidence of effectiveness can you share regarding the integration of investor education into other types of service delivery (such as workforce development, general financial planning or client cultivation)? ANSWER: I have experienced investor integration through my career as a sales executive. Our company considered providing services in exchange for equity shares. Being concerned about the return on investment (directly related to my compensation), I needed to understand the growth potential of the business, and potential exit considerations. This included recent M & A deals in the industry, and what various types of investors care about when evaluating that particular product (including venture capital and institutional investors). ---- 7) What lessons have been learned from qualitative or quantitative study of target audiences, input from behavioral science professionals, data analytics or other inputs regarding effective ways to educate investors generally and newer investors specifically? ANSWER: I learned that using modern open source algorithms can be an accessible way to perform qualitative studies, and considerations for evaluating future performance - by using actual historical data, even real-time data, which is relatively accessible through public APIs. I believe newer investors can learn relatively quickly by plugging historical data into machine learning algorithms - not with aims to make decisions (which requires much more complete analysis, and financial / legal knowledge) but to learn. ---- 10) How might FINRA and the FINRA Foundation best serve the field of investor education? ANSWER: I believe FINRA can help by doing anything to support tools or other means of providing specific financial knowledge (not just general information) average investors need. The barrier to self-directed investors needs to be removed, as the corporate investment markets (especially private markets) are currently limited to the ultra wealthy, who can access the technical financial knowledge through personal connections, or by paying top lawyers or investment consulting advisors. Facebook Groups and google searches shouldn’t be the most accessible and reliable source of information for the average investor. Our country is filled with intelligent business professionals who have capital to invest, if they were empowered by the same technical knowledge used by the ultra wealthy.