Financial regulators, public authorities and other organisations are increasingly using behavioural insights to educate investors to make more informed financial decisions, according to a joint report by IOSCO and OECD.
The accelerated growth of new and innovative technologies, an excessive amount of available financial information, and increasingly sophisticated financial products make it difficult for retail investors to navigate today's complex financial markets.
Many organisations offer education and financial literacy programmes, but investors often fail to make rational financial choices because of their own cognitive, social and psychological biases -- all of which can act as barriers to sound financial decision making.
These findings were made by International Organisation of Securities Commissions (IOSCO) and Organisation for Economic Co-operation and Development (OECD) report.
The report examined how findings from behavioural sciences can be used to develop investor education and financial literacy initiatives that may be more effective than traditional programmes, largely by mitigating the effects of behavioural biases.
Behavioural sciences focus on the way individuals think and behave, based on empirical evidence from a range of social sciences, such as economics, psychology, and social marketing, as well as from other fields like neuroscience.
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The report also provides various approaches for regulators, policy-makers, and practitioners to choose from when considering whether and how to apply behavioural insights.
IOSCO is the leading international policy forum for securities watchdog and is recognised as the global standard setter for securities regulations.
Also, OECD is a forum in which governments compare and exchange policy experiences, identify good practices in light of emerging challenges, and promote decisions and recommendations to produce better policies for better lives.