From basic concepts to advanced strategies: the Freedom24 approach to investor education

Olga Milko, the Business Development Director at Freedom24, spoke to the Cyprus Mail about the growing importance of financial literacy in today’s complex economic landscape.

The experienced finance professional explained that as markets become more intricate, understanding the fundamentals of personal finance has become a necessity, particularly for individuals who are new to investing.

Milko mentioned that even basic concepts such as inflation and the cost of money “play a significant role in shaping our everyday lives and the future of our children”.

“Imagine you have some savings, let’s say €20-30k. What are the options if you plan to keep the savings? Not that much – keep it in cash at home (in fact, the most risky scenario), deposit these funds with a bank and… that’s it,” she said.

Milko acknowledged the emotional aspect of investing, describing it as “an emotional roller coaster” where fear and greed often drive impulsive decisions

She cautioned that if one decides to use this money after five years, they might face an unpleasant surprise, where the purchasing power of their savings has diminished, possibly by as much as 20 per cent due to inflation.

This is the point, Milko noted, where individuals start contemplating investment strategies.

Milko referenced the performance of the S&P 500 index, which she noted had seen significant growth.

“In 2019, the S&P 500 index was at 3025 compared to a recent value of 5530, which is more than an 80 per cent increase in the last five years,” she said.

She noted that an investment of €20,000 in a fund tracking this index could have grown to approximately €36,000 today, demonstrating the potential of average investment returns.

However, she stressed that before one designs a personal investment strategy, it is crucial to understand the basic logic of how financial markets operate.

“At the heart of financial literacy is the ability to make informed decisions,” she stated.

“This involves understanding basic financial concepts, such as risk and reward, which are crucial for evaluating investment opportunities,” she added.

Moreover, she explained that “informed decision-making helps new investors avoid common pitfalls, such as falling for scams or making overly speculative investments.”

“A solid foundation in financial literacy is key to effective financial planning,” she stressed.

In addition, Milko acknowledged the emotional aspect of investing, describing it as “an emotional roller coaster” where fear and greed often drive impulsive decisions.

She advocated for the role of financial literacy in helping investors manage these emotions, promoting a long-term perspective that reduces the likelihood of panic selling during market downturns.

Ensuring users are well-informed

Milko also outlined the specific initiatives and resources that the Freedom24 investment platform offers to enhance users’ financial literacy and assist them in making informed investment decisions.

Milko underscored that in Europe, Freedom24 provides several initiatives aimed at educating both novice and experienced investors.

Milko emphasised that the first step she recommends is engaging with the Freedom24 Academy, which she described as “a complimentary educational initiative tailored for users of our investment platform”.

She explained that this online resource offers multiple-tier educational programmes, starting with the basics of stock investing.

“It is a foundational course that introduces key financial instruments, portfolio formation principles and stock market operations,” she said, noting that it’s ideal for newcomers who want to grasp the essentials of investing.

For more seasoned investors, Milko mentioned that Freedom24 offers an advanced educational module. “It is designed for those with a solid grasp of the stock market who favour active investment strategies,” she said.

This module covers essential topics such as technical analysis, margin trading and risk hedging – skills necessary for the independent management of a securities portfolio.

Milko also highlighted that since the platform launched options trading and structured products, they have created opportunities for users to become more experienced investors.

“We provide an opportunity to actually become this experienced investor after successful completion of our options trading and structured products online course,” she explained.

These courses, she said, are enriched with practical advice and real-life investment examples, helping investors “strike a balance between income and risk”.

“Whether an investor is just starting out or looking to refine strategies, our Academy provides the knowledge and tools to navigate the stock market confidently,” she said.

“We will definitely continue to develop our educational project, add new online courses and organise personal offline meetings with investors in the countries where our company operates,” she added.

Reflecting on the importance of continuous education, Milko stated, “I believe that education is not a final goal but a lifetime path”.

To support this ongoing journey, she explained that Freedom24 provides users with multiple tools such as access to analyst reports, recommendations, and market news. These resources, she noted, are designed to help investors comprehend market trends and economic indicators, providing “professional insights into the potential of various stocks and market trends”.

Milko also detailed the platform’s rigorous approach to assessing the financial literacy of its users before they start trading.

“In the fast-paced and complex world of finance, ensuring that users have a sufficient level of financial literacy before they start investing is crucial,” she said. “Freedom24 employs a variety of strategies to assess the financial literacy of their users and take several steps to equip them with the necessary knowledge,” she added.

Moreover, Milko described how all new clients begin their investment journey with an online onboarding questionnaire.

“This initial assessment helps us gauge the level of financial literacy,” she explained, noting that the questionnaire includes various questions aimed at understanding the user’s financial objectives and expectations from trading.

Additionally, the questionnaire assesses prior experience with financial instruments such as stocks, bonds, options and futures.

She elaborated on the importance of this process, stating that “to operate with more complex financial instruments, the client needs to show an understanding of financial concepts like risk, diversification and market mechanisms”.

Milko mentioned that the appropriateness assessment is a critical step in estimating the user’s comfort level with different types of financial risks. “This assessment helps us tailor the trading experience to match the user’s risk profile, ensuring that they are not exposed to instruments that are too complex or risky for their understanding,” she said.

Educational tools & dealing with complex instruments

Milko also highlighted the educational tools and courses provided by the platform, specifically designed to enhance users’ understanding of key trading concepts such as risk management, portfolio diversification and market analysis.

By combining the educational material from the Freedom24 Academy with up-to-date market information available on the Freedom24 platform, clients gain access to “high-quality and reliable information,” Milko explained.

She elaborated that this information is presented not just as theoretical concepts but also through real-market scenarios, supported by actual market data. This data is gathered by Freedom24’s analysts and is based on research from major investment banks, providing a comprehensive resource for investors.

“Pay attention to the course for experienced investors, combine it with everyday market data,” she advised, emphasising that this combination offers a “powerful tool to build your own investment strategy.”

She pointed out that such a strategy can be customised to account for an investor’s risk appetite, whether they have short or long-term goals, and can be easily adapted to reflect ongoing economic challenges.

Milko also discussed the strategies employed by the platform to ensure that users have a solid understanding of complex financial instruments and strategies, such as derivatives and leveraged products.

She highlighted that Freedom24 takes a multifaceted approach, combining educational resources, user-friendly tools, risk warnings and personalised support to address this challenge.

Milko explained that the platform’s online academy plays a crucial role in this process by offering “comprehensive guides and tutorials that explain the basics and complexities of financial instruments like derivatives and leveraged products”.

She said that an important part of the platform’s product implementation involves “clear and prominent risk warnings” which are displayed whenever users access or attempt to trade these complex products.

Additionally, Milko pointed out that clients are often required to “acknowledge understanding of risks before they can trade certain high-risk products.” This ensures that users are fully aware of the potential dangers associated with these instruments.

“And if there are still blank spots in understanding left, our dedicated customer support is available to answer questions and provide guidance on complex instruments,” she said.

“By implementing these comprehensive measures, Freedom24 aims to equip its users with the knowledge and skills necessary to navigate complex financial instruments confidently and responsibly,” she added.

The importance of robust customer support

Touching on the significant role that customer support and advisory services play in enhancing users’ financial literacy on the platform, Milko explained that these services are essential in providing personalised assistance, guidance and education, helping users acquire the tools and knowledge necessary to make informed investment decisions.

Milko emphasised the company’s commitment to individual guidance and problem resolution.

“In our company, we pay attention to individual guidance and problem resolution,” she stated.

The customer support services at Freedom24 are designed to offer prompt and clear navigation through the platform’s full range of products, regulatory requirements and market infrastructure. This personalised approach, she noted, is instrumental in helping users of all experience levels understand complex financial concepts within the context of their own portfolios.

Milko highlighted that customer support services are not only about resolving issues but also about building users’ confidence and competence in using the platform.

“Customer support services assist users in navigating the platform, resolving issues, and understanding specific investment products,” she explained. This, in turn, fosters greater user confidence and competence.

To ensure timely and informed decision-making, Milko mentioned that Freedom24 offers real-time assistance, including live platform requests and phone support.

“We aim to provide immediate assistance to users,” she said, noting that this is crucial for helping users make timely and informed decisions.

“Our investment platform is accessible to users of different experience levels; also to cater to a diverse user base, support services are available in multiple languages,” she added.

Advanced trading tools while not scaring novice investors away

Milko also shared her insights on how online trading platforms can strike a balance between offering advanced trading tools and maintaining simplicity for novice investors.

She acknowledged that the rise of online trading platforms has indeed democratised access to financial markets, empowering individuals with the tools to manage and grow their investments. However, she also highlighted the challenge of balancing sophisticated tools with ease of use.

“Achieving this balance is crucial for ensuring that all users, regardless of their experience level, can navigate the platform effectively and make informed investment decisions,” she stated.

“The initial and most important tool is the trading platform, it should prioritise a simple design with clear navigation, ensuring that essential features are easily accessible,” Milko added, noting “this helps prevent overwhelming new users with too much information at once”.

Moreover, she explained that “most of the extra features need to be customisable”, to “allow users to tailor their experience according to their skill level”.

For instance, novice investors might opt for a simplified view highlighting basic functionalities, while experienced traders could customise their dashboard to include advanced tools and analytics.

“A good solution could be using tiered account levels where beginner accounts focus on fundamental trading options and educational resources, while advanced accounts provide access to a wider array of tools,” she said.

These advanced tools might include options trading, margin accounts and algorithmic trading capabilities.

She also underscored the importance of making advanced trading tools user-friendly.

“Advanced trading tools are great for experienced traders, but they need to be easy to use for everyone,” Milko noted.

She advocated for simplifying these tools without losing their functionality, to make them accessible to a broader audience.

Furthermore, to make trading platforms both beginner-friendly and powerful for experts, Milko recommended focusing on user-friendly design, step-by-step features, helpful educational resources, strong support, and regular user feedback.

“This approach helps everyone, from novices to pros, navigate the financial markets with confidence,” she said. “It not only makes the platform better to use but also builds a more inclusive and active trading community,” she added.

How effective are financial literacy programmes?

Milko was also happy to discuss how the effectiveness of the platform’s financial literacy programmes and educational resources is measured.

She highlighted that, as with any product, statistics and data collection followed by thorough analysis are essential for understanding the value and usefulness of these offerings to the end user.

Milko explained that the academy courses are accessible to all prospective clients. She said that “the average picture of the user, becoming an investor after enhancing his or her financial literacy, results in more balanced trading strategies, less emotional response to market fluctuations and a more stable profit trend”.

This indicates that improvements in financial literacy contribute to better trading behaviour and financial outcomes.

What is more, she mentioned that “financially literate individuals are adept at leveraging financial tools and technology, such as trading platforms and analytical software”.

This knowledge, she continued, enables them to maximise returns by understanding tax implications, fees, and other costs associated with investing.

Additionally, to gauge user improvement and satisfaction, Milko mentioned that Freedom24 carefully collects feedback and continuously develops its financial literacy programmes.

Given the platform’s extensive reach across European markets, Milko acknowledged that educational approaches can vary significantly. She noted that “we sometimes face a dramatically different approach to the educational pattern from the side of our clients,” and added that “our local teams in 12 European offices make every effort to improve the clients’ experience and ensure the understanding of the investment tools”.

Social trading: benefits & risks

Addressing the impact of social trading and online investment communities on financial advice and information, Milko clarified that Freedom24 has chosen not to integrate any form of social trading or investment community into their platform.

Milko acknowledged the growing popularity of social trading, where both novice and experienced investors share tips, strategies and real-time trades. “Social trading and online investment communities have become increasingly popular,” she said.

While recognising the potential benefits, she also highlighted the significant risks associated with these platforms, expressing concerns about the accuracy and reliability of information shared within these communities.

“We observe that these communities come with significant risks and potential harms,” she noted.

She explained that individuals sharing tips and strategies without verified expertise can lead to misinformation. “Inexperienced investors might follow poor advice, resulting in significant financial losses,” Milko warned.

Another issue she raised was the anonymity of many participants in these communities.

“Many participants in online communities remain anonymous,” Milko said, which makes it challenging to hold them accountable for their advice. “This anonymity can embolden individuals to share reckless or fraudulent tips without facing consequences,” she added.

Milko also discussed the emotional impact of social trading, stating that “the fast-paced nature of social trading can create a sense of urgency and fear of missing out, so-called FOMO”.

“This emotional response can lead to impulsive decisions, where investors might make trades without thorough analysis,” she added.

Next steps on the road to bolstering financial literacy

Finally, Milko outlined her vision for future developments in the platform’s approach to financial literacy.

“The ultimate goal is to ensure that every potential user clearly understands what opportunities (and risks of course) investments in financial markets can bring,” Milko said.

She highlighted that her personal satisfaction comes from seeing more people gain access to basic financial literacy, rather than focusing solely on competition.

“I will personally be more than happy knowing that more people have access to at least the basics of financial literacy,” Milko noted.

She added that it is important for individuals to feel confident and make informed decisions about starting their investment journey.

As both a professional and a parent, Milko said that it is important for financial literacy to be integrated into governmental education programmes.

“I strongly believe that financial literacy must be part of the governmental education programme,” she stated.

Moreover, she said that “the big picture into the future of financial literacy is to build and sustain wealth over the long term.”

Milko highlighted the broader benefits of financial literacy, including financial independence and security.

“It provides the knowledge needed for financial independence and security, reducing the likelihood of debt and financial hardship,” she explained.

“By fostering a deep understanding of personal finance, the majority of all age groups can achieve a stable and prosperous financial future,” Milko said.

“And as we move into an increasingly uncertain economic climate, the importance of financial literacy cannot be overstated,” she concluded.