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Backseat Economist

The Future Of Financial Advice.....

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Mods - please keep this on the main forum for a while before moving as appropriate....

I think the one thing to come out of all the issues discussed over the last few years, and, one that seems to be ignored sometimes is that that there is no such thing as impartial financial advice - and there never will be. People in general and posters on here criticise the FSA, the government, the Bank Of England for the decisions taken/not taken but, the problem has simply been compounded by peoples' attitudes to money/saving/debt etc.

Everyone bangs on about how incompetent and corrupt everyone else is, epecially those in positions of power or influence but it does strike me that if people have the education to make the decisions that they alone should be responsible for we wouldn't be in the position we're all in.

What would be useful to have from people is any ideas for how knowledge of economics/finance/advice can be for the benefit of people seeking to make investment decisions in future. I've got my own ideas, but it would be helpful to know everyone else's thoughts, especially from senior posters here.

GT.

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Everyone bangs on about how incompetent and corrupt everyone else is, epecially those in positions of power or influence but it does strike me that if people have the education to make the decisions that they alone should be responsible for we wouldn't be in the position we're all in.

Absolutely, many people have an appalling level of financial intelligence / numeracy / callitwhatyouwill.

Unfortunately we're in a culture where most people don't even see the point of learning basic mathematics at school - "coz that's wot calculahers are for innit" - so of course they're going to do whatever Caral Vorderman on 'telly tells them to do.

A "personal economics" GCSE might help but I fear the syllabus would be corrupted by agendas: "Module 2: The Benefits Of House Owning". Let's be honest, teaching fifteen and sixteen-year-olds critical thinking will never get the official seal of approval.

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OK, the FSA do and have had to regulate the investment industry in recent years which is evolving all the time. After the collapse of Lehman Brothers, any investment product has to clearly lay out counterparty risk and recourse in the event of a bank's collapse (Issuer of Securities). Risks have to be at least as prominent, if not more than the potential benefits. Also financial advisers have to complete a verification form to prevent money laundering. In that form, they have to state and sign that the investor has received appropriate financial advice and has a full understanding of the product.

This hasn't happened with mortgages though - when a person or couple are potentially making the biggest financial decision of their lives. Charts for the past 20 years showing average house prices, interest rates and house prices to earnings ratios should be compulsory when selling a mortgage. If a broker sells anything but a repayment mortgage, it should be clearly stated as to why this product was recommended to their client with some culpability going to the broker if the client is in any way misinformed.

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OK, the FSA do and have had to regulate the investment industry in recent years which is evolving all the time. After the collapse of Lehman Brothers, any investment product has to clearly lay out counterparty risk and recourse in the event of a bank's collapse (Issuer of Securities). Risks have to be at least as prominent, if not more than the potential benefits. Also financial advisers have to complete a verification form to prevent money laundering. In that form, they have to state and sign that the investor has received appropriate financial advice and has a full understanding of the product.

This hasn't happened with mortgages though - when a person or couple are potentially making the biggest financial decision of their lives. Charts for the past 20 years showing average house prices, interest rates and house prices to earnings ratios should be compulsory when selling a mortgage. If a broker sells anything but a repayment mortgage, it should be clearly stated as to why this product was recommended to their client with some culpability going to the broker if the client is in any way misinformed.

Two points - saying the role of the FSA is evolving is a bit like an incompetent doctor who just killed your loved one consoling you by saying we now have a better understanding of the problem.

The second point - runaway house price inflation would not have been any different regardless of how financially astute borrowers are - it was caused by a credit bubble. Those who bought were boiling frogs - most who bought noticed only too late. HPCers are of course just contrarian investors.

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A "personal economics" GCSE might help but I fear the syllabus would be corrupted by agendas: "Module 2: The Benefits Of House Owning". Let's be honest, teaching fifteen and sixteen-year-olds critical thinking will never get the official seal of approval.

God, what a wonderful vision you have just inspired:

Compulsory lessions in critical thinking.

EG "Last week in the chapter on Einstein's views on neuroscience, we looked at the problem of illegitimite authority*. Today we will deal with the motive fallacy. That is to say, we will consider why people's motivation for making a statement is irrelevant from the truth or falsity of the statement, which must be assessed on its own merits. We will then analyse this article from the Daily Mail and count the number of logical errors it contains."

*This refers to Einstein's statement that the average human being uses 10% of his mental capacity. Or is it 30%? It is backed by no research but is frequently believed and repeated because Einstein said it and Einstein woz clever. He was indeed a legitimate authority on astrophysics but he knew no more about neuroscience then I do. Well, less, actually, since I have had some training...

Edited by Selling up

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Absolutely, many people have an appalling level of financial intelligence / numeracy / callitwhatyouwill.

Unfortunately we're in a culture where most people don't even see the point of learning basic mathematics at school - "coz that's wot calculahers are for innit" - so of course they're going to do whatever Caral Vorderman on 'telly tells them to do.

Yes, part of the problem, but not the whole solution either. I can't see "Money As Debt" being included as required viewing material for GCSE students :rolleyes: But, I do think that some sort of structure needs to be set up and made available for all adults and children alike that takes things from a very simple easy to understand level.

The second point - runaway house price inflation would not have been any different regardless of how financially astute borrowers are - it was caused by a credit bubble. Those who bought were boiling frogs - most who bought noticed only too late. HPCers are of course just contrarian investors.

Point taken, and this is where people have to take a certain amount of personal responsibility for their own actions. But that has to come from somewhere - the problem is, as I know all too well...that doesn't usually happen until you're knee deep in financial trouble and have nowhere else to go.

GT.

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A "personal economics" GCSE might help...

you'll learn more about economics (especially monetary policy) in a few days reading posts on HPC and GEI than you would in 11 years of state education.

... but I fear the syllabus would be corrupted by agendas: "Module 2: The Benefits Of House Owning". Let's be honest, teaching fifteen and sixteen-year-olds critical thinking will never get the official seal of approval.

exactly.

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The last thing TPTB want is for the general public to understand the monetary

and banking system.

The essentials are not too difficult, so if they ever talk about it they need to dress

it up as highly complex and best left to the banksters and their politician paeons.

I can just imagine a school teaching the system of fractional reserve banking and where

new money comes from, as likely as flying pigs.

Over 99% of the general public haven't even got the faintest clue about the money

system, which is quite funny in a black sort of way considering how important money

is to everybody and how much many concern themselves with it.

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