Abraham Okusanya is unquestionably a good bloke. He and his investment consulting firm Finalytiq are 100% on the side of end-consumers, and they’re doing everything they can to ensure that fund management firms do their best for them. But when it comes to one of the fault lines dividing consumers’ real friends from consumers’ not-so-real or indeed false friends, as identified in my new financial services marketing book No Small Change, I’m afraid that Abraham is on the other side of the line from my co-author Anthony Thomson and me.
Let me explain. Abraham has just written a hard-hitting article in the online edition of FT Adviser that’s highly critical of Absolute Return funds in general, and Aberdeen Standard’s giant GARS fund in particular. He has one massive objection to them: they’re far too complicated. He says: “Hands up if you really understand how GARS works? Enough to explain it to a typical client? I certainly don’t. Many advisers and discretionary fund managers who invested in GARS didn’t. I’ll wager that many analysts and managers who work at the Standard Life multi-asset teams and indeed the most senior people at Standard Life don’t either.”
And he goes on to deliver his coup de grace: “If all these professionals don’t seem to understand the fund, what hope has poor old Mrs Miggins got?”
Leaving aside my intense dislike of the patronising, alienating and horribly over-used term “Mrs Miggins”, it’s the sense of what Abraham’s saying that bothers me. Let me be clear: if he was saying that Absolute Return funds like GARS don’t work, or can only find a market by making false promises they won’t be able to keep, then I’d completely share his intense disapproval. But he isn’t. It’s the complexity that’s upsetting him. And for the life of me, I cannot understand the financial services industry’s obsession with explaining how complicated things work, whether to our colleagues within the industry or to our poor old end customers.
It’s not just Abraham who wants everything explained. It’s everyone. It starts with the regulator, who has insisted for years on a regime which provides consumers with rafts of unintelligible and impenetrable detail about whatever it is they’re putting their money into. It includes all those who keep calling for a massive educational effort to get key financial concepts across to consumers so that they’ll become better able to grasp the detail of what we’re offering them. And it also embraces all those firms publishing mountains of market reports, pie charts, analyses of one sort or another, fund manager interviews and all the other manifestations of an industry that’s grimly determined to explain itself to people.
No other industry behaves like this. There are countless examples of industries that provide complex products and services, but which feel no obligation at all to explain how they work either to their end customers or indeed to their intermediaries – or “shops” as they are often known. People buy all sorts of IT products – phones, tablets and computers – without having the faintest idea how they actually work, and the amiable sales guys and girls in PC World and my Vodafone shops don’t know much more. You can buy a car without knowing a thing about the mechanics of ABS braking, and perhaps more crucially you can take a daily statin or SSRI tablet without a clue about what they do to your body chemistry (or even what SSRI actually stands for – Selective Serotonin Reuptake Inhibitors, since you ask). And, trust me, the same is true of your average GP.
What all these things have in common, as well as complexity that makes their workings quite incomprehensible, is a clear and simple message about what they do – or, to put it another way, about why people might want to buy, own or use them. I don’t know anything about how ABS brakes operate, but I do know that if I put my right foot hard down on the pedal on a wet and slippery road I’ll come to a stop without skidding. And I don’t know what that Atorvastatin tablet I take every morning does when it gets into my bloodstream, but I know that somehow it reduces my cholesterol level and that makes it less likely that I’ll have a heart attack. And these simple, clear messages are absolutely all I need or want to know.
At the same basic level, I understand – more or less – what GARS is supposed to do. It’s supposed to keep going up in all market conditions. This, I must admit, sounds a bit too good to be true, and makes me wonder whether I’ve got it quite right. In all market conditions? Really? And going up, not just standing still or going down less than the market? And is this just a pious hope, or a solid promise, or something in between? (ABS, after all, doesn’t say that it aims to prevent you from skidding, or that you won’t skid quite so much – it says you won’t skid, period, and you won’t.) As I say, if the GARS/Absolute Return Fund headline promise is false, or overclaimed, then that’s bad and I’m against it.
But if it’s robust, I have no problem with it at all. And as we move slowly but irreversibly into a world in which consumers are going to have to take more responsibility for their financial security, and make more of their own financial choices and decisions, it becomes more and more important that we present them with those choices and decisions in ways that are meaningful to them. Which, in turn, means that we have to stop presenting those choices and decisions in ways that are only meaningful to the most pointy-headed specialists and experts in the industry.
In fact, it may well be that in order to present consumers with “headline” benefits that are valuable and meaningful to them, we need products and services which, when you lift the bonnet, are even more complicated than absolute return funds. That prospect doesn’t bother me in the slightest – provided only that Abraham, and all those others around the industry who think like he does, can be discouraged from making even more doomed and counter-productive attempts to explain them all.