Those who plan for their financial future are more confident about their ability to take care of themselves, states the 2012 Household Financial Planning Survey, prepared, in part, by the Consumer Federation of America. Here, CFA's executive director, Stephen Brobeck, talks to contributor Michelle Lodge about the survey and regulatory reform.
1. What can advisors do to improve the financial literacy of their clients, and how will that benefit their practices? Advisors should clearly explain the relation between investor risk and reward. They should also clearly spell out the nature and extent of the risks of investment options contemplated. When investors have a better understanding of finances, they may be less likely to blame their advisor when they experience risks rather than rewards. However, given the dependence of investors on their advisors, the most important thing advisors can do is act in their clients' best interests.
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