Tom Baigrie: Maths for the real world
You should read online the Hansard transcript of the Parliamentary debate on December 15 which resolved “That this House….believes that the country has a duty to equip its young people properly through education to make informed financial decisions; and calls on the Government to consider the provision of financial education as part of the current curriculum review.”
It’s a great example of how lobbying, in this case led by Martin Lewis, can achieve good things.
It would take a foolhardy Government not to act according to the resolution, though one fears that schools will struggle to deliver the lessons as effectively as is needed to counterbalance the glossy marketing aimed at getting us to spend unwisely.
Reading the debate makes clear just how well Parliament can work. There was very little politics and a lot of common sense. It’s also clear that MPs like to show off! Shakespeare’s Polonius and Iago, Dickens’ Mr Pickwick (inevitably) and even Ben Franklin were all quoted, but the best quote was from MP Jenny Chapman. “Education is the armour against being misled.” Spot on, ma’am, though good advice can do that job too.
Perhaps the most practical and quickest way of integrating personal finance into the examined elements of the curriculum (rather than tucking it into the PHSE basket along with five-a-day and the condoms) would be to require all relevant mathematical questions to use finance examples. “If you bought a mobile phone on a 12-month contract at £10 per month what would you have to pay in total” would make an eight-year-old think, and GCSE students can do a bit of APR calc-ulation perhaps, or explain why buying a car on HP looks cheaper than paying for it in cash, but certainly isn’t.
Finance is where adults meet maths most, so I hope we see the focusing of relevant maths questions on finance and eventually an examined financial skills module as part of the maths curriculum.
This would be a far more sensible approach than the other current drive, that for simplified products. The latter is en route to being policy and is clearly driven by the need to help uneducated consumers avoid making dumb decisions. But simplified is not simple. As we consumers are all different we need many different products and versions of products to choose from, that means state specified simplicity is not what’s needed, but rather clarity and honesty and enough knowledge to avoid dumb mistakes.
Of course, helping clients do that is a good definition of the job of an adviser. This seems now to have been recognised in the world of mortgages, but not else-where. Perhaps it should be, for I fear simplified products are a mirage, conjured up by the advice desert that regulation has caused.
It is education that is the right solution to picking between them, education and a viable advice service; not a statist prescription of what consumers should and should not be able to buy and be charged. When has state prescription ever worked in areas where consumer decision-making is voluntary?
Simple products already exist where they serve a purpose, as do those that use complexity to deliver better value, It is the third group, those that use complexity to deliver a rip-off, that should be tackled, but as with pensions in particular and financial advice generally, new rules seeking to perfect the good enough are preferred to tough regulatory action against those who mislead. That makes our rulers’ lives simpler, but it doesn’t help uneducated consumers at all.
Tom Baigrie is chief executive of Lifesearch