Financial Education 2013


There’s good news, and bad news.


The good is that people seem to be realising one of the core messages of this site, the training I do and the book – money isn’t a goal, it’s a means to an end.


And there’s a great article in Psychology Today.  It points out, among lots of other good stuff, that research is showing people are beginning to understand that happiness is more important than other things – notably, than being rich.


Incidentally, that’s one of the reasons that the first two chapters of the book are about attitudes to money and happiness, while investing doesn’t appear until chapter 9, money is simply not as important as the person.


So it’s great to see what I wrote, probably four-five years ago, is getting confirmation in academic research, and practice now.


Also the FCA, the regulatory body for Independent Financial Advisers, want to put “more psychology” (that is, more good and valid psychology, not common misperceptions) into the regulations so that the public are better protected, That’s particularly good because the FCA have control of  RDR, the changes about financial advisers having to be better trained, and taking fees rather than commission.   They’ve said that the team looking at the post RDR changes might usefully talk to me about it.


So, with a song in my heart (so to speak) I went to a “summit” about financial education. And made a point of talking to the senior people (either Chair or CEO, can’t remember which way round) of the Money Advice Service (MAS) and the Personal Finance Education Group (PFEG).


MAS is the body that gives “free, unbiased, independent advice” to the public.  PFEG is is the “UK’s leading financial education charity”.  


So in theory, PFEG deals with teaching children, and MAS gives help and advice to adults.


And I spoke to the Chair and CEO (or CEO and Chair) of PFEG and MAS and gave them each a copy of Taming the Pound, suggesting that it might be handy. For example, if adults learned to look at happiness, values etc. they would be less susceptible to being conned into stupid investments, loans etc.  And if children learned to distinguish between what they want because other people have got it, and what they really want, they might be happier with what they get.  And then everybody can use their money to get happy, rather than chase the money, and be miserable (and often, broke).


They both said it sounded interesting.  And I said that I’d contact them in a couple of weeks to arrange a meeting so that we could discuss it.


And there it ends.  That was a month ago.  I can’t contact them, they don’t return calls, they don’t return emails, they’re never in when I call.


And the MAS site and it’s advice is still about products and “life stages”.  Your life stage might be the same as your friends from school, does that mean you want the same things, that the same things make you happy or that you want to spend your money in the same way on the same things?  Or that the same products will be suitable for both of you?


And PFEG tells children about APRs and products, and the banking system and other areas of National economics.  If somebody tells you that payday lenders, Wonga etc. are bad, the APR is high etc. do you change your behaviour?  Only in the same way that people give up smoking because it’s bad for them, don’t get overweight and diabetic because they are told that they shouldn’t eat too much sugar.  If you find out that PSBR has grown 3% against a Treasury estimate of 2.75% does it help you to any degree to live a happier life?


The focus on products, on the complexities of the “mechanics” of money (interest rates, how banks work etc.) is a mistake.  The money is less complex and less important than the people.  So why don’t the PFEG and MAS use the research and start teaching and advising about the people, starting with helping people (child and adult) to determine what would make them happy, then work towards that?  If I ever get to speak to them, I’ll ask.


If they did that, people would start using their money as a tool, instead of their money using them.





Posted in Advisers, Basic concepts, Children, Current financial events | Leave a comment

How far is poverty?


There were some figures in a report  (by insurer L & G) recently that make quite scary reading.


Essentially, the average household in the UK is 18 days away from poverty.


So if the main breadwinner unexpectedly died or was off work due to a long-term sickness or injury, the family would have just over two weeks until the money ran out.

Obviously, that’s an average, so it probably doesn’t apply to you; in the same way that the “average” family with 2.4 children doesn’t apply to you – unless you have exactly 0.4 of a child, of course!


But it does mean that if some people are far better off than that, some are worse off and are, presumably, less than a week from being unable to pay the rent, mortgage, food bills etc. In fact, the survey indicates that 37% are in that position, they have no savings and could be in trouble tomorrow, unless they’ve got some sort of insurance.


Similarly, the findings indicate average savings of £660, and that the “18 day” figure is more than three times lower than households estimate their savings would last.


What to do?


Read chapter 10 of Taming the Pound!  I explain in there how you can work out for yourself what you need – and then you can get help to arrange cover, change your spending and savings patterns etc.  I also explain how to make those changes.


Interestingly, in the blurb from the L & G (sent to financial advisers) they say, “We also found only 31% of UK households are protected by life insurance or critical illness cover.”


That’s a fair point, but the thing many people need (also explained in Taming the Pound) is “permanent” protection, something that pays and goes on paying if you are ill or injured and can’t work.  It’s not like critical illness cover that gives you a one off payment and then leaves you to get on with it, however long you can’t work (or doesn’t pay you at all if you have an injury or illness that isn’t defined as “critical”). 


The trouble is, critical illness cover  is easier to understand and (most important) sell than permanent protection.  I said in Taming the Pound that ongoing protection is undersold, because of the fact that it’s hard for salesmen to understand and even harder for them to explain.  The figures bear that out, as they have for decades.


So the report is a great wake-up call to look at your finances and your lifestyle.  But it’s a lousy suggestion of what to do about it.


Ignore what people want to sell you.  


Work out what you want to buy and how you want to change, and do that.  You’re an individual, you are complex.  Nobody can tell you exactly what you “ought” to do, or what you “ought” to buy.  You can work it out, then you can decide what you actually need and what is worth doing and paying for.


You are the important bit not the money.  And you are the complicated bit, not the insurance policies.





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Life skills education

I keep seeing media articles lately about teaching things to children.  I’ve seen videos and articles about teaching finance, emotional intelligence, happiness and resilience, thinking skills and entrepreneurial skills.  


That’s great, except that the curriculum is pretty crowded already, and how do you decide what to put in?


Actually, you don’t have to. I mentioned before about integrating different elements into the curriculum.


But we still don’t seem to have got “joined up thinking” in the UK school system (or the system in general, come to that).


As part of the programme I’ve suggested, I’d make the overall goal happiness  That’s the subject of chapter two of Taming the Pound and it’s only chapter two because chapter one introduces the idea of thinking about money in terms of it being a means to an end like happiness, rather than thinking of money as an end in itself.


And I’ve been referred to a really nice TedX talk by Dr Ilona Boniwell,

 which says many of the same things as the book and one of my previous posts, but probably says it better.


Dr. Boniwell does say that we teach mathematics in schools, but not happiness.  I’m not sure I’d agree on the first point.  Certainly, National Numeracy don’t think we do, they say


 Working with a range of partners from all sectors, we will challenge those taking part to improve their numeracy skills to at least Level 1 (roughly equivalent to the standards expected of 14-year-olds). With 17 million people of working age in England currently below this level, the Challenge will begin to tackle an enormous and long-term task.


I’d suggest that if 17 million people are not operating at the level expected of a 14 year old, we’re maybe not teaching maths too well.


But actually, if we teach finance as a functional skill, aiming towards happiness, and we integrate the goal (happiness), the motivation (why, not just what, you learn) and the process (a bit of maths, a lot of problem solving, making choices, deferring gratification etc.) we actually have it covered.


Similarly, Dr. Boniwell says that we teach thinking skills.  Do we?  According to quite a lot of organisations, school leavers don’t understand what is needed in business, for example, for entrepreneurs.


So I think that maybe there are some elements that we need to put in, about what thinking skills to teach.  


And in fact Dr. Boniwell and I are on the same wavelength (and even the same evidence) with a couple of points she makes.  


One is about the importance of knowing what to choose, where she uses exactly the same example as I do, about the fact that more choice, that we think is helpful, makes it harder to make choices (it’s on page 104, about “Status Quo” bias!)


The other is that it is hard to defer gratification and it often needs to be taught, (which is page 379, about “deferring gratification” and in another post on this site).  Actually, there is a nice piece about that which is the subject of a post from Daniel Goleman.


My point is that we can teach a basic, integrated set of skills.  They fit into a way of organising one’s life that I’ve talked about before, but that basically goes:


1. Sort out your values, such as how you personally find happiness.
2. Be aware of your own mind, your tendency to “keep up with the Jones’s” etc.
3. Set your goals
4. Make the plan to achieve the goals

5. Manage your behaviour to stick to the goals, which might mean learning how to make better choices, deferring gratification etc., and might even mean learning a few useful points about finance (like how to use credit cards sensibly) and some simple maths (like understanding when an APR on a loan is going to make you bankrupt).


It’s perfectly feasible to teach people (child or adult) these things and the motivation, such as happiness, is the starting point.  If they aren’t motivated to learn it, they won’t, which is why people don’t tend to learn maths at school, they don’t actually see the point of it.  


We can try to teach bits and pieces, but if we do, we’ll end up with lack of motivation, or lack of basic skills, or people who know lots of small pieces of  “how to” but that can’t actually put a plan together to solve a particular problem, like how to raise the mortgage to buy their dream house, how to save the deposit, how to wait until they can do the deal rather than wasting the money in the meantime, etc.


If we integrate the skills, instead of arguing about whether the priority is to teach happiness, or emotional intelligence, or maths, or finance or whatever, we’ll actually have a population who can determine what they need to be happy, plan how to get it, and then stick to the plan.


In other words, we’ll have a population that has the life skills they need.







Posted in Basic concepts, Values | Leave a comment

Banking regulations and tax loopholes – yawn.


There were a couple of articles in the free London papers on Friday that suggest that the powers that be still don’t understand human behaviour.   It would be funny, except for the fact that they show that the public are still going to pay more than they need, because the powers that be are part of the problem, not the solution.


One, the front page in the Metro, was about how advisers to Government use their knowledge to help their rich clients dodge tax laws.


Twenty five years ago, I used to point out to clients that I couldn’t afford myself.  I advised wealthy people how to make the best use of their money, tax relief etc.  If they could afford me (or more correctly, us, as I didn’t do it all solo), they could benefit. Such as the couple who were, if I recall, an accountant and a solicitor with two children.  They sued one another for divorce and maintenance of one child each, but still lived together. That and various other dodges meant that they paid about £1,000 tax on a combined income of about £85,000 (which was quite a bit then).  They could have eliminated the £1,000 if they could have been bothered.  


There’s always been a three tier system, the very poor don’t pay much tax because they don’t have much money anyway and you can’t get blood from a stone.  The middle income (most of us), get screwed into the ground because we get taxed but can’t afford the thousands we need to get the fancy advice to get out of the tax net (it’s like the law, if you’re not wealthy, you can’t really afford defamation actions etc.)  And the very rich can pay somebody to save them a lot more tax than they pay in fees.


And being an adviser and using the “inside track” isn’t new.  When Cameron was talking about parenting lessons, one of the providers who was going to be able to get Government supplied vouchers from parents was “Parentgym, the company run by Mr Cameron’s friend and former adviser, Octavius Black.” 


I did point out at the time that it looked as if Mr. Black had advised Mr. Cameron to adopt a policy, and then set up a company to benefit from that policy.  Maybe that wasn’t how it happened, I don’t know, but while, a year or so later, the Metro thinks it’s front page news that people take advantage of links or that big firms with big connections can benefit from policy and help the wealthy avoid tax, well, sorry, but it’s not “man bites dog”, it’s “dog bites man”; it isn’t news.


The other article was in the Evening Standard, under the headline, “Bankers face jail under regulation rethink”.  We have, apparently, disagreement over how to achieve a “robust set of rules”.  This is to try to punish “bad behaviour” and “behaving recklessly”.  


Wow, the “members of the cross party group of MPs and Peers” are against sin – fantastic!


I have said before what needs to happen in practice, rather than in theory.  I’ve described a way to think about regulating personal financial services, what we could do about the Retail Distribution Review (RDR) and how people pay for advice and how the regulations need to deal with the reality of behaviour and stop playing the blame game 


These articles also, like this one, have a lot of links to other useful items.


I also wrote an article on the subject of “honest bankers” and how the “we’re all against sin” might work in practice.  Sadly, Mindful Money, the site I wrote it for doesn’t carry my blog now, and they seem to have taken down that post (or maybe I just can’t find it).  So I’ve put it on this site, here.


It would be nice if the regulators, Government and the media would read some or all of the posts – I really think we could make things better in a practical way.







Posted in Current financial events | Leave a comment

Reward for what?


This article was written for Mindful Money in January 2012.  They seem to have taken it off their site, but I think it is still relevant.  I wrote it for them rather than putting it here originally because it’s more about “National” than personal finance. However in terms of regulation of what is sold to people, and how bankers are remunerated (from our money), it applies to the Taming the Pound idea of helping people help themselves to control their money.



There was an interesting piece of rhetoric from Martin Wheatley, the head of the new Financial Conduct Authority (FCA).  He was speaking to the British Bankers Association (  He set out his wishes for a (utopian) situation where the banks would be the customers’ friend and not sell them inappropriate products. 


It’s nice in a way that he’s trying to do this.  It fits in with the desire for honesty etc. 


But is it realistic, does it address any real problems and does it recognise that he and his organisation (and the predecessor, the FSA) are a large part of the problem? (



If we’re going to have talks about banks going back to the “bank manager in the cupboard”, the small businessman’s friend etc., lovely.  How exactly is that going to happen?  What is the reward system for banks


It’s based on making money – that’s what businesses are supposed to do.  If banks give “free” advice (like they used to) it isn’t free, it comes out of the bank charges for cheque books etc.  If you have free cheque books etc. the bank has to get its money from somewhere, and it can’t give “free” advice.


When we went over to the concept of the bank branch as a “sales unit” (and the model became one of paying for buying products and services, rather than everybody effectively paying a fee to have an account that got them “free” services that they could use), the set up changed.


I was actually working for the independent finance arm of a major bank in the late 1980’s.  Part of my job was training the bank staff about what was possible to do beyond the products the bank wanted to sell.  They got double commission on selling the in-house products – to encourage staff to sell the bank stuff rather than pass it to us to broker it for the best deal in the market.


Still, the bank staff wanted to call us in, because they saw their role as being to help the customer.  They didn’t really know insurance and investment etc. they knew banking.  They wanted to open accounts, do what they were good at, and then pass the other stuff on to somebody who was trained to do it.  They saw themselves as good at customer service and were leaving in droves because “I joined the bank to help customers not to be a salesman”


The model is now to sell things, not provide a “free” service (for which they charge in regular fees).


How do the banks go back to being something they haven’t been for thirty years or more?  Mr. Wheatley doesn’t say.


Real problems

The response from Independent Financial Advisors (as you can see from comments on some of the links, and I get first hand from friends still in that field) is that, naturally, the banks won’t give decent quality advice anyway (that’s also picked up in the Telegraph article


I’ve got a certain sympathy with that – after all, I did the IFA job for about 14 years.


The level of technical competence that IFAs have to have from this year, I got in 1992/3 (when the qualification came out).  The banks’ staff don’t even have to have that, from what I can make of the regulations.


It was the case in the 80’s through to today that you can have “specialists” who only learn one product, or family of products.  They can sell one company’s policies, meaning that it is OK if the policy is absolute rubbish as long as it is the best the company does.


It used to go even further towards lunacy, maybe it still does, and one could learn just mortgages, or just investment-linked life policies or something. 


If you target people to sell specific products, people react as they usually do.  If the only tool you have is a hammer, all problems begin to look like a nail.


So you always got people (particularly the most limited, poorly trained people) selling rubbish.


Mr. Wheatley doesn’t want people to do that.


Might it therefore be a good idea for him to stop the limited and specialist idea, and make all people qualified and responsible for selling the best product in the market?


Appealing to bankers’ better nature is OK, but as they will lose their jobs if they give in to their better nature, don’t sell as much and don’t make any money, does Mr. Wheatley think that it is going to happen? 


Part of the problem


Apart from the obsession with products and the – let’s say it, naiveté – of appealing to the bankers’ better nature, the FSA have set up another problem.


Successive heads of the FSA have been previously employed in banking (such as Lord Turner).  Given that such a person is part of the “tribe” and probably has on speed dial the number of the person who is currently playing golf with at least one Director of any bank in question, according to small group theory – what is going to happen?


If you find somebody in your social group in an ethically questionable situation, do you immediately call the police and read your former best man’s good friend his Miranda rights?  Or do you give them a bit of leeway, because you’re sure they wouldn’t be doing anything they shouldn’t?


Successive regulators seem to have been reluctant to be tough on banks, whether it is because of the “six degrees of separation” factor, fear of banks’ financial clout, the consideration that a remunerative non-executive director role will be lost if you drop them in it – I don’t know.


But I’m fairly sure that, for the reasons above, among others, giving lectures on morals to the banks is not terribly helpful.  I would think it will be as practically useful as giving lectures on the moral imperative for hygiene and customer service to an NHS practice run by Dr. Shipman.




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Ordering people to save or to lose weight.


I saw an article in the Metro the other day (18th April) about how Croydon council is considering banning new fast-food outlets.


They’ve had 246 outlets operating in the last year, so I’m not convinced that stopping the number increasing would have a huge impact!


I’ve said before that brute force “controls” like that don’t work.  But still we have people saying they want to “reduce the number near schools” and similar “I’m against sin and in favour of the blindingly obvious good” comments.


We can do bans, and orders and planning restrictions etc.  And that is the same as having orders and rule restructures to “force” people to save for pensions.  It looks like good sense, doesn’t work, wastes money and distracts time, effort and funding from policy that might work.


Eventually, it’s going to occur to somebody in Government (National and local) that flexing your muscles and trying to force people to do what you think is best for them isn’t going to work.  We need to think (in terms of finance, diet and everything else), about what motivates people.


People tend to eat fast food because it’s convenient and they like it.  They might not even be hungry, but as I explained, they will still eat it.  So perhaps we need to make healthy fast food more convenient and tasty. Maybe we need to make unhealthy fast food more inconvenient and more unpalatable.  


There are various ways to do it, and that’s what Government should look at.


You can lead a horse to water, but you can’t make it drink.  What you can do is salt its oats.


Government needs to work out how to salt the oats of people so that they will actually want to save, to eat healthier food etc. rather than being told to do those things while still wanting to spend money now on fatty, salty, sugary snack food.


Or perhaps, given the topic, Government needs to think (or ask other people to think for them, as they find thinking so difficult) about using a low-sodium salt-substitute on people’s oats!





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Money Coaching


I’ve discovered that this site is about Money Coaching – which was news to me because I’ve never called it that.  But thanks to a recent client, I’ve discovered that is what most people call it.


It is an illustration of how important our perceptions (rather than actual objective truth) are – my perception was that I was helping people tame their finances, think more sensibly about money, find happiness, learn useful skills like goal setting etc.  And with this site, the book  (which is also on e-book) and with individual and group coaching, workshops, seminars etc., I was making that help readily available.  But I never called it Money Coaching.  Yet that’s the word that 10,000 people a month search for – so their perception (your perception?) is that what I’m doing is money coaching.


That makes sense – it’s about money, and what I’m doing is coaching, either in person or via the site, the book or a workshop etc.


I’m still having a hard time persuading educators, Government, the financial services industry and the media that it is important.  Which is strange with the emphasis on money in society and the fact that “coaching” is everywhere, the Olympic athletes have coaches, there are coaches for business executives in the private sector, the public sector is always putting out tenders for “coaching programmes”.  


I was in touch with National Numeracy recently, which is a charity trying to help adults with numeracy.  I made the point about financial capacity that I’ve made before.  I pointed out that if people didn’t manage to learn maths at school that was probably either because:


1. They lacked the ability to learn – in which case trying to teach them now is pointless because if they couldn’t learn then, why will they suddenly be smarter now?


2. They didn’t see the point – in the same way that people often don’t learn Latin, history etc., because they think what is the point?  So they don’t learn it or remember it because they don’t have any motive, it simply doesn’t seem relevant or useful.


So it was probably about motivation, because generally if people are motivated they can learn (like people who say they can’t do maths who tell you in a fraction of a second what a three dart finish is counting backwards in triples and ending on a double).  People will say they “can’t” do things, but when they have enough reason to do it, they learn.


So if National Numeracy (or anybody else) just tries to teach people maths, why are those people going to learn to do calculus (or whatever) any better than they did at school?  If you give them a reason, however, they will learn.  If you teach them, for example, why they tend to want to buy everything now (which requires borrowing to afford it) and therefor why  understanding interest rates, APR etc. is important, then they have a reason to remember percentages, what interest rates are, how compound interest works, etc.  And they will remember it, and suddenly they are actually quite good at maths.


They generally agreed, but they aren’t about finance, they’re about maths, so it doesn’t seem likely they’re going to use my ideas!


Similarly, I’m going back to the PFEG that I’ve contacted before, to see if they’re going to incorporate the elements of money coaching into financial education, contacting local authorities about providing it for adults and within the education system.  


Maybe I’ll have more luck this time, but the prevailing idea remains that if you force feed people (adults or children) with a diet of APR, budgeting, avoiding pay day loans etc. the people will suddenly become master money managers, not get into debt, save for pensions etc.  This, of course, ignores the fact that most people know that pay day loans are a poor idea and that the APR on those loans is astronomical, yet 70% or so of the population have large rolling credit card debts and the payday loan companies proliferate and their management pay structures make merchant bankers look poorly rewarded.  


And it’s not exactly rocket science to work out that “I ought to save more for retirement” – but the powers that be still haven’t understood that it isn’t that people don’t know it’s a good idea to save.  People know it, but find that they can’t actually make their good intentions into actions (which is where coaching comes in) any more than the Government can “educate” people about finance by dictating that people should be told things they already know (like cheap borrowing is better than expensive borrowing and no borrowing at all is best) instead of understanding why people don’t use the knowledge they already have more effectively.  Unfortunately, the Government (and charities, local authorities etc.) aren’t amenable to coaching so I can’t explain to them that:


with money, the important point is not learning how, it’s learning why.


But in the meantime, until I can get it mainstream, if what you want is not simply  “what do I invest in” or “where do I borrow cheaply”, but “how do I get control of my money and understand where the money goes and why I do the daft things with money that I do”, or you want someone to help you be happy and get the life you want, and to work with you on managing your money – please get in contact.





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Dying for money.

I saw a very sad headline the other day (Metro, January 23rd 2013).


It said “Male suicide at 10-year high as recession bites”.


That’s the sort of thing, suicide, depression, anxiety, that people associate with psychologists, but it’s not something I deal with.  As I’ve explained before, I’m not a therapist, counselling psychologist, etc. 


So I can only look on and feel sad when I see that sort of thing.


But it encouraged me, to an extent, that Professor Stephen Platt, a Samaritan trustee had publicly stated something that I think is really important.  


He said that it suicide was a social, as well as mental health issue.  


People seem to think that it’s all about mental health, all we have to do is provide support and make people “stronger” and it won’t be a problem.  Professor Platt seems to have realised that that isn’t true.  


I said in the first chapter of Taming the Pound


“We all have individual attitudes, shaped by our personal experiences, our parents, our peer group, our gender and biology, the society we live in and our political beliefs.  And those attitudes give money a lot more importance for us than just a tool to obtain things.  We can see money as the answer to our prayers (or a temptation from something evil), as a symbol of our masculinity or femininity, as something to be hidden away and not talked about, or a thing to be boasted about.”


If we see it as a symbol of masculinity (for example) if we don’t have much money, does that mean we’re not much of a man?


And Professor Platt seems to agree, making the comment:


“Samaritan’s research shows men judge themselves by a gold standard of masculinity set by society, and when they can’t meet these expectations they can feel worthless and that there is no reason for them to live”


For once, I don’t feel much satisfaction at being able to say “I told you so”, this is just too sad.  People are, quite literally, dying for money.  Not even for money, but for a vision of what money means.


And we all know it.  I also told a story in Taming the Pound:



“As an example of the socially set attitudes to money and incomes, I was once asked to comment on some couples’ financial history for a magazine article.  The woman of one couple worked for a bank as a senior manager and earned a six-figure salary.  In her comments, she said she hadn’t revealed her income to her partner for some months after they started seeing one another; she let him think she was quite junior and earned less than him.  In fact, the man earned less than his partner and made a point of defending himself from censure, by commenting that he made sure he paid his way and wasn’t “living off” his partner. 


Hiding her high income was, in my experience, typical of high earning women; but would a man do the same?  Being male, and at the risk of sounding crass, I can say that earning lots of money is something I’d be tempted to boast about to attract women, not play down to avoid scaring them off!  Similarly, would a woman apologise or be defensive about her partner earning a lot or be tempted to boast about it? 


She seemed to be concerned whether money threatened her relationship security; he wondered if people would feel it made him less masculine and have lower status.


It’s a social norm, which I suspect we can all understand, but if we think of money only as having the same objective value for all of us and that it doesn’t have biological and social values woven in, it doesn’t make sense. “


We can all understand it – the scary thing is that we can, we can all understand why somebody would feel emasculated, so we can all understand why somebody would commit suicide because they don’t measure up to some gold standard, a symbolic icon of what money means.


But money isn’t supposed to be a idol to worship, it’s supposed to be a means to an end – that’s why this site (and the book) has the subtitle “make money your servant, not your master”.


Are we all a bit too ready to understand that, for many of us, it is still the boss?  And are we sufficiently aware that we will potentially kill ourselves worshiping it instead of putting it in its rightful place as our servant?







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Being a happier person


I’ve been involved in some discussions recently about “happiness”.  


I’ve written about it before, but the message doesn’t seem to get through – people still assume money is the key to happiness despite all the evidence.


I just did an interview for Zest magazine which asked some slightly different questions, including ones about “being a better person”


That tends to depend on what you think “better” would mean.  What it seemed to mean in context was having good characteristics, being helpful to people etc.  Which, of course, might also include having lots of money to give away. 


But it is probably a more useful goal than wanting to be “rich”.


It’s a bit of a double edged sword though.  Trying to be better is a nice ambition, but it can head towards “I ought to be, I should be, why aren’t I” etc.  Any counsellor, coach or therapist will tell you those are dangerous words. They make people unhappy with what they are, because if you “ought to be”, richer, a better person, slimmer etc. you aren’t and are emphasising what you don’t have not what you do, is rarely a good thing.  They also mean that you’re loading expectations on yourself.  Why ought you to be nice to everybody, all the time? Who says? 


If you’re in the running for Dalai Lama being perfect and being nice all the time may be a reasonable ambition (but not according to the Dalai Lama himself, who says he isn’t always perfect).  For most it’s not practical or reasonable to heap expectations on yourself. And it can be even more difficult for women (the main Zest audience) because they tend to be more likely to suffer from “imposter syndrome”, feeling that as they know they are not absolutely perfect, somebody is going to tap them on the shoulder and tell them “I caught you, I know you’re just faking it, you’re not really perfect, how can you pretend to be a nice person”?  And that way lies madness.


What’s actually more useful in terms of being a “better person”(and which has the effect of making you happy) is to look at your motivation to be helpful, better, etc.


Why do you want to be helpful (in the same way as, if you read Taming the Pound you’d ask yourself why do you want more money – what is it for?) 


Do you want to have a reputation for being helpful, do you have some friends that help you and you want to “pay back”, do you think you’re a “bad” person and need to build up some good Karma, are you just full of the joy of life and want to make everybody happy? 


I looked at some of the elements before and the way they arose out of lots of separate areas of research


But in coaching, I’d look at people’s values (which is a big subject, but basically it is about what is really important to you).  I’d also look at your strengths, are you naturally high on compassion, kindness etc., are you sociable and good at bringing people together, are you good at solving practical problems.  Generally, you can help and be kind to others by using strengths on their behalf that they don’t have – which also has the effect of making you happier because using our natural strengths tends to do that.


So if you know why you’re doing something, what your motivation is, you know yourself and what you’re good at and you actually think about what your values are in life, you can be happier and a better person.


And you don’t actually need any money to do it.



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FSA still living in the past.


I found that the FSA is warning that advisors need “to review each portfolio to mitigate the risk of portfolios becoming misaligned“.


That’s true, as far as it goes – but it only goes about three millimetres and then stalls!


The problem is that what they are saying is that

a) you can accurately calculate attitude to risk,

b) you can accurately calculate the risk of a given portfolio.


Regarding a) I’ve said repeatedly (including to the FSA, who simply don’t listen) that the “attitude to risk” questionnaires need a lot more than they’ve got to have any chance of working.


Regarding b) I’ve said that the future is unpredictable and the predictions are just gueses.  Therefore advisors take a chance on their reputationevery time they tell a client that “this portfolio carries this degree of risk


The reason the measures of risk in markets don’t work is that all the statistics used (like Alpha, Beta, Sharp Ratio, etc.) are based on an assumption of normality.  If markets were normally distributed, then big movements in stocks would occur with the same frequency as ubelievably tall people occur, every thousand years or so.  We’ve had 7 market movements that size in the last 100 years.


Markets are not normally distributed.  So the maths doesn’t work.


An underlying assumption of the statistics they use is that the data are independent, as with individual spins of a roulette wheel (and it is artificial situations like that which form the basis of game theory and lots of investment theories, including portfolio theory). 


The data are not independent in the real world.  Like with the weather, the stock prices one day are not independent of the prices the day before.  And the action is continuous, you don’t make a stock purchase, find out whether it wins or loses, make another bet and so on, like in a casino.  When does your bet finish and you know whether you’ve won or lost?  How does that work with the Hong Kong and New York markets, when does the wheel stop spinning?


So they are using maths that doesn’t apply to the data they’ve got, they don’t understand the nature of the data and consequently they are applying the wrong methods to unsuitable data in the wrong way.


In addition they are measuring “attitude to risk”, in a way that is psychologically flawed and mathematically invalid.


So the FSA is saying “line up factors A and B”, which would be good advice – except that both A and B are mathematically invalid, psychologically nonsensical and largely meaningless.


Given how much the FSA award themselves in terms of bonus for their great work in “keeping investors safe” it would be really nice if they would ask for the help they so desperately need. 


Essentially, both advisors and investors need to ignore the FSA guidelines and do some sensible things – like get psychologically valid “attitude to risk” questionnaires standardised and used and use slightly different mathematical procedures with a far greater allowance for error.  Of course, the FSA will try to stop that happening, because they are dinosaurs (not only are they cold blooded, but they have a brain the size of a pea located somewhere near their rectum) and resent any progress.


If people did that, and stopped feeding the egos of these idiots, perhaps the FSA would finally learn something and come up to date with cold hard facts.






Posted in Advisers, Current financial events | Leave a comment