SEC and Online Trading Academy, Former Chief Economist, Dr. Jeffrey H. Harris, Comment that not all Education is Equal for Retail Traders

Dr. Harris says education and experience did not seem to carry the day as measures of the capability to advise investors. He suggested that education was based on trade school, high school education, and trades were skills you did not lose. If we define ourselves as “traders” rather than “investors,” it brings a very different set of reasons to change our market structure. Most people are worried about missing an opportunity, but that’s not the main reason we should be changing our rules and regulations.

During that conference, SEC Chairman Jay Clayton noted that many people in the U.S. market who are supposedly taking their education seriously and have “a variety of financial experiences” and “extensive backgrounds” “fall into one of two categories” when it comes to an understanding “financial products and practices in a market,” namely that they “are either too simplistic or don’t understand the complexities of modern financial products and practices.

For some, financial education means joining a financial institution and taking some courses on debt management or how to borrow wisely. This education is the type of education the OTC Academy teaches and is a proven deterrent to fraud. For others, financial education is the type of education they get when they read the Wall Street Journal and WSJ.com. They enjoy the news but often find it useful to be able to understand financial topics. But, for a lot of folks, financial education goes far beyond reading a newspaper. For them, financial education means learning to identify people who prey on people in financial distress and enabling those who don’t know they are committing fraud.

How education in the financial markets is changing from a widening focus on securities finance to a broader focus on topics like wealth management, banking, advisory, and more. In a recent article, Dr. Harris shares his concern about the tendency of all educators to emphasize financial literacy in their presentations but neglect the higher-level skills needed. He recommends that as part of their training for the financial industry, most financial educators would be well-served to have a “financial trader mindset.”

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