Lost the rizz and not the GOAT?

I had a trip to Edinburgh this week (and didn’t take a coat, so did the Wim Hof technique all day just walking around the streets) to talk to a large bank about the end customer. What do people want and how can finance firms do better?

I started out my talk with a common line I use – namely that I set Boring Money up to help people who don’t have PhDs in Economics to make better choices with their money. Afterwards, a lovely young guy came and introduced himself. “Hi,” he said, sheepishly. “I’ve got a PhD in Economics and I loved your talk.” Lol. If it makes all of you feel better, he also told me that he struggles to pick ISAs and work out which funds to buy. Phew! Of course he's now in Boring Money’s safe hands, so maybe I need to change the strapline?

I also had the pleasure of hosting a panel of 5 ‘normal people’ – some of the bank’s customers – from their early 20s to someone retiring this year, and they shared their views on what they knew, didn’t know and wanted to know!

Communication and information was the common theme. Tell me what I’ve got, what to expect, and what I should be doing.

Going on a burger binge

One man was fed up that he had received a pension statement reporting his money had gone down from £30,000 to £25,000 (using illustrative numbers). And this same statement went on to tell him he should pay in more. Then showed him all the fees he’d paid. Understandably, he was fed up. “They’ve lost me 5 grand. They still charge me. And then ask for more money! But there’s no pain for them”.

It’s a very uncomfortable truth about investments that a firm can rightly say they have done a good job if they have ‘only’ lost you £5,000, if the average firm has lost you £8,000, for example. This is what a firm means when they say they have ‘beaten the benchmark’. It’s like going on a burger and ice cream binge for a month and only putting on two stone when everyone else puts on three stone – it still doesn’t feel great! (Allegedly. I have not tried this trick yet, but it does sound tempting). So, however skilful a team, there are times when stock markets just fall and these are just the rules of engagement.

Think back to 9/11, when US markets closed for 4 days, anticipating chaos and panic selling, and then the Dow Jones fell by 7% the first day it opened up. Or the 20th February in 2020, when the stock markets got Covid and crashed. Or more recently, when the Japanese stock market had a wobble and the rest of the world had a temporary tech-induced panic attack.

None of this is anyone’s fault, and it’s as certain a feature of the investment markets as the expression on a teenager’s face when you make a joke in front of their friends. (I recommend using the words ‘rizz’ and ‘the GOAT’ and ‘that slaps’ in this joke for maximum effect. Glossary at the bottom for anyone over 25).

Whatever the factual investment logic, our silent emotional benchmark is cash

The fact of the matter is that for many of us, the silent benchmark is cash. Even though it shouldn’t be. Because our opportunity cost of investing is not having it in a savings account. So fund managers may pat themselves on the back for outperforming the MSCI World (massive collection of global shares), for example. But if the MSCI is down 10% and they're ‘only’ down 6%, and savings accounts are paying say 3% in interest, of course we don’t feel great about this.

Investing is all about accepting the highs and the lows, which of course also has its perks. Anyone on the US tech stock wagon will have loved the highs of recent years. But when it comes to the lows, it comes back to communication. If you know that many of your pension customers will be seeing numbers in the red, it’s just common sense to acknowledge this. And to openly share why.

I don’t think Peter Hargreaves, founder of Hargreaves Lansdown, would mind me sharing a chat we had over lunch one time, when he talked about how important it was to communicate. A key chapter for him in the growth of the company was actually after the 1987 Black Monday crash, when most of the industry ducked for cover and stopped talking to customers. He stepped up the communication at this time and, unsurprisingly, customers responded well.

I can’t be @rsed to buy you flowers

I had another meeting with a fund manager yesterday. Their whole ethos is that investing is a long-term game. Which, of course, it should be. And so, they're reluctant to provide too-frequent updates for fear it promotes short-termism or knee-jerk reactions. And as I shivered my way back to the airport, I thought there was an analogy here with marriage. This too is a long-term relationship, but it doesn’t mean that you don’t need to buy flowers or have a chat every week. It’s not how human beings work.

So. Money, men and women. When you lose the rizz and worry that you’re not currently the GOAT, don’t be afraid to say this fund doesn’t slap right now. And tell people why. Preferably in three short bullet points and not on page 68 of a PDF I don’t have the time to download and attempt to read in the queue at Tesco on my mobile!

For those of you working out what slaps right now, there’s some new pieces this week – a feature from BlackRock on how mined commodities are fundamental for energy transition (it's only through mining companies that there will be the copper needed for electrification, the metals needed to update electricity grids across the world, the lithium for use in batteries, plus the iron ore for the production of steel needed for wind turbines); smart moves for parents paying private school fees and what is an equity income fund (for anyone looking for some income to come from their investments or ISA), with some picks from the experts.

Have a great weekend everyone, safe in the knowledge that our Prime Minister is taking a vital message about sausages to the UN General Assembly. Phew.

Holly

PS Oldies’ Glossary:

• Rizz – charm, style and attractiveness – from charisma.

• The GOAT – greatest of all time.

• That slaps – something is amazing. The term originated in the Bay Area and comes from the physical action of slapping a subwoofer while playing a song with extra bass.

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