The FSA emphasis on education is misplaced
All week I have mulling over something that Confucius supposedly said, and I have concluded that as wise as he was, he was not a businessman. “Give a man a fish and he will eat for a day. Teach a man to fish and he will eat for a lifetime.”
But think about it. If you teach everyone to fish, you will have no fishing industry. And the other problem is that it is hugely inefficient. In society we achieve greater efficiency when people specialise, some will fish, but then exchange their surplus for some other goods and services they need.
However I am convinced that the policy wonks at the FSA are fans of Confucius. They insist in a belief that everyone must learn how to fish – well figuratively speaking that is. Unsurprisingly policy wonks are not business people either. I imagine that if they were overseeing the fishing industry, you would not be able to simply walk into a fishmongers, buy a piece of fish and walk out again. Oh no, first you would get a lesson on fishing quotas, how much it cost to catch the fish, how to ‘clean’ it and how much profit the fishmonger made. Some of it is interesting stuff, but who really cares?
And that is one of the problems – policy wonks assume that people want to know all this stuff. Most people do not. They want to know they are not being ripped off, and they want someone to reassure them that what they are doing is right for them, but they do not want a GCSE in charges and small print. When people walk into a restaurant after work on Friday night, they just want to sit down and have a good time. They do not want to be dragged into the kitchen to see how it is made, or what it costs to run the restaurant.
Yet the FSA policy wonks have been banging the same ‘information’ drum for the best part of 25 years, and financial services providers have had to go along with it. And it is wrong. There is a mantra I hear too often from advisers – and I am guilty of using it myself – that we are here to educate our clients. No, we are not. Having quizzed several clients (and potential clients) they have told me this is a huge turn-off. Clients are fed up with information overload, they do not want any more. They want know whether their goals are achievable, what their options are, and what we recommend. They do not want an A to Z in charges, legislation, alpha or beta?
There are those in the FSA who believe that having more information amounts to having better information. There is an assumption that having more information makes you better informed. Yet research shows this is not the case. Having more information rarely means making better decisions. But it does fool you into having more confidence about the decisions you make. By all means teach a man to fish, but I am reminded of another saying: give a man enough rope…
Dennis Hall is managing director of Yellowtail Financial Planning