Like many of us, Linda Johnstone (pictured), Head of Investment Proposition at international platform Novia Global, is a firm believer that the world of investment needs to be as straightforward as possible if it is really to be effective at engaging greater numbers of Brits.
In this, her second blog for IFA Magazine, Linda is on a quest for clarity. She highlights just some of things we can do as an industry to move in a more positive direction towards greater clarity, conciseness and collaboration so that advisers can serve as enablers and not as impediments when it comes to making investment a less daunting and more appealing prospect.
The Law of the Conservation of Difficulty was conceived by evolutionary biologist Richard Dawkins. Broadly speaking, it states that academics in less demanding disciplines are more likely to use obscure language.
This, Dawkins argues, is because they fear their work might be seen as uninteresting or even elementary. To counter such perceptions, they make their endeavours appear impressive by employing mystifying terminology.
There are several great examples of this notion being taken to the extreme. Maybe the most infamous is Transgressing the Boundaries: Toward a Transformative Hermeneutics of Quantum Gravity, which was written as a spoof but ended up being published by a journal whose editors mistook its premeditated gibberish for high-brow insight[1].
I mention all the above with the issue of financial literacy in mind. In the UK, according to a study published last year, nearly three quarters of the population have an inadequate comprehension of money matters[2].
Against this alarming backdrop, providers of financial services have a responsibility to make investing as straightforward as possible. Unlike those academics who seek to blind with science, we need to convey messages that are crystal-clear.
There are various ways in which investment platforms – my chosen sphere – might play their part. Features such as user-friendly interfaces, transparent reporting and consolidation of multiple holdings can help smooth an investment journey.
Yet it is advisers who can perhaps make the biggest difference of all. More than any other link in the chain, they face the challenge of boiling things down, losing nothing in translation and communicating with maximum effectiveness. So how might they do it?
If you can’t explain it…
A useful starting point is to concede there is nothing to be gained from trying to sound like a genius. Such pretension does clients no favours whatsoever, because complication and confusion too frequently go hand in hand.
The Law of the Conservation of Difficulty offers further guidance here. There are few academic disciplines more esoteric than theoretical physics, yet one of its most celebrated exponents, Richard Feynman, ranks among the most brilliant communicators in history.
Feynman won a Nobel Prize for his pioneering work on quantum electrodynamics. It sounds like a complex subject – and it is. It concerns the interaction of light and matter and aims to unite quantum mechanics with Einstein’s special theory of relativity.
To his enormous credit, Feynman – a straight-talking, down-to-earth New Yorker – prided himself on making this stuff accessible[3]. “If you can’t explain something in simple terms,” he once declared, “you don’t understand it.”
This is precisely the sort of philosophy advisers should embrace when dealing with clients. The objective should not be to dazzle – less still to overwhelm. Money matters have to be articulated with clarity, conciseness and consistency.
They also have to be absorbed, which is why following up is always prudent. Encouraging genuine dialogue is often the best way of discovering whether anything has been misconstrued.
Rendering the ins and outs of investing virtually indecipherable is largely forgivable if done inadvertently. Done deliberately, frankly, it is nothing less than a grave insult to clients and a blow to the credibility of our industry.
Clarity from co-creation
Importantly, platforms and advisers can also work together to enhance clients’ grasp of the investment experience. The key is to cooperate closely at the earliest opportunity.
Take Novia Global. Nine years ago, when the company was founded, the fundamental goal was to meet an unmet need by facilitating intelligent wealth management in international markets.
In essence, we sought to fill a gap because advisers and their clients asked us to. We like to think our business model is still firmly rooted in what our stakeholders require today.
The appeal of such “co-creation” lies in the fact that advisers and clients not only understand what they are getting: they also get what they want. This stands in marked contrast to bewildering them with gobbledegook about products and services that might not even be necessary.
Of course, none of this is quite the same as improving financial literacy, which is a task that may be better left to policymakers and educators. It is also true that low levels of financial literacy might not be a problem among certain demographics in any event.
Even so, we have to acknowledge the act of accumulating and preserving wealth should not be an exercise in bafflement. Particularly in the age of Consumer Duty, advisers should serve as enablers – not as impediments.
In tandem, we have to accept everyone is likely to benefit from a considered, considerate and collaborative approach to explaining money matters. Ultimately, lest we forget, that is one of the principal reasons why our industry exists.
Linda Johnstone is Novia Global’s Head of Investment Proposition.
[1] See, for example, Guardian: “The Sokal affair”, June 5 2003.
[2] See, for example, Financial Times: “Three quarters fall below financial literacy benchmark”, July 28 2023.
[3] See, for example, TED: “Richard Feynman: physics is fun to imagine”. March 3 2010.
