The punters just do not want what the pensions industry is trying to sell them
These are the words of the financial editor of the Evening Standard, Anthony Hilton.
Hilton expresses his frustration not at the public but at a section of the financial services industry that refuses to accept it can be wrong.
At a pensions event recently, speaker after speaker noted the reluctance of the public to buy pension products, as a result of which their ability to live comfortably in old age might well be much diminished.
Various short term fixes were suggested, revolving around the restoration of trust in the City and the financial services industry.
What was needed most, though, according to the majority of contributors, was a major push for significantly better financial education in schools so people would understand why they had to save.
Hilton then questions just what this education is before and concludes that its motivation may be more “Soviet than City”. He is saying , what this blog has been saying, that it is not the punter but the product that is wrong.
The financial services industry is very poor at giving people what they want, rather than what it finds easy to supply.
Hilton argues that as a society we are less deferential, more demanding and we expect simple solutions to complex questions. In this world judgements are increasingly emotional rather than rational.
He develops this argument to distinguish between the loss of intellectual trust (for instance the trauma of fund managers in discovering that all asset classes correlated to zero in late 2008) to the loss of emotional trust in the system itself..
for the last 30 years financial services have been about selling to customers products which they do not really want to buy and the rewards to the firms have consistently been much fatter than the rewards to the customers.
And he concludes that until emotional trust returns, the public will not use the products to anything like the extent the pensions industry would like.
Who can retain trust in saving? – those who teach us how to spend!
I had the pleasure of meeting Alvin Hall , the American financial educator last week, we discussed this question of trust and his take was that the reason Martin Lewis can touch so many is that he is seen to be “on people’s side”.
Lewis , Hall, Altmann and other “consumerists” have two things in common – they get people to believe they are on their side and they use mass media. But very few people can do this as skilfully as these three- I know I cannot.
Just because you’re good at pensions doesn’t make you trusted
Speaking with a friend in financial services whose company is running financial education in schools how things were going, he said on Wednesday that he was encouraged his program now had the interest of Towers Watson and Hymans Robertson.
I suspect that the support of those two colossi of actuarial consultancy would not cut much mustard outside the narrow reaches of the City that he operates in.
When I went to the digital version of Anthony Hilton’s article, I found it had had 62 views, there may be a few more than that who have read the article in the Paper.
But over 11m people read Martin Lewis’ newsletters , Alvin Ros and Martin are recognised in most living rooms in the land.
Anthony Hilton gets some pretty good “views” in the Standard but not so in Pensions World.
Restoring confidence in pensions means abandoning our old ways and accepting that Anthony Hilton is right and we are wrong. The pubic are not buying it any more, they lost trust in us a long time ago and do not trust us to give them a fair deal.
Ironically Moneysavingexpert.com and saveyourdough.com are websites that encourage responsible spending as much as sensible saving.
The inevitable conclusion is that we want help in managing our money and people want genuinely independent education.
Should who should be found in financial education ?
When George Osborne threw open the doors on budget day , the NAPF were “perplexed”. They were perplexed by the freedoms on offer and I sense they are sen more perplexed that the public is showing every sign of loving their new-found liberty. People are wanting to spend on retirement again.
But all the research says they want and need help.
You do not have to be a coder to use a computer, a mechanic to drive a car and you do not have to understand investments to save into a pension. But you need to be competent to use a computer, licensed to drive a car and you’ll need help to know how to save into and spend your pension.
You are a long time spending your pension (you’ve been a long time building up the pot). Planning your income for the second half of your working life means taking into account a lot more than your pension pot, you need to what “gong right” looks like and the costs of “going wrong”.
This means having a real conversation about risk, about the cost of certainty, the merits of cash-flow management and the need to make long-term plans as well as to manage day to day finances.
In this new world where people want to save, it is up to the financial services industry to create financial products that are genuine game-changers. Products that allow people to use their new freedoms as they want by delivering what they say on the packet.
The maintenance of the mighty investment funds that enable us to stay free should be the primary concern of the banks , insurers and investment houses.
But these are not the people we need explaining how complex financial products work.
In fact coders are the last people I want to show me how to use Powerpoint and I no more want a tyre-fitter showing me how to drive safely than I want an investment manager teaching me how to plan for later years.
Even if they are independent, most people in the City seem incapable of talking with people in a way that gets them on people’s side.
The business of education sits properly with those who the public trust- and I use the emotional as well as the intellectual definitions of trust. When Morrisons wanted to turn their staff onto pension savings they used Alvin, if this Government wants people to understand their pension freedoms, perhaps they should think along the same lines.
More people will listen to Martin Lewis, Ros Altmann and Alvin Lee than the PMI, NAPF and SPC.
Educating kids to behave responsibly does not mean making them product experts
I am not for educating school children about the ways of the City, I think childhood should stay innocent of financial products
I am for teaching children the value of citizenship and how to behave responsibly in a free-market. If a child asks me “should I save” , I would say “yes you should save” , but I would not recommend to the child a website on investment theory.
If kids want to find out more, they will do, they have access to everything they need on Facebook, Google and Buzzfeed.
Kids appear more natural savers than adults
All the evidence from auto-enrolment suggests that the younger you are , the greater your trust in financial services. The greatest cynicism comes from those in later years. The opt-in rates for those below 22 are high, the highest level of opt-outs is among those over 50.
This tells me that people are born free but become enchained in prejudice against saving as they grow older.
This would suggest to me we were better having those at school educating us about the value of saving than the other way round!
This article first appeared in www.pensinoplaypen.com/top-thinking