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Friday 18 November 2011

A tale of two people

I want to share a story of two people; Mr Smith and Mr Jones.

Mr Smith wanted a BMW 5 Series; because it would improve his status and he would find love and happiness with the woman of his dreams. He looked everywhere and there were thousands of second hand BMWs. Eventually he found a shiny silver one at an incredible price. He paid his money and drove his dream car away.




Very quickly the car started to fall to pieces, all the shininess hid underlying problems and quickly the car was worthless. Mr Smith lost all his money and had not found the girl of his dreams. And when he went to find the man who had sold him the car he had gone.

Mr Jones wanted a car to get him from A to B, he wanted something that would be reliable and he wanted someone to look after it for him so he could focus on the journey. As a bonus he wanted to meet the woman of his dreams.

He did his research, and found someone who listened to what his goals where, prioritised them and then delivered him with the car to achieve those goals. Even when the car felt sluggish the person who helped him to find the car stepped in and helped get over those sluggish moments. In the long run Mr Jones achieved his goals and was able to focus on the journey whilst someone else made sure everything else was working, and more importantly he met the girl of his dreams and got married. He paid a little more than Mr Smith but the extra money was worth every penny.



So what does this mean, many people (including trade bodies like the ABI) have a fixation that saving (whether as a pension or an investment) is about selling a product. Just look at the latest quarterly ABI consumer survey, it focuses on products (including this idea of simple products), it focuses on "value for money" and says nothing about financial planning.

The point is simple unless we can get people to understand the order to financial advice people will always be fixated on price and product, and not goals. A pension is great but what do you want to achieve, can it be achieved through another means.

There are excellent financial advisers who focus on financial planning so what do you think, what do you do? What do people around the world do?

Follow me on Twitter so please spread the word and lets change the world.

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