Recently on the @Zerocredit_UK Twitter account, there was a question posted and it got me thinking. I was going to write a comment as I often do on various blogs, but sometime ago I was invited to contribute to the Zero-credit blog and in this my first post, I will respond to the question asked. So what was the question?
If there are more consumers than bankers, why should consumers be jumping through hoops to *understand* personal finance?
Finance is undeniably a complicated subject, with many laws and fines if you don't pay your taxes on time or simply don't understand. Accountancy, for this reason, could be considered as one of the last jobs for life. With personal finance, there are hundreds of accounts, loans, mortgages, and a plethora of other financial products. To help with this, where businesses have accountants, the rest of us have Financial Advisors.
The reality, however, is that many of us can't afford the services of Accountants or Financial Advisors. The best the poorest people can hope for is advice given voluntarily, courtesy of services such as the Citizens Advice Bureau. Their advice I have found is invaluable, and yet the service is shrinking at a time when it is needed most as more of us are getting into financial difficulty following the loss of work and homes.
It is difficult to get a man to understand something when his salary depends on his not understanding it. ~ Upton Sinclair
So the average consumer jumps "through hoops to understand personal finance" because they can't afford advisors explaining it in a way that they can understand? I believe so, but it goes much deeper than this.
I believe the real reason is one of control.
In the song "Re:evolution" by The Shamen, the first line is "If the truth can be told so as to be understood, it will be believed". Do you believe everything your bank says? They may be telling the truth, but even in plain English the banks' terms and conditions are a dozen pages long, if printed at a size we can all read, let alone understand! For that reason, the banks and Financial Services Industry are rarely trusted, a trust which is eroded further with reports such as that of the Barclays Tax Dodging Service for the super-rich. Trust is a necessity to have with organisations who have control of your money.
Money is the biggest incentive for many people, and so to earn money or save money, most people will go a long way to do as they are told if they are getting a good benefit, such as free banking. An example of what we are told is pay a certain amount into your account every month for extra services and higher interest, these services are of very low value relative to the the profits the bank make from consumer banking when their terms are breached. Sadly many people have been with their for years, sometimes the very same bank that persuaded them to join with a 'free' travel card.
So in order to control, people are kept from knowing too much. The application of knowledge is power; too much knowledge of how the system works takes money, power and profits away from the rich. They won't let that happen, just as most of us won't let someone take our money. The strange thing is, even as a wealthy person gets paid more and more, they still want more, they get greedy. Some get caught (remember Bernie Madoff?!) but most just sail their yacht to a tax haven.
How do we change this?
The answer, I believe, is for us to advocate people we can trust, who don't take our money without clear explanation of where it goes and that these people represent the majority of us who lack the skills to navigate the financial services minefield.
Which people? Who chooses? I believe our best opportunity for change is to back a pressure group that promotes what we believe in, such as the Taxpayers Alliance or the massively popular 38 Degrees. Zero-credit has a role to play in this too. Do you think enough people would rise up? Please add your comments below.