Everywhere we look these days, there’s choice – so much choice (and complexity). In fact, we are positively tormented by it. No wonder we put off doing some things.
I hate shopping, I admit it (I’m such a bloke). Me, in the supermarket, when it’s late and I’m too tired to be there: that’s a good example of me at my worst. Picture the scene: what’s next on my shopping list? Chicken. [Trundles over to the cold section.] Is that whole chicken … or drumsticks … or wings, or thighs or breast? I don’t know: it just says
“chicken”! Skin on or off? Boneless? 4, 6, 8 or 12 pieces? [Getting a bit stressed over chicken at this point.] Ok, whole chicken – a decision! But it’s not over yet. Corn-fed, free range, organic, free range and organic, West Country (does that make a difference?)? Basic, value, superior, taste the difference? OMG! I just want “chicken”! (Little do I suspect the still greater torment to come when I have to buy “shampoo”.)
Of course, we use simple heuristics to help us deal with these choices, solutions like the one I chose last time (the wrong one), the one the wife would choose (free range organic), the one with a famous brand name (doesn’t work so well on chicken) or, when I get to the shampoo, the one that says “normal hair” on it (a glimmer of hope amid the supermarket insanity).
When it comes to financial products, there’s no respite from this tyranny. In fact, it’s far worse. Exactly how many products are there? I don’t think anyone can be quite sure but I have it on excellent authority that it’s in excess of 35,000. Of course, that’s not even the half of it. Just think of the huge list of product features – say, capped drawdown (partial, phased or full) with a range of regular income payment options, perhaps ad hoc payments
too. And then there’s the pricing – bundled, unbundled, menu-driven, fund-based and so on. Or the conditions – minimums, maximums, terms, redemption penalties, policy exclusions (may I suggest stress induced by a super-computer-busting proliferation of choice?).
Meanwhile, let’s consider what evolution has equipped us for: making rapid choices with little thought and between very few options (3 or 4, tops). There’s a monumental disconnect with that and what is arguably the ultimate version of the Travelling Salesman Problem.
So what of all this? Well, it has reinforced something I hope I already knew: the value of advice. Advisers and paraplanners, unlike Joe and Josephine Public, understand the tax system, legislation on pensions, investment, assurance and so on and know how to work
out clients’ goals, needs, model cash flow and produce a financial plan – although it takes a tremendous effort to acquire and maintain that. But something else has also dawned on me. When it comes to product selection, Joe and Josephine can (and do) give up or choose at random; really robust product selection, on the other hand, is rather a mighty challenge I hadn’t fully appreciated.