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Just like drivers license. Take a test of basic financial competency and education. Pay 100 bucks for the test. Done.

by 127 5y ago

lxgr 5y ago
Some European countries are using a variant of this. When I opened a brokerage account, I had to give an estimate of my level of familiarity with various asset classes and was excluded from trading the ones I am not proficient in. Unfortunately, the implementation is absolute bullshit. Proficiency is exclusively measured in experience, leading to a textbook example of Catch-22: You can trade precisely whatever you've already been trading in the past. I do believe that some basic level of understanding of the mechanics of markets and various asset classes should be a pre-requirement, and I like the driver's license analogy: Just like in road traffic, with investment decisions, your actions don't only endanger yourself. Unfortunately I don't know how that could be implemented without being yet another driver of inequality or being extremely easy to bypass.
- kolinko 5y ago
  Hm, depends on a country perhaps. I did the test twice in Poland, and yes - there were questions about experience, but also questions from knowledge. My guess is that if you fail answering questions about the experience you will get access to fewer instruments, and with time you can get access to more. The test could be definitely done better though, perhaps closer to the new tests for basic drone piloting. For basic drone piloting, in Poland at least, you have to take an online course, and then take a test with I think 40 knowledge questions selected randomly from a pool of 90 or so. You have 90 sec to answer each question, so if you're a good Googler, you can cheat, but really after taking the online course you don't need to. Took me 2-3h to get my basic permissions to fly a drone. Advanced permissions require a weekend in-person training and a more complicated exam. Still pretty accessible. I think we could have the same thing with investor qualification - a good test, and also a single "license", instead of each bank implementing their own testing scheme to answer 10 basic questions.

Just like drivers license. Take a test of basic financial competency and education. Pay 100 bucks for the test. Done.

by 127 5y ago

Just like drivers license. Take a test of basic financial competency and education. Pay 100 bucks for the test. Done.

lxgr 5y ago

Some European countries are using a variant of this. When I opened a brokerage account, I had to give an estimate of my level of familiarity with various asset classes and was excluded from trading the ones I am not proficient in. Unfortunately, the implementation is absolute bullshit. Proficiency is exclusively measured in experience, leading to a textbook example of Catch-22: You can trade precisely whatever you've already been trading in the past. I do believe that some basic level of understanding of the mechanics of markets and various asset classes should be a pre-requirement, and I like the driver's license analogy: Just like in road traffic, with investment decisions, your actions don't only endanger yourself. Unfortunately I don't know how that could be implemented without being yet another driver of inequality or being extremely easy to bypass.

kolinko 5y ago
Hm, depends on a country perhaps. I did the test twice in Poland, and yes - there were questions about experience, but also questions from knowledge. My guess is that if you fail answering questions about the experience you will get access to fewer instruments, and with time you can get access to more. The test could be definitely done better though, perhaps closer to the new tests for basic drone piloting. For basic drone piloting, in Poland at least, you have to take an online course, and then take a test with I think 40 knowledge questions selected randomly from a pool of 90 or so. You have 90 sec to answer each question, so if you're a good Googler, you can cheat, but really after taking the online course you don't need to. Took me 2-3h to get my basic permissions to fly a drone. Advanced permissions require a weekend in-person training and a more complicated exam. Still pretty accessible. I think we could have the same thing with investor qualification - a good test, and also a single "license", instead of each bank implementing their own testing scheme to answer 10 basic questions.