Financial matters are essential to most people, yet they can also be exceptionally arcane, complex and not easily understood by the average person, who’s just trying to sock away some savings. As such, all these factors combined make the toil of investor education seem like a particularly Sisyphean task.

In October, securities regulators celebrated Investor Education Month by ramping up their instructional efforts with contests, games and new resources designed to focus investors’ attention on their finances. This year, iPods and Nintendo Wii video-game consoles were among the enticements that some of the securities commissions were offering.

Yet, despite it all, investors remain either woefully unprepared to take care of their investments or, at the very least, fall far short of their own best intentions.

A recent Canadian Securities Administrators survey carried out by pollster Ipsos-Reid Corp. this past summer found that when it comes to investing, many Canadians talk a good game, but their actions often don’t measure up.

“Canadians express confidence and believe that they are knowledgeable and responsible about investing,” the CSA survey report states. “Yet, their behaviour may indicate otherwise.”

For example, the survey found that 85% of Canadians believe that it is important to build up their personal savings, but only 65% have some savings or investments set aside for the future; this latter figure is down from 73% in 2006.

Moreover, Canadian investors are not doing adequate research or enough financial planning, the survey suggests. Notably, it found that only about 25% of investors say they have a written financial plan that includes clear investment goals, despite the fact that two-thirds agree that having a formal, written plan is important.

The results also reveal that less than half of the survey respondents have worked with their financial advisor, or someone in a financial services institution, to create a formal assessment of their willingness to take risk. And, among those who have assessed their risk tolerance, only half have reviewed their risk profile within the past year.

One of the CSA’s primary conclusions from all of this: “This research clearly shows Canadians are not doing all they can to make informed investment decisions.”

Closing the gap between what people know they should be doing and what they actually do is now one of the primary challenges facing investor educators. Although it may be heartening that the majority of people think that saving is important and that they should have a financial plan, those intentions are useless if they aren’t followed up with action.

One reason why there’s such a gap between people’s knowledge and their behaviour is the abstract nature of investing, suggests Tom Hamza, president of the Toronto-based Investor Education Fund, which is funded by the Ontario Securities Commission.

“The nature of financial management is such that people can avoid it. If you don’t do something that doesn’t have results until you’re 40 years out, or 25 years out, the impact doesn’t seem severe until you start really considering what that impact is,” he says. “People need to be made aware of the fact that the decisions they make today will have long-term implications.”

To do that, there needs to be a concerted outreach effort, Hamza says: “For [investors] actually to use the information [that’s available] and act appropriately requires them to be convinced that it’s worthwhile, and to be made aware of it. And I think that in the long run, it’s something that needs to go from being passive information to being something that consumers are actually looking for. It can’t just be ‘If you build it, they will come’.”

Indeed, regulators have built a variety of investor education resources over the past few years, but the big gap between knowledge and action reported in the CSA’s latest survey suggests that those efforts haven’t been entirely successful in improving outcomes for investors. And, given the long-term nature of the problem, it’s also likely to take a long time to fix.

One of the keys to getting people to change their behaviour, and to act upon what they may already know, involves timing, Hamza suggests. This means getting the right information to them at the right time — which, for many people, is at the major moments in their lives: when they are getting married, starting a family or facing darker issues, such as disease and divorce.

@page_break@Targeting investor education to reach people at these critical points in their lives is the idea behind an investor education program that Toronto-based DundeeWealth Inc. unveiled earlier this year. Launched in May, the Snapshots program provides articles and links to information on various topics — both financial and non-financial — to help people deal with these sorts of major events.

Snapshots “empowers advisors to educate their clients when [those clients] need it — and when research says they are looking for it — at certain life events,” says Terri Williams, vice president of editorial services and production with DundeeWealth and a former head of the Investor Education Fund.

“Advisors can print out these articles and hand them to clients, send clients a link to the articles or use an eNewsletter Builder we built internally to share specific stories with clients,” Williams explains, “depending on their specific needs.”

There’s also an advisor education component to Snapshots that gives advisors a list of frequently asked questions about these various “life events,” information to help advisors answer those questions and continuing education courses for advisors relating to each subject.

Since the program’s launch at the end of May, the investor education website has recorded almost 14,000 page views, Williams reports, and 700 DundeeWealth advisors have used the newsletter generator to create 1,700 newsletters, each of which can contain up to five articles.

The hope for DundeeWealth is that clients will benefit from the information that advisors pass along; that this generates greater trust among them, the firm and their advisors; and that this trust motivates clients to act — which, ultimately, will generate more business.

Although DundeeWealth has yet to quantify how effective the program has been, Williams says, advisors report anecdotally that Snapshots has helped them generate business. In one case, for example, the program helped an advisor convince a “semi-engaged” client to go ahead with a comprehensive financial plan incorporating both investments and insurance.

This sort of industry-led effort is surely welcome. Hamza says that any time these issues are discussed, it’s an opportunity for people to increase their investment knowledge — and that’s a good thing. “The industry does have a role in this,” he says, “and it makes good business sense.”

But the financial services industry’s response, in and of itself, is not likely to be the answer to the inves-tor education conundrum. For one, objectivity will always be open to question. Although the industry can be counted on to preach the virtues of saving, investing and buying insurance, it may not be as forthcoming about risks — and it cannot be expected to give proper attention to priorities that don’t lead to product sales, such as paying down debt.

Moreover, the initiatives reach only people who have already become — or are considering becoming — clients. This means that a large swath of the population won’t be touched by such efforts — namely, the 35% of Canadians that aren’t saving or investing at all, according to the CSA survey; not to mention, the 15% who don’t even consider it important to do any of these things.

Some experts believe that the effort to educate people about financial matters needs to begin much earlier in life, and that this effort must be more comprehensive.

Investor advocacy group the Canadian Foundation for Advancement of Investor Rights (a.k.a. FAIR Canada) has called on the country’s premiers and the prime minister to establish a national strategy for improving financial literacy and to devote the resources necessary to execute that strategy.

There are signs that this issue is being taken more seriously. In June, the federal Finance Department convened a task force on financial literacy headed by Sun Life Financial Inc. CEO Donald Stewart. The task force is slated to begin public consultations in the spring of 2010, with an eye to producing recommendations to the finance minister by the end of the year.

Additionally, some provinces have started to incorporate an investor-education component into their high-school curricula — an effort pioneered in British Columbia. “We are starting to find some traction in the school system,” Hamza says, adding that giving people a basic level of understanding of financial matters at that stage “is probably the most important first step.” It should then be supported, he adds, with ongoing education as people reach those major milestones in their lives.

The regulators also have made some progress toward ensuring that the investing process itself isn’t more confusing than it needs to be — starting with more useful, plain-language disclosure so that people can understand what they are buying and performance reporting that more clearly reveals how those investments are doing.

These are some of the goals of recent and ongoing regulatory initiatives, such as the long-running investment fund point-of-sale initiative, certain elements of registration reform and the proposed client relationship model. While these sorts of efforts are aimed at existing investors, if they work as intended, they may also lower the barrier to action by people who aren’t yet investing.

In other jurisdictions, regulators are going beyond disclosure in their efforts to inspire faith in the financial system. In the U.S., the creation of a financial consumer protection agency was one of regulatory reforms proposed in response to the financial crisis. In Britain, regulators have attempted to improve the lot of consumers by introducing a regime to provide people with basic advice and plain-vanilla financial products — and planning to outlaw sales commissions in an effort to ensure that even if people don’t entirely understand their financial affairs, they are getting unbiased advice from the financial services industry.

Although better educated inves-tors may be the best defence against failed retirements and troubled investments, the magnitude and difficulty of closing the current knowledge gap suggests that regulators cannot rely on education alone to protect investors. IE