Financial Triage and Concierge

After working with Toynbee Hall for a while, my ideas about how to help people to manage money came together in a new form – which we’ve started to promote with those helping those who are “financially unhealthy”.


Here’s a link to the first results of this model.


Financial Triage and Concierge: a model for empowering individuals

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How can we teach financial capability


This is a companion piece to “What’s the problem with financial capability?” There I suggested some issues with the practice of teaching financial capability.  Here I cover questions asked about how to implement the ideas, and objections to changing what is done now.


  • Values are important for motivation and happiness, but we shouldn’t impose values on people.


Don’t confuse “personal values” with “what a sub-section of society value”.  It’s not about imposing should’s (“you should work hard”, “should get a steady job”).  It’s about finding out what actually motivates the person.


There’s evidence (read anything by Martin Seligman) that working at something you value personally is more satisfying (read “Flow” by Csikszentmihalyi), it motivates you to achieve more and leads to happiness.


Try this, you’ve made a change now (gone to university, started your business, got your new job, quit your old job).  Imagine you’re ten or fifteen years older and are looking back, having had fantastic success, achieved what you wanted. You’re interviewed by your favourite interviewer on TV.  What do you tell them you’re proudest of, what achievements do you think made it worthwhile – what is it you’ve achieved? (there are several more exercises on this in Taming the Pound).  That’s your personal value.


Somebody may find they “value” being wealthy, that’s fine if it’s true. They will work hard and learn whatever they need to get there, so there’s no problem with motivation.  What will happen in fact is that, when the money motive is taken away, they’ll start to think about what really matters to them.  They might want to start a charity to help with a problem a relative or friend has suffered, establish a business, become an ambassador of goodwill – the point is that it’s something that’s an internal value to them.  If they (with your help) tie what they’re learning to that objective, they’ll be working for something that makes them happy, that really motivates them to learn and that will give them immense satisfaction in the journey, rather than only in the arrival.


  • But people do want money, we’ve tried the “you don’t really want money itself, it’s only a tool” line and it doesn’t work.


If you say it, it’s not true; if they say it, it is. So get them to say it.


Try this.  Imagine you win the lottery and you’ve got £50 million. What would you do?  No self-editing— no matter how crazy it sounds. Write down the first 15 things that come to mind. Be as specific as you can.


After 20 minutes, look at the list and see where the desire for it has come from: “someone else has one,” “this is what I should want,” “I always said ‘when I grow up I want. . . . ’ ” Now separate the list into three “buckets”: things you feel you should want if you have £50M, things someone else (family, friends, and so on) thinks you would want if you have £50M, and things (or activities) that you really want. For example, do you feel that if you’re a millionaire you have to have a big house like the one you’ve seen in Hello? Do you want a Ferrari because the guy up the road bought a Mercedes?


Now, count up the things that come from the media and adverts.  Look at desires driven by competition with friends and family (to prove you’re the best) or enemies (to shut them up), the stuff that “experts” have told you that you ought to want, the ones you’ve been sold, the ones that your parents want. Finally, add up the ones that could fulfil your dreams, ones that you would truly value and be happy about long term. With clients, the last list is always the shortest.


Money is a tool and most people do realise it when they stop focussing on the money itself and move to what the money is a tool for them to achieve (there’s more detail on this and other exercises in Finance is Personal)  If they still just want the money, great, they know exactly how much they need and exactly what they’ll buy with it when they get it – so they’ve got a definite goal.


  • Teaching better decision making is too complex, we have to focus on particular financial issues.


Since I’ve taught decision making in universities, with public and private sector organisations and professional organisations, I know it is possible.


And it’s needed, even judges and experts who have to make impartial decisions don’t actually know what influences them, like blood sugar and their own biases 


It isn’t simple to know how to counter that.  But that’s why I’m a qualified psychologist who teaches this material.  Notice that the Research Briefing points out both that “As most people are unaware of their cognitive biases, they are hard to control, but their effect may be mitigated by a variety of targeted strategies” and “training judges and educating jurors may reduce the influence of cognitive biases in court.”


That indicates that you can target those problems with strategies (i.e. there are methods to help people make better decisions) and that training can help – so you can train them.


I tend to use a lot of the literature on decision making in my work, and I’d recommend reading Risk Savvy (Gigerenzer), The Power of Intuition (Klein), The Power of Habit (Duhigg) and Influence (Cialdini) if you are interested.


  • We already teach skills like budgeting, that’s what people need, so general decision making can be learned from that.


There are hundreds of ways to budget suited to different situations. Who says the one you teach (or the one they remember, if they remember) is going to work for them in their situation in ten years’ time? If you do it that way, the people you teach:


  • don’t know which one to use in a given situation (like learning statistical formulae and not knowing which one to use for real work, because all the practice in learning them was a series of questions on a particular formula).


  • can’t remember it, because at the time it didn’t seem relevant, there’s not enough motive to remember


  • it’s out of date, since 10 years after you teach kids about finding the best mobile phone the technology is different, nobody wants a phone (they have implants or wearables), there have been 3 changes of Government and 13 budgets and all the laws, taxes, protection and everything they can remember (if anything) is irrelevant.


  • could apply principles to specifics for themselves if they’re motivated and you’ve taught principles, but can’t derive general principles from specific examples without some help at the time.


  • We already work on real world decision making, like doing things around mobile phones so this is nothing new.


As above, picking examples like phones sounds real world, but it goes out of date quickly and it’s actually narrow, it’s tactical. Problem solving in the real world is strategic.


For example, how does being able to work out a good interest rate help with making decisions about what course to follow at university, or what house you actually want to live in?  It’s too specific a skill.


If you teach prioritisation skills, people can work out what they really want (from a phone, a degree or a house) and separate wants from needs for their own unique personality.


If you teach judgment, they can understand how they, personally, tend to make decision errors – are they too emotional, jump to conclusions and ignore evidence or do they try to be too scientific, make up complicated formulae that are actually meaningless but give them a false sense of accuracy (what happened to LTCM, look it up; also true of the basic investment theory used in markets, MPT). Or do they make different sorts of error in different situations?


If you teach about values, they can work out what they really want, and what their real goals are.


And if you teach about the brain and thinking, they can work out the best way to make different types of decision, given the situation they’re in – not simply following a rule they’ve been given irrespective of reality.


  • But you can’t teach this stuff, it comes with experience.


One reason 70% of people are in debt is that they haven’t learned from experience how to make decisions well.  And reflection, one of the methods I use, is the standard method of professional development using experience in many areas, and increasingly an assessment method at undergraduate level and beyond.


It’s also well suited to learning for adolescence onwards, I’m currently using it in a project helping young offenders not repeat offending and there’s interest in extending it to ex-prisoners so that they have the skills to integrate into society effectively and be productive community members.


Shouldn’t the next generation of kids get the same opportunity?



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What’s the problem with financial capability?

It sounds easy to teach – just teach financial skills.  So why doesn’t that work?  A few reasons.


  • We think of financial capability. 


But finance is only one tool in life, there are many others. There’s making good decisions, such as decisions about careers, health, housing as well as money.


Learning about finance doesn’t help to make better decisions generally.


Learning about how we make decisions, about how our minds work, how to separate needs from wants, to realise what our real passions are and work out how to pursue them helps with any sort of decision.


  • Life success isn’t about finance.


Would you rather be happy, productive and fulfilled, or rich?  The evidence is that materialistic values, having lots of “stuff” is actually linked to unhappiness, while doing things that have a value for you , doing things for which you have a talent, using money for the benefit of others ( are all linked to a fulfilling and happy life (and greater business success).


And a focus on finance as the sole object limits us.  Instead of choosing to study or work in something we love, would excel at and would eventually earn above average in, we do something that pays well on average, but that bores us and end up at the lower end – and miserable but trapped in a job we can’t afford to leave.


  • Finance is actually pretty simple to learn.


People say finance is difficult and because people say it, others believe it – we conform to norms (read “The Emperor’s New Clothes” by Hans Anderson).  Marketers use “9 out of 10 said….” because we listen to other people’s opinions to form our own – read “Social Proof” in Cialdini’s “Influence”.


Finance is relatively simple.  All pound coins are the same, they have no emotions, make no wild decisions, one pound plus another pound is always two pounds. Finance depends on money always being basically the same, or it can’t be exchanged properly and loses its function.


  • It’s people who are complicated.


Each person is unique, they have emotions, make irrational decisions.  Take one person and add another and you could have the cure for cancer or a weapon of mass destruction.


The human brain is the most complex single entity in the known universe.  It has emergent properties (complexity), it’s not linear so the results can be massively more or less than the sum of the parts and thesame  starting conditions don’t always lead to the same conclusion (chaotic), it’s self-organising and constantly rewiring itself and most of it isn’t available to consciousness.  It also comes with no user manual!


  • Learning anything depends more on motivation than complexity.


Most people can remember things they want to. People who are “bad at maths” can quote batting averages, count backwards in trebles ending on a double in darts and quote the goal scorers for the last 50 years for their team. People can remember, or instantly forget, Strictly contestants, Bayes’ Theorem, shopping lists or quantum physics formulae. Whether they remember or forget depends on relevance to their interests, not complexity.



Most things are simple if we actually want to learn them. The problem is that most people don’t want to learn finance. Hands up if you actually want to learn all the rules on pensions!



  • Life is not logical, so “rational thought” doesn’t always work.


In a casino, rationality (if you’re sensible) rules. You know the odds, the payoff, when the gamble ends and you know that the game doesn’t change in the middle.  Learning probability and statistics (like Bayes’ Theorem) is necessary. So from “A Beautiful Mind” to the Nudge Unit, we’re told to be “logical” and that the use of thinking that is “irrational”, “intuitive” of “heuristic” (mental short-cut) is a Mortal Sin.


In real life (and financial markets) you don’t know the odds, the payoff or when the gamble finishes (if indeed it does finish). The game regularly changes in the middle, due to technology, the budget, competitor action etc.


Tell me, which one is actually a gamble?


That’s a reason you have banking crises, market slumps, pension funds that disappear, sudden debts – people assume that the theory that works in a lab or casino applies to life and that is simply not true.  Read “Risk Savvy” by Gigerenzer.


  • Humans are well adapted to real life.


We evolved over 250,000 years or so to deal with life as it actually is – without casinos, John Nash, misinterpretations of Kahneman and Tversky and behavioural economists worshipping a painted idol called “rational thought”.


Everybody alive exists because our ancestors thought fast enough to survive.  Try applying Game Theory or Bayes’ Theorem to the question of whether it’s good odds to try to chase lions from a kill – see how many descendants you have when it takes you 45 minutes to work out whether to fight or run.


  • Unfortunately, the life we’re adapted for is hunter gathering – which most of us don’t do


Modern life isn’t what we evolved for, so we have various adaptations that served us well in the past, but don’t always help now.  They’re what behavioural economists keep moaning about, the “irrational” human mind, not realising that that’s the way it is and you can’t just change it and become a Vulcan and “logical”.


For example:

We have optimism bias, (, read “The Optimism Bias” by Sharot) because we need hope to get us out of bed (or our cave) in the morning.  We think we’re more in control than we are which is why so many projects are late and over budget, homework is handed in late, we never do as much on our day off as we expected etc.  We genuinely expect to pay loans back, we just don’t quite manage it in reality.


We evolved to think short term as going hungry today might mean dead in a week, so money today is much more valuable to us than money in a week, a month or a year.  That’s a reason pension provision is inadequate, £100 now has more value to us than £10,000 a year in 40 years’ time,  So we genuinely feel we need the money now, we only want to have the money in the future, so we have to borrow it now.


We learned to keep track of favours, obligations, debts etc. as mental accounts, so we treat money on credit cards as different to cash ( although it’s all, ultimately, of the same value objectively.


Having mental accounts and similarly having confirmation bias and being loss averse make perfect sense if you are a hunter gatherer (read Fiske, Structures of Social Life, Barkow, Cosmides and Tooby, The Adapted Mind and Pinker, The Blank Slate).  But in modern life you’ll probably pay more on credit card than you will in cash (nearly everybody does), you’ll distort the evidence to fit what you believe to start with instead of actually testing whether you’re right (we all do) and you’ll miss out on opportunities that rational thought would indicate you should take (most of us).


Notice, none of the problems are about money, they’re about how we operate as people


  • And there are a scores more reasons that it’s difficult to teach “financial capability”.


As examples:

Our habits are strong and hard to change (read “The Power of Habit”, by Duhigg).

We’re often ambivalent about whether we really want to change (read about Motivational Interviewing for change).


We have trouble deferring gratification (look up, “the marshmallow experiment”) and use the wrong tactics to do it.


We often apply the wrong tactics, at the wrong time and keep hoping for a magic solution to change instead of actually working at the right things (read “Changing for Good”, by Prochaska, Norcross and DiClemente).


We don’t know our own minds (look up, “the rope bridge experiment”, an example of how we don’t actually recognise the emotions that drive our behaviour).


We learn unconsciously – our “money stories” are very powerful, what we’ve learned early on about money stays with us (read about “life scripts” in Transactional Analysis and chapter 2 of “Finance is Personal” by Stephenson and Hutchins).


  • So what could we do?


Teach general skills, like decision making, prioritising and judgment that have multiple uses.


Teach how the brain works and how it can be controlled so it helps us, rather than confuses us.


Focus on motivation, what we value, happiness, fulfilment.


Teach ways to build motivation, to separate wants from needs for the individual and how to change habits and behaviour.


Teach the control of impulses, allowing people to put off gratification (such as saving for things).


Treat money as simply one tool in a whole toolbox to help achieve a happy, fulfilled life.


In short:

  • We think of financial capability



De-emphasise finance and emphasise human capability.


Recognise that we’re the complex, important part and that money is simple, relatively trivial and our servant, not our master.





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Financial ignorance

happy not richI was surprised how simple the questions described in this research were.


But the most surprising thing is how much difference they claim some basic financial facts would make, as in the quote: 


“Lusardi and Mitchell found that providing financial knowledge to people with low levels of formal education boosts their economic situation by an amount equivalent to 82 percent of their initial wealth, while the equivalent value for college graduates is a substantial 56 percent.”


Which suggests that, as a college graduate, if I didn’t know those simple answers I’d be considerably worse off.  Or, actually, given that I’m qualified as a financial adviser as well, I’d probably have gone bankrupt by now if I didn’t know any finance!


The research does suggest that people can benefit from learning some basic information (very, very basic information).  But it appears that the assumption is made that if you continue to throw financial information at people, they’ll automatically make better and better financial decisions.  


Not true. the people who claim to know the most facts about finance are economists and bankers – do you think their knowledge indicates that they make top notch financial decisions?  If you do, where were you when economists said that LTCM was a great idea and bankers poured billions into it?  Where were you when Fred Goodwin was Knighted and made European Banker of the Year and economists and bankers thought these were well deserved?


Yes, it’s useful for people to have some basic knowledge about finance, but more isn’t necessarily better – it tends to lead to overconfidence (such as bankers and economists – and men generally) tend to have about that knowledge.  It’s better to know than not to know, but how much is enough?  Should you know enough, for example, to come up with your own theory to compete with the half-dozen or so theories about why LTCM failed?  Is that going to save you from financial mistakes – for example, spending money on “keeping up with the banking Jones’s” when they purchase a new car, leaving you with massive debts that you can’t shake off for something that you don’t actually need?


You’re better off, if you want to learn something, to learn about yourself, how you typically think, what financial mistakes you repeatedly make, how you can motivate yourself to behave differently and set effective financial goals.  And rather than finance itself, the key knowledge to have is about what, ultimately, you value to make you happy.


You can learn about finance in the hope that your money will somehow know what you want and if you serve it faithfully will provide it for you.  Or you can learn what you want, and use the money as a servant to get it for you.


Who do you want to be the focus, and the boss – you, or your money?





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Dealing with debt

Debt coupleAnother headline about debt recently was how 4 million people owe almost £130 on their energy supplies.  


Do you think that people decided to owe money?  


Apparently a third owe more than they did a year ago and less than a tenth owe less.  Not surprising, because apparently the average bill is up £53 on the year (to £1,265) and up £793 (172%) on ten years ago.


Obviously, reports confuse the maths because they quote fractions and percentages (but not both) the first time they mention the figures so it’s difficult to compare one with the other.  Then they don’t quote either percentages or fractions and just give figures, which means the information is presented in about four different ways and unless you’re quite good at maths, you lose track of what the real facts are.  I’m never sure whether that’s for dramatic impact, because nobody involved actually understands how to work out percentages from figures (or vice versa) or what percentages are as fractions, or possibly that they’re deliberately trying to confuse people.  But I do know that most people reading the reports are unlikely to have a clear understanding of all the figures.


Because nobody really understands it, comments such as “despite knowing they could reduce their bills by moving to a cheaper energy plan, many see debt as a barrier to switching”, go without comment.


I’d want to ask – “how do you know the reason that people don’t switch is seeing debt as a barrier?”.  And, “so what reason do the other people, who don’t see debt as a barrier, have for not switching or even better asking for more useful help?”


And if people are so clued up that they know about switching, know it might be a problem if they have debt to pass over and therefore may need to get help or clear the debt before they switch, why don’t they have enough clue to:


  • Get a loan to clear the debt (is it really going to be so hard to borrow £130?)
  • Work out that “with a difference of more than £300 between the cheapest and most expensive tariff on the market” they could get back that £130 in about five months.
  • Find a cheaper tariff that doesn’t hamper them just because they have a debt, or arrange to pay off the debt with the new provider.
  • Get some of the help from the Department of Energy and Climate Change, who say “support is available to vulnerable households”.


The point is that people don’t make decisions logically.  Even the people who think they are rational and make “logical” decisions, don’t.  Human beings simply aren’t like that.


There can be all sorts of reasons people don’t switch, and I doubt that working out rationally that having existing energy debt might be a problem is in the top 100.


The top half dozen reasons are  going to include shame at being in debt at all, feeling stupid for not knowing how to deal with a common feature of modern life, embarrassment at having to ask for help, and confusion over the choices involved and the conflicting advice they are given.


It would be a lot more useful if people were helped to understand that everybody feels they “ought” to be:


  • logical,
  • able to make rational decisions if faced with multiple options,
  • a responsible adult and able to cope with all of life’s challenges without any problem,
  • never be “weak” or ask for help,


And it would help to teach people that in fact, we’re all human.  That means that, in fact:


  • nobody is logical,
  • nobody can really deal with more than about three choices without having to simplify the options and take short-cuts,
  • everybody wants to think they are at least as smart as average and fears they aren’t, 
  • everybody wants to be seen (and to see themselves) as a responsible adult and doesn’t want to admit that they can’t cope sometimes,
  • everybody thinks that seeking help is a sign of weakness,
  • everybody thinks that “other people” have got it sorted and will laugh at or despise anybody admitting they are scared, in debt or confused. 


It would be great if the message would go out that people are human.  And instead of banner headlines about problems and how help is available, with speculation about why people don’t act logically or use the information available, we started to teach people what being human means, and help them to deal with their reluctance to seek help and actually solve their problems.







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Investment advice

Why do people keep giving financial advice that is biased and omits vital details?


I read an article in the Financial Mail on Sunday.  It’s not exactly a professional journal, but it reaches a lot of people and, sadly, a lot of the readers think it’s worth reading as it’s “independent”.


They’re talking about a “Dogs” portfolio (of the 10 highest yielding shares on the FTSE 100) which, allegedly, is beating the FTSE 100 index.  


It may be doing that – but what they don’t emphasise is that they’re investing a “notional” £10,000.


This, they allege, would have grown to £12,141 as distinct from £11,211 since Spring 2012.


Fine.  So it’s “notional”.  That means it’s ignoring all dealing costs.  It’s ignoring any bid/offer spread (on units if it’s a fund), initial charges, stamp duty, ongoing administration charges, any fund charges for management, transfer charges and anything else such as losses from delays in getting out of bad stocks and the tax charges and accountancy costs etc.


You might think that doesn’t make much difference.  But if you look at Barber & Odean’s classic paper “Trading Is Hazardous to Your Wealth: The Common Stock Investment Performance of Individual Investors” you find that it makes a lot of difference.  To quote:


Using account data for over 60,000 households from a large discount brokerage firm, we analyze the common stock investment performance of individual investors from February 1991 through December 1996. The average household tilts their common stock investment toward high-beta, small, value stocks, and turns over 80 per cent of their portfolio annually. On one hand, the gross returns (before accounting for transaction costs) earned by the average household are unremarkable; the average household earned an annualized geometric mean gross return of 17.7 per cent while the value-weighted market index earned 17.1 per cent. On the other hand, the net returns earned by the average household lag reasonable benchmarks by economically and statistically significant amounts; the average household earned an annualized geometric mean net return of 15.3 per cent. The 20 per cent of households that trade most (which average at least 9.6 per cent turnover per month) earned an annualized geometric mean net return of 10.0 per cent. The poor performance of those households that trade frequently is generally consistent with the implications of recent theoretical models of investor overconfidence. Our central message is that trading is hazardous to your wealth.”


So if average trading reduces the annual return from 17.7% to 15.3% when times are good, what do you figure it will do to costs of the Dogs when times are not so good?  Remember they have to trade periodically and they’ll certainly trade when shares rise so the yield falls and the yield drops out of the top ten, when shares fall and they cut their dividend etc.


As Warren Buffet said, over the last 35 years [this was to the late 1990’s] it “should have been easy for investors to earn juicy returns.  All they had to do was piggyback corporate America in a diversified, low-expense way.  An index fund that they never touched would have done the job.  Instead many investors have had experiences ranging from mediocre to disastrous.”


But people aren’t content with those returns, they try to find a way to do better, and usually do significantly worse (and, occasionally, do slightly better for a while, before they again do worse).


And the prime reason Buffet suggests for the experiences he describes:

high costs, usually because investors traded excessively or spent far too much non investment management”


With all the interest in human behaviour and decision making of late, you’d think it would be reflected in the way investment advice is given.  After all, there’s lots of talk about biases, mistakes in logic etc. nowadays.


But no, the fact that Thaler (who is a poster boy for the research by dint of being the Cabinet Office adviser and the author of “Nudge) and De Bondt produced a report that said that:


“75% of funds trail the index and of the ones that don’t half keep up only by luck”


is ignored and people still try to find ways to “beat the index”, pick fund managers who can, devise schemes, theoretical approaches, stock picking ideas etc. that ignore costs and other elements of reality.


If they were logical, they’d accept that they are biased, they are desperately trying to justify what they want to do, which is suggest a way to beat the index – but they don’t want to do it with their own money because they know they’ll lose it.  They want you to gamble your money on it, and quote selective details (such as those that avoid all the costs and work on a “notional” basis) to try to induce you to do something daft.


As a final word, let’s look at what Warren Buffet, the one person who actually has consistently beaten the market says is the best advice.   


By periodically investing in an index fund, for example, the know-nothing investor can actually out-perform most investment professionals. Paradoxically, when “dumb” money acknowledges its limitations, it ceases to be dumb.”




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Too much month, not enough money


Generally, the more “right wing” our economic/political view, the more likely we are to regard money as being a reward for effort and talent, the more “left wing” the more we may be suspicious of the effects of money.  


Perhaps a good way to sum up the political/social angle is with a couple of: “I wish I’d said that” items.


First, a quote:

“If you want to know what God thinks of money, look at the people He gives it to.”

Joe Moore


If you think that is unfair, perhaps you’ll like the story (probably apocryphal) about the reporter who interviews the very rich man.  Towards the end of the interview, the reporter says:


You know sir, if I had as much money as you I’d never work again.”  The rich man replies, “Boy, that is the reason that the Good Lord will see to it that you never have that much money.


That’s a quote from what I wrote in Taming the Pound, about three or four years ago. 


I was reminded of it when I saw an article about poverty driving nearly a million (913,000) to food banks.


The Trussell Trust (a Christian charity that works to combat poverty and exclusion and apparently the largest provider of food banks) said that this was “the tip of the iceberg” as it doesn’t include “those helped by other emergency food providers, those living in towns where there is no food bank, those too ashamed to seek help”.


Taking the last group, it ties in with the Money Advice Service figure of about 1.5 million of the estimated 8.8 million who are “over indebted” (political speak for in deep s**t) – but nobody seems to be able to work out whether this is because they’re ashamed to ask for help, don’t know where to go for help, don’t realise they’re in debt and so on.  


It’s a standard official answer that people are too stupid to know they’re in debt, or have no idea where to go (despite the MAS spending millions on advertising on TV, on buses etc.).  I doubt it, I think people are quite complex and for all sorts of reasons (but not ignorance about money) they choose not to address the problems they have in much the same way that people soldier on with illness, relationship breakdown etc.; they know it’s going on but they try to ignore it because it’s too painful to deal with.


After all if, even when people need food, they’re still reluctant to ask for help, doesn’t that say something about complex human motivation – surely even the Government and the MAS don’t really believe that people are so stupid that they don’t know when they’re hungry.


But the whole thing has stepped up a notch now, with an article that one of my friends referred me to in the Guardian.


It looks as if the argument is that any person with a disability or indeed without a job is being categorised as lazy and work-shy and therefore deserving of starvation. That’s apparently not everybody’s opinion, because a couple of days before there was an Observer article that suggested that while IDS (who does sound like a disease, his critics are right) thinks that food banks are evil and encourage laziness, Cameron (fresh from his latest attempts to be a Blair clone and embrace religion – although I don’t think he’s trying to be Pope), says that the Christian charities like Trussell Trust are doing a good job.


It would be quite nice if they’d actually think about what they’re saying (hard for politicians, I know).  Do they truly believe that “the disabled” are one, unitary group?  Do they really think, seriously, that everybody who hasn’t got a job is lazy or that everybody who doesn’t ask for help is ignorant?  I’m prepared to accept that people might be too stupid to understand the benefit system (nobody understands that), but surely there are plenty of reasons why people don’t ask for help, don’t have enough food or don’t have a job.


It’s the sort of simplistic drivel that I was trying to point out in the quote at the start of the article.  The sort of rubbish that Boris (another political simpleton) spouts regularly and that I said last year would be a problem by increasing financial hardship.


Why is it politicians and policy-makers, officials and all the rest fail to understand that people are complicated?  There are no simple answers.  Yes there are some lazy people who fiddle the benefits system, and there are plenty of people who through no fault of their own can’t get a job although they want one, or want one but can’t afford to take one because of childcare issues etc.  Similarly, there are people who can’t afford food because they’ve lived beyond their means and become the authors of their own misfortune and there are those who can’t afford food because they have suffered bereavement, had appalling luck and simply don’t have enough.


There isn’t an easy, unitary answer, each person is unique and trying to claim, as most of the powers that be do, that “all people in this situation are lazy/martyrs/stupid/oppressed” is harmful.  That attitude perpetuates the same stupidity shown by Boris, and the facile reasoning of the quote at the start, with the difference that at least the quoted examples are funny.


I realise that in talking about this my article title brands me, I think of income as monthly, not weekly or daily – so I’m from a background of relative privilege.  But really, shouldn’t people who have the power to do something about this not be so childish and simplistic, and shouldn’t they challenge the notion that the only thing that matters is money – so that greed isn’t good and the most good we can do is to make sure that we don’t have people queueing up for food parcels?





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Pensions: are pensioners adults?


There has been a lot about pensions since the budget bombshell, particularly in the financial press.


George Osborne plans to allow savers to take their entire pension pot as cash when they reach age 55.  


He also said that the Government is consulting on proposals to introduce a face-to-face at-retirement guidance service for all Defined Contribution (where the pension depends on how much you put in, rather than on your salary) pension scheme members.


One of the things being said (and it wasn’t a prank, although it came out on 1st April) was that there would be a “skills gap” in providing advice, particularly if that “face-to-face” idea is actually implemented.


So Brooks Newmark, the Conservative MP for Braintree said, “It still seems to me there is going to be a gap in terms of the number of people and the quality of advice that is going to be needed, and which could leave the potential for errors and abuses.


MPs were apparently “grilling”, the Director General of the Association of Professional Financial Advisers, Chris Hannant.


There were lots of reasonable points made, which is pretty unusual for a group of MPs.  


Hannant said that if “everyone who is retiring next year was to seek full advice there would be a challenge on capacity.”


Which is almost certainly true. Of course, he added that this was a challenge for “the advice sector to become more efficient, and that advice could be delivered more cost effectively through the use of junior staff who are overseen by fully trained advisers.”


That, on the basis of 30 years or so of experience a couple of degrees, a couple of post-graduate degrees, financial planning qualifications, being a registered supervisor etc. is a pretty good plan for causing chaos and giving some awful advice. 


But surprisingly, to me anyway, Newmark said: “It still seems to me there is going to be a gap in terms of the number of people and the quality of advice that is going to be needed, and which could leave the potential for errors and abuses.”


Very sensible, as was the enquiry from Andy Love, the Labour MP for Edmonton who “asked whether lower cost advice channels could help fill the gap between advice and guidance.”


But my award for the best comment was, as quoted in the Money Marketing article, from Syndaxi Chartered Financial Planners managing director Robert Reid, who said, “At long last people are being treated as adults – we just have to hope they behave as adults.”


And that’s the point.  We don’t have to hope they act like adults – if we did it’s a forlorn hope because people don’t behave like adults about money (at least, they don’t behave logically, maximise their resources, prioritise sensibly, behave in accordance with their goals and plans or behave in a way even remotely resembling how we imagine adults do).


The emphasis in all these ideas is on the money, the question posed being, how can you maximise post tax income? 


And that might be important.  But what people choose to do is now more open.  It used to be that you had to buy an annuity (basically, an annual income) and you couldn’t have the money until about sixty or older, now it’s a lot easier to take lump sums, you can take the money earlier, you’ve got a lot more options.


And we know that having more options makes choice harder, not easier.  We also know that faced by too much or too complex choice people won’t make a decision at all.  


And we know that, as Caroline Rookes, chief executive of the MAS, said about a survey they commissioned last year, ‘Millions of people could escape their spiral of debt by accessing free advice.  However, this study presents us with a fundamental challenge: the majority of people with debt difficulties do not seek advice.”


That rather puts paid to the apparently sensible idea of Andy Love about low cost channels.  You can give people free advice (let alone low cost) and they won’t use it.


Because the real problem is that it’s the wrong sort of advice.  Not that the financial advisers are bad, I used to be one, and I know the majority work very hard to help their clients and to give them the best advice they can.  


The problem is that what everybody is focussed on is the technical stuff about the money, maximisation of income.  That’s useful, but it’s not really much help unless somebody knows what the person actually wants from their money.  


You can try to sort out different ways of getting the pension out and maximise what they’ve got at a given age, but what if they really don’t need that because they’re going to do part time consultancy, or if they want to have a big holiday while they are young enough to enjoy it rather than maximising their income for the next 20 years?


What people actually want is to get the life they want.  But nobody seems to be concerned about how to help them to work out exactly what that is, and what money, when, would best help them achieve it.  


The money side of pensions is pretty complicated.  But compared to the human brain, the single most complex thing in the known universe, pensions are laughably simple.


So what we could do is to train the “junior” staff that Hannant mentions, the “low cost channels” that Love suggests, the MAS staff that Rookes manages to help people behave like we fondly imagine adults behave.  


That would mean that people would know what they actually wanted, and they’d be able to be relatively specific about the way that they wanted their retirement income to go, and they’d have a good idea of what “maximising” the value of their post tax income would be for them.  And that would make the job of the advisers a lot easier, they’d be using their technical skills to aim at a defined target, rather than trying to produce some sort of magical answer that would work for everybody.


And we could even try to educate people about retirement and pensions.  Not about the technical details, tax and so on, but about lifestyles, choices, happiness, fulfilment  – things that are actually important to people and that you may be able to use money to help with (or may not).  Because if they know about those, they know what they want from their money.


It’s pretty simple, are the people to be the servants of the money, or do the people make the choices, and the money is used to help them implement the choices?


The way it is, the money rules, and the people do what the money says.  Does that sound adult to you?  It could be changed to you being in charge and the money (with technical help on tax, pensions legislation etc.) being your tool – which would you prefer?








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No-nup or no brain?

There was a piece in the Evening Standard the other day about agreements for co-habiting couples, a “no-nup” (equivalent to the “pre-nuptial” agreement of married couples).


The theory seems to be that it’s a sensible idea.  Maybe, but I think it might well be more of a “it seemed a good idea at the time but it’s turned out expensive and divisive” idea in fact, for most couples.


 I talked in Taming the Pound about pre-nup ideas, and the basics still hold true for no-nups.


On the plus side, getting agreement is a good thing.


But is sitting down and detailing what each of you brought in and how you split the bills at the start (before pay rises, promotions, job changes, children, redundancy, changes of mind, retraining etc.) “getting agreement”?  


In the same issue of the Evening Standard (March 31st) as the no-nup article there was another piece headlined “Father sues son for return of £2m classic cars.”  Apparently the father lent four cars to the son when they had (according to the court papers), a “good relationship”. Three or four years later there are mutual accusations and a court case.  


What do you think, is the problem that they hadn’t paid a lawyer to draw up a cast iron contract – or is it that the relationship broke down?  Dad says he lent the cars and the son didn’t return them.  Dad claims his son sent a text and said they’d be returned if they never saw one another again.  That didn’t happen and now dad is suing for return of the cars in good condition or 3 million Euros in damages.  Son can’t be contacted but “is expected to contest the allegations”.  


What do you think, would a legal contract made four years before cover sending a text and cases of “he said,  (s)he said”?


I don’t think so, I think it would have meant paying fees for a contract, and then paying again when it all went sour.  So wouldn’t it have been a better investment to spend less on the cars and the legal side (like suing one another) and more on actually bonding so they talk, rather than text, and they have a relationship and don’t wish never to see one another again?


But getting back to couples, is the issue what is brought into the relationship or how things stand at one moment in time? What about changes over time, aren’t there bigger things in a relationship than who owns more of the CD collection?


I said in Taming the Pound:


I’m not talking just about practical things like wills when you have children, buy a house or get married.  I mean your ideas and values.  What do you both want from life, what would make you happy? 

Are jobs of vital importance to both, one or neither of you? 

Do either or both of you dream of doing something different, maybe travelling or conversely being centres of the local community? 

What is going to make you happy, and what is going to make your partner happy – do you know and do you ever talk about it?


Aren’t those more important issues and more likely to make or break the relationship?


Similarly, if you look into the future (whether you’re married or not), 


This starts to get more complicated if you have children. 


(and it applies to gay couples, married or not, who are adopting children)


What does the person who gives up more time do if they don’t have paid work because of children? 

Do they get to feel like a free-loader because they are not paying their share any more, does the one who is earning more pay them for their time, and if so, how much? 

What about if you earn different amounts to start with; do you allocate the value of the house in proportion to the amount you put in (so if one pays 2/3 of the mortgage and the bills, do they get 2/3) and what happens if the relative incomes change, one of you loses your job etc.?  


Also, what about cars, do you have a better car because you have more money, so your partner isn’t allowed to drive your car? 


What about if one of you wants to study for advanced qualifications or to get another job, and has to take a cut in salary to do it; do they give up their share while they are not earning, do they get paid a proportion that they pay back, how does it work?


Those are things that need to be thought about as the relationship progresses.  And they’re why I said (prophetically as it turned out).


That’s one reason why, when people say to me that “if we get married I’d insist on a pre-nuptial agreement” I tend to ask how many hundred pages they think it will need to cover everything.  Not that pre-nuptial agreements are a bad idea inherently, it is just that if you haven’t sorted out the values in the relationship (do you want children, what are your values that you want your money to help you achieve, how important to happiness are your jobs, etc.) you will have a hard time setting everything out.


You can’t rely on “we have shared values about …..,” you can’t use a shared common sense approach; you have to nail it all down in writing.  That doesn’t tend to engender trust, so if you start to write it all down, you have to write it all down.  That doesn’t just take the romance out of it, you end up with something the length of war and peace to argue about on cold winter nights! 


On the other hand you can make the assumption that your partner sees it all the same way that you do without even talking about it, and if you find you don’t share the values, either the sketchy pre-nuptial agreement isn’t going to give you the answer or you have to decide to rewrite it every few months.


So I’d suggest talking about your values in depth, then if you want to put it in writing afterwards, fine. 


Go into legal deals first off and you’ll probably never get as far as values, you’ll be too busy drawing up battle lines.  The only people who make money from disputes are lawyers, not the two of you.


And perhaps that’s the key point.  This suggestion has come from a legal firm that charges £25 per month (per month!), for unlimited legal documents (there’s never any shortage of those), a 30 minute consultation (wow, a whole 30 minutes!) and up to (which of course, includes the figure zero) off additional legal fees (which you can be sure will occur).  


Or, for about half the monthly fee you could buy Taming the Pound.  And for less than a year’s subscription you could get about four hours of consultation with me – and you wouldn’t be paying ever after.  I’d even help you make a list of what you brought into the relationship if you really want, but I honestly think that there are more important things to talk about with somebody that you’re serious enough about to consider sharing your home and your life with.







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Mindfulness, happiness and finance.


It looks as if the UK military are catching up with the US marines.  According to the Sunday Times, senior military personnel are being taught “happiness” lessons and meditation.


The inverted commas indicate that there is still a fair amount of scepticism about it, from the journalists at least.  Which seems to contrast with what was said in a similar article about the Marines a few months ago. But it does seem that happiness, mindfulness etc. are being seen as realistic ways to improve performance by the Western world’s military.


So I’m quite please by the fact that Taming the Pound (which went to the publishers over three years ago) has as a key point happiness.  And it covers mindfulness as a viable way of making better decisions, defining priorities that really matter and dealing with the pressure of life without getting pushed into debt, short term thinking and risk-taking. As I mentioned in a post a while ago.


I’m wondering if I was really prophetic.  I did suggest that we ought to teach this stuff in schools, and that financial “experts”, like bankers (and the economists who advise on the National economy) ought to have to learn it as well.


Maybe that will happen – it really will be a strange world if education and finance (that are thought to go for experiments – often bizarre ones)  stay rooted in the 19th and 20th century while the military (notorious for conservatism, tradition and clinging to the past) move into the 21st.


Maybe I’m winning and the powers that be in finance, Government and education will actually begin to adopt methods that work – wouldn’t that be great.







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