On Demand

“Most of us realise we have self-control problems, but we underestimate their severity.”  Thaler – Misbehaving.  The making of Behavioural Economics.

The battle between passion (temptation) and how to limit choices to prevent self destruction is not only a major topic of behavioural science it is the foundation of a relatively new industry.  The financial planning industry.  Without doubt investor behaviour (habits) is the greatest roadblock to the achievement of planned financial goals and aspirations.  Most people have a fundamental knowledge of things financial – they are literate.  They also know how to source information and how to source money when required.  These ‘temptations’ have been increasingly provided and promoted – a continuation of the original transgression if you like, of taking a bite of the apple.

At the moment the financial services profession is attempting to educate and implement change.  Perhaps it simply needs to respond.  A bit like Uber or ‘On Demand’ problem solving as opposed to the austerity associated with budgeting and goal setting.  The planner prescribes a solution and the problem goes away (hopefully) – after all – is that not the service our GPs are really providing. It certainly is on www.getheal.com or www.seekingarrangement.com.  Whilst the medical, transport or escort business is not financial services the client is looking for an instant service at an agreed price provided through an online provider aligning service provider with service required.  The difference in each instance to pure online (information) being a face to face service – a prescription after analysis if you will.

The Retirement Commission is now The Commission for Financial Capability.  Just as the ‘Behavioural Economists’ are impacting on the thinking of pure economists The Retirement Commission for Financial Capability “recognises the very important distinction between literacy and capability.”  Martin Hawes, Sunday Star Times 9.08.2015.  Knowledge versus capability.

This generation accepts differentiation between knowledge and capability and hence the burgeoning ‘On Demand’ services now provided in NZ and Worldwide.  It will be manifestly obvious within the financial service sector when the inevitable Bear market follows the current ‘Bull’.  KiwiSaver investors whom have been inundated with online ‘knowledge’ by their particular providers will get their first taste of market cycles and volatility.  There will be a race to ‘safety’ and it will be messy.  An ‘On Demand’ service might well prosper in providing face to face advice to ‘disaffected’ KiwiSaver nervous nellies.

Another demographic development at the opposite end of the market – the retirees and business succession / farm succession – investors, whilst not in the same technology user space (they are old fashioned communicators) – they talk to each other at social gatherings and on the phone.  The last six years of Bull market capital market growth will have created a euphoria for many ‘new’ to investing.  A 20% correction (and we’ve had 13 of them since the second world war) will frighten the living daylights out of many.  Perhaps an ‘On Demand’ investment service could benefit this Grey Power group.  A fee for service alternative ‘solution’ to concerned or aggrieved investors!

It is unfortunate that many people will not plan and the many who do cannot maintain the self-control to fulfil previously determined goals and aspirations.  The challenge of temptation simply overpowering previous will or motivation.  It is a human frailty and one which is causing much financial and mental pressure on families.  Whilst financial planning is the obvious long term answer because it aligns goals, products and services with an ongoing personalised service relationship – some people will need a quick ‘injection’, like going to the Doctor when feeling sick.  As long as the prescribed medicine fits the complaint and it doesn’t come accompanied by a lecture on – not smoking, not drinking and not eating fatty food – perhaps we like that more than exercise and self-restraint – and or the financial budgeting and investing equivalents.