# FINRA Foundation and Stanford study finds few investors have advanced risk literacy

URL: https://www.financialadvsr.com/article/finra-foundation-and-stanford-study-finds-few-investors-have-advanced-risk-a342e1
Published: October 8, 2026
By: Theo Marsh, Regulation Correspondent
Section: Regulation
Publisher: Financial ADVSR (https://www.financialadvsr.com)

Research from the FINRA Foundation and Stanford found 18% of surveyed US investors showed advanced investment literacy, with weaker knowledge associated with greater fraud susceptibility.

Most US investors lack advanced knowledge of investment risk, according to new research from the FINRA Investor Education Foundation and the Stanford Initiative for Financial Decision-Making. InvestmentNews reported on the findings on October 8, 2026, and said the work links gaps in risk literacy to fraud vulnerability and weaker retirement outcomes.

According to FINRA's release, the organizations published the research on October 5, 2026, as part of World Investor Week, which runs October 5 to 11. The study is titled "What Separates Sophisticated Investors? Risk Literacy and Investment Decision-Making." Financial Planning reported that it draws on the FINRA Foundation's 2024 National Financial Capability Study.

FA-Mag reported that the study examined 2,861 US investors who hold investments outside retirement accounts. According to FINRA, researchers used 13 investment knowledge questions to sort participants into three groups: low, basic-only and advanced literacy.

Only 18% of investors demonstrated advanced literacy, FA-Mag reported. Some 66% fell into the basic-only group and 16% showed low literacy. FA-Mag said the advanced questions covered diversification, interest rate risk, leverage and margin risk, short selling, option payoffs and the priority of claims in a bankruptcy.

The research also looked at how literacy relates to susceptibility to fraud. Finance Magnates reported that advanced literacy was associated with lower fraud susceptibility, though the study does not establish causation. Stockpil reported that when presented with a hypothetical offer of guaranteed, risk-free 25% annual returns over five years, 54% of basic-only investors said they would invest, compared with 35% of advanced investors.

Sources of information differed by literacy level, according to FA-Mag. It reported that 74% of investors with low literacy rely on informal sources such as friends, family and colleagues, compared with 51% of those with advanced literacy. Some 43% of low-literacy investors follow advice from social media influencers, versus 13% of advanced-literacy investors.

Financial Planning quoted FINRA Foundation President Christine Kieffer as saying the research underscores the importance of emphasizing risk-related concepts in investor education and elevating financial fraud recognition as a complementary subject.

The FINRA Foundation is the research and education arm of FINRA, according to the organization's release. The Stanford initiative is a collaboration among the Stanford Graduate School of Business, the Stanford Institute for Economic Policy Research and the Stanford Department of Economics, Financial Planning reported.

Key facts:
- Study sample: 2,861 US investors holding investments outside retirement accounts (FA-Mag).
- 18% showed advanced investment literacy; 66% basic-only; 16% low (FA-Mag).
- 54% of basic-only investors said they would take a hypothetical guaranteed 25% annual return offer, versus 35% of advanced investors (Stockpil).
- 43% of low-literacy investors follow social media influencers, versus 13% of advanced-literacy investors (FA-Mag).

Why it matters: For advisors, the findings point to a large share of investors who may not grasp risks such as leverage, interest rate exposure or bankruptcy priority, which bears on client education and expectation-setting. The reported reliance on informal sources and influencers among lower-literacy investors also shows where advisors compete for trust. The study does not establish causation, so the fraud link is an association.

Sources:
- InvestmentNews: https://www.investmentnews.com/practice-management/most-investors-lack-advanced-risk-knowledge-finra-finds/268531
- fa-mag.com: https://www.fa-mag.com/news/most-americans-struggle-with-investment-risk-literacy-88704.html
- finra.org: https://www.finra.org/media-center/newsreleases/2026/new-research-finds-most-investors-lack-advanced-investment-knowledge
- stockpil.com: https://stockpil.com/finra-stanford-18-percent-advanced-investment-literacy
- financemagnates.com: https://www.financemagnates.com/forex/only-18-of-us-investors-show-advanced-investment-literacy-study-finds/
- financial-planning.com: https://www.financial-planning.com/news/highly-confident-investors-struggle-to-detect-fraud-finra-finds
- finra.org: https://www.finra.org/media-center