How can I trust it?
In marketing lectures in university there was a lot of talk around strategy, advertising and the making of the standard Nando’s ad. The main message was to simply find a way to get your goods into the consumers basket. My grievance comes when this “sell at all cost” mentality bleeds into the financial sector.
I wonder how the average bloke decides when it comes to purchasing a financial product nowadays. You are bombarded with information from social media, conventional media, at a braai and even from your financial advisor. Throw in emotions and unique financial needs and you have a consumer whose opinions are highly influenced.
Advertising aims to get a specific message through to us but how do you know if this is really the personification of this company’s ethos or just false advertising? Take the mission statement of a once enormous American company: “Integrity – We work with customers and prospects openly, honestly and sincerely.” The company was Enron, a company that went under in 2001 because of one of the largest cases of accounting fraud ever. How can I trust the intentions of a company when it is this obvious that they only care about their bottom line?
I am concerned that there is a real ethical problem on the rise. There is an obvious difference between the type of messages being sold to the public through advertising. There is no way that the poster with the sport star against the wall at the airport promising you 20% per year in returns and a respected asset manager is the same personification of a company’s best intentions. Even so, consumers are exposed to both daily.
Another two examples, one more extreme than the other; On a website I saw a flickering advertisement with a young man claiming he now earns 7 times his salary by trading Bitcoin. The greedy nature of the advertisement triggers emotion and want. The real question to me however is what kind of trading fees does a company earn who advertises this. Unfortunately, often the emotion remains the prevailing factor.
In the second example it is a well-known local insurance company who clearly plays on one’s emotion when they describe how their investment product made it possible for their clients to take an overseas trip of their dreams. In our experience however, this product is highly complicated and has a complex fee structure. The public however is drawn in by the emotion in the advertising and thus marketing wins the battle.
As such it is understandable that there is a distrust in the financial sector and financial advisors. Unfortunately, your ethical standards are made up of your exposure to different experiences, your values, upbringing and education. One advisor feels that it is within ethical bounds charging a client a 3% advice fee while others feel this is completely unethical. Either way, the public is not protected against this.
The debate between passive and active fund management comes to mind. Passive or index funds are currently riding the wave of the increased Naspers exposure resulting in good returns, and all of a sudden, active fund managers are said to be out dated and worthless. Active fund managers easily outperform passive funds over longer periods of time. Either or both options can form part of ethical advice but when marketing influences the consumer through misleading advertising that leads clients to action, this is an issue.
As a consumer you don’t have to agree with everything and should try to ignore the advertisements and shiny reception halls and try to ask your advisor or product supplier thorough and meaningful questions. It is no longer good enough to trust someone just because a friend or family member recommended them. Do your own homework and try to avoid sensationalists and their opinions. Find a norm that is acceptable to you in terms of what you need and expect. You will quickly separate the good from the bad when you start asking the ethical and uncomfortable questions you deserve the answers to.
The best talk I have ever been to, was hosted by Dave Fishwich from M&G. In the first video he was wearing a suit and giving an overview of world economics. In the second video he was doing the exact same thing, but he was lying on the beach in a speedo with a Pina colada in hand. His question was who you would rather believe, as the story is the same. The answer is obvious.
As consumers of financial products, we often get our opinions and perceptions from the image given to us in the media. Force yourself to think critically and to judge any financial advice or product with a good helping of skepticism. The good thing is that once you have gone through this process, there are good advisers who follow a code of ethics with whom you can build a relationship.
Trust is built over time and is something that must be constantly built on based on the interaction of emotions and experiences. Never has there been this much information to dissect but this also puts consumers in a position to make informed decisions if the information can be proved to be ethical.