I’ve been reading Rory Sutherland’s book. He’s a marketing guy who works for the famous ad agency Ogilvy. He’s good if you like a different take.
In an interview, he says that financial services have one big overlooked flaw.
There’s too much choice.
Economists tell us that ‘choice is a good thing for consumers’, but do they not use Netflix?
‘More is better’. Wrong.
A herd of antelope don’t stay in a group so they can find the best grass.
They bunch together so they can relax.
A lone antelope could find better grass to eat if it went off on its own. It can go to places the herd can’t.
But the lone antelope would have to spend much more of its time anxiously looking around for lions and snakes, and much less time grazing.
Meanwhile, the herd spends most of its time grazing, not worrying.
Safety in numbers.
Following the herd
Humans are a herd species too.
We don’t feel comfortable doing things on our own. That’s why the crab in a bucket mentality is so powerful.
Take for example, your workplace pension.
When everyone in your company is signed up for the same scheme, you’re all okay with that and gladly sign up.
Why? A couple reasons:
- You’re all in the same boat. If something goes wrong… ‘aah well, at least I’m not the only one.’
- There’s probably some finance nerd in your company who would’ve made a big fuss if your workplace pension was, in any way, bad. Going forward, they’ll also know if the fees have been hiked or if the fund is underperforming. They’re the anxious antelope of the herd. They’ll be ahead of the game and any important news will reach you. In other words, if it’s good enough for the finance nerds and the CEO, it’s good enough for me.
Safety in numbers.
Going it alone
The problem starts when you branch out beyond the workplace pension and start considering other financial services and products.
ISAs, different providers, mortgages, percentage fees vs flat fees, funds, stocks.
Because there’s so much choice everyone ends up with something different. We don’t end up as satisfied customers. Instead, everyone is nervously looking around at each other worrying that they’ve got a bad deal.
We’re flooded with options and information.
This is one of the biggest challenges of sorting out your finances.
Those who’ve made a choice feel unsure about it, and those who haven’t feel paralysed by the options.
To make things worse, the financial services companies are out to take advantage of the poor lone antelope suckers who’ve been separated from the herd.
Owners and civilians…
Find your herd
So, what do you do if you’re feeling like a lone antelope stuck out in the middle of the savanna, with the sun going down and some spooky noises coming from off in the distance?
You’ve got to find your herd. You’re already here so that’s a start.
Here are a few other ways to do it.
- Hit up someone who knows more than you and ask them what they’re doing. Obviously if they tell you to stick your life savings into a triple leveraged cryptocurrency CFD then maybe don’t do it. But seeking out someone smart that you trust is a good place to start.
- If that’s not possible, the internet is your friend. That’s how you found this obscure newsletter. It’s called social media for a reason, as soon as you start acting social instead of lurking, you realise what it’s supposed to be for. You can actually interact with people. The subreddits r/UKInvesting and r/UKPersonalFinance are also good places to talk about money.
- The internet is your friend only if you tweak your feed. Align your timeline with your goals. What does your information diet look like? Just like food it’s: garbage in, garbage out. Take memes for example. My take on memes is: I’m going to be sent them, so I don’t need to follow meme accounts.
- Maybe you’re the centre of knowledge for people around you. Be aware of that. Share resources, books, YouTube videos, Insta accounts… teaching the people around you is a core part of everything.
Getting actively involved in learning is a key way to combat the overwhelming number of products and information out there.
But learning by reading and researching can only take you so far.
I get comments and DMs about which ISA provider to go with, which ETF is better, the benefits of one robo advisor vs another, whether to invest £100 a month or £80 plus £20 into some special thing.
If you’ve done your research, the chances are you’re ready to go - you’re just getting in your own way.
Just do something.
The best way to learn is by doing, tinkering and trial and error.
With long-term investing you want to invest early and often, and you should do your best not to disrupt the habit of saving and power of compounding along the way.
But what’s most important is that you find the right fit for you. What works for some may not work for you.
Chopping and changing at the start is, in fact, desirable because you want to be comfortable with it for the long-haul.
For example, I opened my first investment ISA with Nutmeg. I continued to research. Then I thought: ‘I’m pretty sure I can see exactly what Nutmeg are doing here… I’m going to just do it myself’.
I transferred my ISA to Trading 212, and started more or less replicating Nutmeg’s ETF allocations in my own T212 portfolio. As well as making stock picks. I carried on reading.
Then I thought: ‘You know what, I don’t want all of my money with Trading 212. They’re a bit hard to get hold of and they’ve not got the longest track record. I’m just making a passive portfolio with them anyway, so I might as well switch to Vanguard.’ And that’s what I did.
You act, and then correct course along the way.
By doing that, I’ve had a much broader set of experiences with three different platforms, and I’m feeling happy I’ve found a set up which will serve me for the long-haul. But who knows, I can change it.
Hope you enjoyed today’s email.
Leave a comment, ask a question. Don’t be a lone antelope.
It’s just the elite group here, none of the Insta engagement spammers.
DMs are always open too if you’d prefer to message there.