“Those who are too smart to engage in politics are punished by being governed by those who are dumber”. Although much of my brief flirtation with Ancient Greek in the 1970s has long since become a hazy memory, some may wish to parallel these words from Plato with the current behaviour of many consumers with financial services.
Perceptions take a long time to change. From within the advisory camp, I have witnessed a gradual transformation of the attitude towards financial consumers – from the 1970s/1980s “prospects and “punters”, through to “customers” and finally arriving at the present day “clients”. That there has been a growth in professionalism in the financial planning sector over the last thirty years is indisputable. And I am not talking merely about pieces of paper, when qualifications have become a sine qua non for continuing to offer advice. The metaphor of hunters seeking one-off kills of their prey has slowly been replaced with one of farmers who cannot afford to neglect their livestock (or indeed livelihoods).
Which makes it all the more ironic that consumers of financial services have been moving in precisely the opposite direction over the same forty year period. From a time when financial advisers were generally regarded as adding some value (irrespective of the truth of this) to the prevailing attitude that they represent a costly level of intermediation which is not worth the candle, we have regressed into an era of dangerously polarised stereotypes.
Of course, this can be seen as part of a broader societal malaise. It has almost become a mark of cleverness to profess generalised disdain for what was previously accepted. All politicians are liars. All journalists are weasels. All financial advisers are parasites. The difference between a hedgehog and a lawyer lying in the road is that there are skid marks near the hedgehog. You get the picture.
The problem with this convenient, compartmentalised philosophy is that the resulting cynicism produces far worse outcomes than any cautious engagement might have done.
At a time when (according to Axa Wealth) 56% of consumers said it was hard to understand investment jargon without the use of an expert, the numbers of those previously regarded as experts have fallen over the thirteen months to December 2012 from over 40,000 to little more than 30,000. Some would maintain that this is the fault of investment jargon and that the industry should do something about it. Possibly – but how simple can a complex subject become? Should we write off all professions as largely superfluous? You can, if you prefer, call a pension a, “pot to help you out when you stop working”, but this won`t dispense with 57 years of relevant legislation. You would not start from here, but unfortunately we are where we are.
One of the benefits of having a couple of years out of the front line of financial services has been the luxury of a dispassionate view about what has been happening in the interim. If I had thought that client relationships had been degenerating a few years ago, this was nothing compared to what is happening now. Cynicism has bred mutual cynicism. The allegation is often that financial advisers can`t be trusted. It turns out that many clients cannot either, undermining any possibility of a productive relationship.
On a regular basis, wholly unexpected (and invariably unmerited) complaints are being received by competent financial planners – often originating from Claims Management Companies. The latest I heard of yesterday was from an 82 year old gentleman who believed that he should have purchased an index-linked annuity some 17 years earlier instead of a level annuity. It took several hours of unnecessary research to demonstrate that the client had received £136,000 to date – against the £95,000 he might have received from an index-linked variant – and, notwithstanding his heart condition and net present values, the Queen`s telegram would need to have arrived on his doormat before the original advice could be seen as anything like questionable. Complaints, once an exceptional event, have now become a regular, debilitating occurrence. This development is sad and destructive, but hopefully reversible.
Two years ago, I thought I would save some hard-earned cash by reading several books on Search Engine Optimisation and Digital Marketing. The result was mixed. On the one hand, there was an opportunity cost to my time and I might have earned more by “sticking to my knitting”. On the other hand, I managed to learn a lot about a subject which had previously been a mystery to me – which, in turn, allowed me to engage with and question those who held themselves out as experts on the subject. It would have been easier to be a cynic, but was ultimately more rewarding to become involved.
As financial advisers have had to “up their game”, it similarly behoves the recipients of such services to learn a bit more and become involved in what is an essential subject for their own future welfare. For example, they can document their own income, expenditure, assets and liabilities; they can get more in touch with their own attitudes to, and capacity for, risk; they can read some of the quality financial newspapers and journals.
The option, of course, is to use ignorance as a strategy and then blame someone else later – putting up the cost of delivering financial services still more. A trite and toe-curling expression it might be, but we really are all in this together.