June 13, 2022

Finance and Information Overload

For the first time since the introduction of the computer, the financial system is experiencing revolutionary innovation at scale. Companies have been integrating technology and finance in ways that present vast opportunities for growth and development in the space. Many of the largest institutions have introduced mobile apps that allow their customers to access their services anywhere in the world, 24/7, finally taking advantage of the advent of smartphones. This is just the tip of the fintech iceberg. Every day, ideas of how to make the financial system more efficient — from banking as a service to DeFi — transform companies, shining a light on the opportunities that technology presents to major financial institutions.

Since the turn of the century, the average person has gained unprecedented digital access to financial instruments such as stocks, options, and ETFs, to name a few. While accessing these instruments of wealth creation has been a major step in the right direction, the financial services ecosystem has fallen short with regard to educating consumers on how to take advantage of these opportunities. Since the popularization of retail investing at the turn of the decade, there have been more headlines in the news to count on the subject of how individual retail investors lost their entire life savings making a bet they believed was a shoe in. In today’s age of mass information, it has become easier than ever for people to be fed misleading information by someone who is not a financial professional or whose incentives are conflicted. The internet has been a hotbed for scams of all sorts, especially those involving newly accessible financial instruments.

A member of our product team, Calvin Arterberry, has described the current environment of retail investment platforms to be similar to “casinos.” Supposed financial ‘gurus’, who tend to target new investors spout their unfounded opinions as fact. By using financial jargon and the promise of riches in their content, they confuse the viewer just enough for them to come off as credible all the while playing into the viewer’s desire to learn about successful investment approaches. “They let you blow your money away then say this is not financial advice,” as Calvin puts it.

Interactions like these are what push people away from using unfamiliar financial instruments to build their wealth. Having experiences with people masquerading as professionals, they begin to view the entire financial system as a way for people to steal others’ hard earned capital. It’s essential that the market address and reverse this trend. If financial systems are used properly, they can help savers and investors generate wealth for themselves while adding value to the global economy in the process. The lack of responsible consumer guidance is currently holding the general public back from fully embracing the financial system as a whole and is stifling the widespread adoption of new innovations. Elevating the public’s financial literacy will pay dividends to both Fintech consumers and Fintech providers, and it is a critical part of our mission at Poolit as we work to spread awareness about and access to investment opportunities in alternative asset classes.