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Symposium 2012

Solution for Improving Financial Education and Literacy

The Challenge

As governments face increasing debt burdens and companies too face significant cost burdens, there is a clear movement towards individual responsibility for financial planning for retirement. This mov ...

As governments face increasing debt burdens and companies too face significant cost burdens, there is a clear movement towards individual responsibility for financial planning for retirement. This movement is happening at precisely the time that individuals themselves are feeling more insecure about the future in the face of declining job security and the increased reluctance of financial institutions to provide credit.

Add a government-approved, simple "plain vanilla product" for each product category.

Financial product choices have proliferated, with complex options that very few nonprofessionals are capable of understanding, contributing to the costly financial "mistakes" that many consumers have made. One simple way of reducing these mistakes is to allow financial service providers to offer a "plain vanilla" option for each product category which would be extremely straightforward, easy to understand, and guaranteed by the government to contain no “harmful” clauses.

If providers offered such a product that met government specifications, it would be approved as an acceptable plain vanilla product that less knowledgeable consumers could choose with confidence. This would not preclude consumers who are more knowledgeable or sophisticated from choosing more complex products that better met their needs.

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