Product Design and Financial Literacy

The responsible design of financial products is a topic of increasing regulatory interest (ASIC, 2014). The issues range from the performance and risks of complex financial instruments, to the marketing and advertising of products to consumers (OECD, 2013). In this research, the relationship of financial literacy to product design is examined in the context of known behavioural finance anomalies. The choice of words used to position a product on the risk-reward spectrum is examined in the context of complex financial products. The study employs semiotic analysis, a method originally from literary criticism, which is now applied to consumer choice (Mick, 1986), advertising (Adams & García, 2007) and the analysis of messaging in audit reports (Hronsky, 1998) and credit risk (Bonne, 2011). This paper finds evidence of a misleading framing of risk and reward in the advertising for binary options. Our recommendation is to consider tighter guidelines on the use of language like investments, when dealing with instruments which are clearly speculative, with the financial properties of gambles.