Investor education should promote financial literacy and behavioural change, says Australian Securities and Investments Commission (ASIC) Chairman Greg Medcraft.

Confident and informed investors are one of the three essential components of an efficient financial market, he told the International Organisation of Securities Commissions (IOSCO), of which he is also Chairman.

The other components are a robust regulatory framework and a competitive financial services industry.

“People do not naturally behave like calculators or economic robots – they behave like people,” Mr Medcraft told the organisation’s investor education conference in Toronto last week. “And people have limited time, personal quirks and are driven by emotion.

“Simply providing information, even if it improves knowledge, is unlikely to change most people’s behaviour. So we have to identify and adopt techniques that maximise the probability of behavioural change.

“We’ve found the key is to motivate people to take action, and then give them practical steps they can easily take.”

He says ASIC’s financial literacy strategy considers the issues that cause the biggest problems, groups that need most help and actions that will create broad generational improvement.

The regulator aims to catch people at “financial turning points”, such as starting their first job, getting married, buying a house or approaching retirement.

“Our research has found people are motivated to look for information when their life circumstances and goals are changing,” Mr Medcraft said.

“The best triggers for changes in behaviour are techniques that reach people at ‘teachable moments’ and focus on real goals. This is because people are most motivated to change when they have a personal goal in mind.”

Mr Medcraft outlined the tools available on ASIC’s MoneySmart website, including investor education material and its retirement planner.

“90% of our visitors say they have taken specific action with their finances as a result of visiting MoneySmart,” he said.

“Lifting financial literacy standards means people have more informed interactions with industry and fewer complaints about unmet expectations.

“Industry can play its role in promoting financial literacy by sponsoring initiatives, but also by helping their own employees manage their money, including pay, superannuation and other benefits.”