People are stupid. I don’t mean that to be as insulting or derogatory as it no doubt sounds. I am a person and include myself in the sweeping generalisation.
I am horribly aware of my own capability to do something stupid at any given moment, as anybody who has seen me driving will attest.
Nowhere is our collective stupidity more apparent – or more dangerous – than when it comes to money.
Every week a new batch of research highlights the gulf between what we should be doing and what we actually are (or, more likely, are not).
There is no longer any doubt that an advice gap exists, now the only debate relates to how many people have fallen into it.
At a recent conference, Joe Lane of the Citizens Advice Bureau (CAB) began to quantify the problem, saying that 49 per cent of UK households – not individuals – have less than £5,000 in savings, including pensions; 25 per cent have less than nothing once debts are taken into account.
The fact the majority are in a mess is not news. Nor, sadly, is the fact that they are largely clueless as to how to get themselves out of it.
The CAB research said 20 per cent admitted they lacked confidence in making financial decisions. And that’s just those that admit it. You can bet there are countless more blundering on, oblivious to – or in denial of – their own ineptitude.
The belated arrival of financial education in schools will change things, but a reversal of the current ubiquitous ignorance will take generations.
And what are we supposed to do about everybody who has already left school? Do we just write off all those between the ages of 18 and 65, conceding that it is probably too late to do anything about their inevitable retirement shortfall?
There should be a real opportunity for our industry to help these people and achieve a holy grail of actually making some cash while being genuinely valuable.
Their lack of understanding or confidence should be no obstacle either. The great American showman PT Barnum once said something along the lines of “Nobody ever made a million by overestimating their audience’s intelligence.”
But instead, the personal finance industry’s response is to further alienate these people, too busy trying to show off how clever it is to bother to cater to them.
Just 20 years (although it feels like a lifetime) ago the industry was built around with-profits products.
Insurance-based investment vehicles that were sold on their complexity, they wore the fact you needed several degrees in economics to understand how they worked as a badge of honour.
Designed by boffins, it was considered a good thing the people they were meant to work for did not understand them.
They were consigned to the dustbin of history by the arrival of products characterised by buzzwords like transparency and simplicity, but since with-profits’ heyday, there have been myriad other new products that have come along, superficially to fill a gap in the market, but in reality just designed to show off whatever clever algorithm the actuaries and analysts have come up with that week.
