Persuasion

The biggest issue in the financial services industry has been for independent practitioners to market and promote their services to a suspicious public whose level of trust is minimal. It’s why the banks have cornered the market – they are trusted (not by our grand parents or by those customers bankrupted through injudicious borrowing). They have fulfilled the materialistic needs of rapacious consumerism, through the provision of lending. In latter years as banks acquired life insurance companies, their product offering has expanded.

For an advice and fee based financial advisory practice, however looking to grow their distribution, bank staff seldom leave the sanctuary and security of their salaried environment to join the independent advice industry – they do not therefore add advice value to an endemic problem in the country. The financial literacy conundrum. On the other hand, traffic does occur in the other direction – a failed independent financial adviser can and often is ‘a star’ if the bank takes them on – pays them a salary and gives them clients to service and products to peddle. We accept this practice in all walks of life, including the medical profession, accounting, engineering, and law. We are not all cut out to be self employed. Even farming is transforming to employee status – with larger farms (daily) and multiple farms owned by lesser numbers of families. Employing managers and workers whose future is not necessarily, to buy a herd, share milk or buy a farm. Bringing new people into financial services as fee based advisers is not easy – but it is what is desperately needed due to the aging advice force qualified in insurance, investment or planning. With an average age of their mid fifties it’s a bit like the retirement/baby boomer dilemma. Everyone can see the cliff coming but no one has determined a strategy to prevent impending ‘lemmings Ville’.

There is a very real difference however between the professions, farming and the advice service of a financial planning practice. As a country we are extremely poorly educated in matters relating to financial control, investment confidence and insurance certainty. The danger of this is exemplified by uneducated Third World countries most often manipulated by fascist dictatorships or socialist communism. The people don’t know what they don’t know, and are therefore subject to the will of an individual or a well oiled regime. As knowledge and communication gradually enters countries and tribes of people, dictatorships, cults and nefarious regimes are replaced by democracies, capitalism and a growing middle class. Lack of education around diet and money in New Zealand is hugely influential in our health and financial well being. And they interrelate. Unfortunately our education system is not the answer; it is in fact part of the problem. Most teachers and lecturers are not strong in financial matters – in fact they are decidedly weak. Gen Y are better placed to solve the problem because: a) they enjoy accessing information, b) they are willing learners and c) they are not biased toward a particular political ideology – unlike most teachers.

Wall Street in New York has a certain appeal to young Americans looking to earn above average incomes in the finance sector. But the entry fee is high, and the quality, special. The applicant is wasting their time if their ‘college’ was not in the top three, their grades exemplary and some ‘sales experience’ having produced results. But one would expect this of a country whose businesses make up 50% of the world’s capital markets against one which is not yet 1%. And here the difference lies. Knowledge of markets, businesses and financial products versus a primary producing country whose GDP is in the main dependent upon one or two countries buying our dairy produce. As a country, we are often cynical of American attitudes and American foreign policy and with this goes a certain cynicism towards capitalism as a whole. We need to change these biases and beliefs if we are to evolve into an economic society capable of lifting more of our people out of a dependency trap or the stress filled lives many are leading due to financial ineptitude – a lower class and a lower middle class bewildered by finance jargon, suspicious of advice, uneducated at home or in our schools, and a middle class voraciously consuming for today.

Next week – How we might fix the problem and it isn’t through our schools.