According to a recent study commissioned by the World Bank, only 37% of Italians show a "fair" degree of financial literacy. We are in 63rd place out of 144 countries, surpassed by almost all EU countries, Cameroon, Senegal and Turkmenistan. But Italy is not Turkmenistan. It is one of the countries with the greatest net household wealth (8.730 billion according to Bank of Italy data relating to the end of 20131), hosts the third largest government debt market in the world, and one of the largest asset management markets. No country has so many private resources to invest and so little knowledge to do it properly.
The 2016 edition of the Report drawn up by Consob on the investment choices of Italian families confirms the low level of financial knowledge of Italian families. Only slightly more than 40% of those interviewed are able to correctly define some basic notions, such as inflation and the relationship between risk and return; more sophisticated concepts relating to the characteristics of the most popular products record even lower percentages. More than 20% of the interviewees declare that they are not familiar with any financial instrument, while the remaining 80% indicate government securities and bank bonds among the investments made or of which they are most frequently aware.
Poor financial literacy is a serious problem both for businesses, which find it difficult to access household savings, and - above all - for the latter. The baby-boomers, the generation born between 1950 and 1965 are approaching retirement and too many people realize late that not having enough resources to face the “perfect storm” consisting of a reduction in public pension coverage, an increase in longevity, and precarious employment of the children. Yet these generations, like the previous ones, saved: in the 20s the savings rate on GDP was around 25-XNUMX%. They have "saved" but have not "invested".
In the name of "security", the resources removed from consumption have taken the form of real estate, liquidity, short-term government bonds; recently of bank bonds; all inappropriate tools for achieving long or very long-term objectives. The appropriate tools exist: Italy has developed among the first investment funds, there is a wide range of ETFs. The intermediaries (banking and financial advisor networks) have a widespread presence and are subject to continuous investment in training. What can holders of savings do today to become investors? And how can the consultants who work in banks and networks help them invest in an informed and appropriate way? On the internet, in print media, in bookstores, there are several manuals dedicated to explaining financial jargon and a thousand technical details.
But that's not what is needed. The skills that the Italians themselves say they lack are others: they lack a "know-how" (or rather a "knowing what not to do"). We need to share not solutions, but the rules of the game” and the appropriate “attitudes” towards investment. And not only these. What has happened in equities, derivatives and fixed income since the turn of the century has destroyed the "efficient markets" hypothesis of the cold, calculating market trader. Even the hypothesis that every market participant is moved by the sole desire to maximize profits shakes in the face of evidence from Psychology and Behavioral Finance.
It has been demonstrated that the investor is moved by a large number of objectives and is anything but cold and rational. Emotions aside, his own way of reasoning and making decisions is subjected to distortions and "vices" that lead him not occasionally, but systematically, to draw lower yields from his savings than would be possible. Consultants have a big role to play. Knowledge of these biases can add to experience and knowledge of the tools and make them more effective in helping their clients make appropriate strategic and tactical decisions to achieve their savings goals.
