Colloquially, perception is reality; and if it’s not written down it didn’t happen. We intuitively know that neither of these statements is wholly accurate but they are handy life-experience truths nonetheless. Better communications are essential.
In many instances, there is a world of a difference between reality and perception. The wooden table is made of atoms (not polished trees). Sound travels in waves (not straight lines). Visible light is a mixture of colours (not only white). Price is a function of affordability (not supply and demand). Central bankers know best (not recently).
Bias is a powerful force. We hear what we want to hear no matter how well it is explained or demonstrated. Our initial perceptions greatly affect our subsequent understanding and we maintain a strong bent towards what we already believe to be true.
All of this has a very worrying impact on how consumers address financial decisions and how advisers truly breakdown consumers’ previously anchored perceptions. Where we already have a notion in our minds we tend to look for evidence, even flimsy evidence, to re-enforce our viewpoint. We simply refuse to focus on reality, which is unfortunate. Remaining wide open to new evidence and new explanations is sensible but we all find it very difficult.
MMPI contends that communication is the real problem. There is no point in using technical jargon; consumers simply do not hear. Most people fear uncertainty and they take comfort in the status quo. Therefore, the best approach to improve communications is to convince consumers that nothing much is changing. Incremental steps over many years will achieve much better consumer outcomes. Regrettably, very few advisers bother to hang around long enough to see this through.
Just like the rest of us, consumers faced with financial decisions, find it very problematic to absorb and parse complex information. They can’t quite grasp the full picture. They allow downside risks to overwhelm their thought processes. They feel best saying no because change is difficult to tackle. As a result, they fail to seize opportunities that make perfect sense for their financial circumstances.
Of course, consumers should not be blamed for these types of responses. They are merely consequences of their general misunderstanding of reality and perception. Financial advisers should change tack. They should stop beating the same old drum – presenting complex brochures and sales material with tortuous language. They should try meeting prospective clients face-to-face, preferably in their own homes or place of work.
It has been a long-standing policy of MMPI to go to the trouble of meeting clients face-to-face – not so some other financial institutions. Deplorably, this position is set to worsen for consumers. Banks are likely to continue to close branches and cut off access to face-to-face interactions. Consumers will be forced to get dubious financial advice from machines or, at best, juniors in a call centre. This will make financial decision making much more hazardous for consumers. This horrid perception is about to become an everyday reality. Caveat emptor!