FTAdviser.com

Of late there appears to have been an absolute deluge of programmes on ITV and the BBC about the credit crunch. The latest one consisted of Martin Lewis helping consumers source the best deal with great words of wisdom such as “shop around” and “seek advice”.

While it would be easy to mock Mr Lewis for stating, as my dear father would put it, “the bleeding obvious”, it did strike a chord with me. People were literally hanging off his every word in a way comparable to how I would image the crowd looked at Jesus when he made his speech on the Mount.

And that’s when it hit me. Back in the day people were taught “few things worth having are easy to get” yet this now appears to have been replaced by “if it is worth having it should be easy to get and someone else should do the thinking for me”.

And this is where I start to rant. I can honestly say I am truly fed of people filling in my screen who want sympathy for failing to engage their brain.

“Oh I took out a £200,000 loan and I only earn £20,000.” Well, I hate to say it but that is your problem.

“Oh a broker told me to do it and then the bank said it was a good idea.” Great, so if the broker told you to sell your granny and the bank recommended opening up a brothel in the driveway on the grounds of it being a good “business opportunity”, would you do it?

A year ago I was looking to buy a house when a broker told me pretty much the same thing. He even recommended taking out a residential property on a buy-to-let purchase, suggesting there were institutions which would be prepared to offer me eight times my salary. Guess what I said? Thanks but no thanks. I knew I couldn’t afford it and it didn’t matter what that guy said.

Now there is a current argument that consumers “don’t know”, are “unaware” of financial matters and should be “taught” the basics. I can accept this as, indeed, the general public do appear to misunderstand basic financial concepts but since when did common sense have to be taught?

I am not asking for calculations similar to those enacted by PhD students from Cambridge. I am not asking for great thoughts similar to Einstein when he discovered E=MC2. I am merely asking people snap back to reality and start understanding that just wanting something does not mean you should have it and education can only go so far.

Responsibility for oneself and for one’s actions can not be taught in schools and ultimately there has to be an end to this nanny state where people are always allowed to blame anything and anyone except themselves for their own predicament. And get compensation and rosy TV footage as we are encouraged to lambast banks, the prime minister, the cat and Mrs Higgins at No 43 in the process.

Britain was not in Euro 2008 but the general population remained unmoved as they had been engaged in another sport, that of navel gazing for a fair while.

And if there is one thing I hope the credit crunch ends, it is this.

What a cracking article. I have never laughed so much and nodded my head in agreement at the same time.
Thank you

amen -
Why do they think they can do as little as possible for themselves and expect everything to be done for them and then if it goes wrong it is someone elses fault?

Well said

Absolutely brilliant, even my 16 year old daughter cannot understand why people spend using credit cards, loans etc when they do not have the money to pay, and yes she is a typical teenager who loves to shop.

I wouldn’t sell my granny if a broker suggested it, but if he suggested i apply for a big loan then i would think about it - that’s why i’m asking him in the first place, that’s what he is there for.
Is the woman from FTAdvisor saying we should ignore all advice?
Financial products are very complex, to the point that, obviously, some bankers don’t understand them either. The real point is that many individuals in financial services have made millions out of such mis-selling while their employers and the public are left to deal with the consequences.
Obviously the responsibility for such a mess should be shared between all participants, but I would argue most of it belongs to the people who benefit most from it.

A good article - In asnwer to Andy P, if it looks to good to be true it probably is. A good ADVISER is the agent of their client and is working for the client. There is now a bit of common sense being said in the interim RDR report, in that advice and sales need to be clearly defined.
You follow an advisers advice at the advisers peril (he has a duty of care as your agent and can be accused/liable if found professionally negligent), you ignore his advice at YOUR peril.
You do what a salesman suggests and he is happy and you may or may not be depending upon whetehr his “Product” is any good, it’s called caveat emptor.
The problem is the man on the street, Which, FOS and FSA seem to have confused this and hence themselves! Now none of us have any certainty and all everyone tries to do is cover their backside rather than focus on what they think is right for their client when advising. We have made a conscious decision to do what we think is right for the client and teh onyl backside covering we have is the fact ALL meetings are recorded on sound files!

As a small firm of IFA’s we effectively stopped our mortgage business as the number of client’s we saw who, in the event of a mortgage rate rise, could not afford their mortgage loan became an ever increasing number.

We offered advice in this respect, told them they could not afford that loan and they went elsewhere for their loan. This was usually back to the bank or building society from where they had come to see if they could get a cheaper rate.

This raises the fact that most of the mortgage clients we saw were only after getting the largest loan at the cheapest rate, invariably so they could have a house similar to what they had seen on Location Location Location or a house in the sun!

What needs to be done and should have been done is that the FSA should have regulated the industry from the ‘top down’ and not spend time mesing around with two and three man band advisers. Had they done this then the regulation would filter through the system to these smaller firms as banks and building societies would be only able to offer ‘Regulated and Approved’ products.

Despite Panarama showing two programs over twelve months the FSA sat in their ivory towers and let the banks and building societies accept mortgage applications, either from Borkers or In-house Advisers where the loan could clearly not be serviced.

In days gone by i.e. ten years ago, you needed to provide a savings history in order demonstrate you had the financial discipline to service and repay your mortgage.

We have to look at the people at the top. Have they demonstrated any financial competance? The answer is clearly NO!

As this is the case then why should we expect the uneducated to act in any other way.

How many times do you here the statement on television or in the newspapers ‘I would sue, you could be entitled to thousands in compensation’?

Those so-called uneducated are in fact the masters of playing this system as the FOS and the FSA see them as apparent victims.

However if the system constantly sets itself up to be sued who is to blame?

This is an excellent article.

I fear the problem of indebtedness is not simply that there has been something of a common sense bypass in the past generation - though I suspect there has been [que usual rant about lack of competition in schools, the health & safety culture, the welfare state etc].

But the long period since the last serious downturn and the availability of ‘cheap money’ over the same lengthy period has combined with the short-memories of so many people to create the illusion that you can live on the never-never without all those inconveniences of hard work and careful thought.

I remember the 89-92 period of high-interest rates and mass unemployment, but I suspect many people either do not or have simply been conditioned to forget it. This is why adages like “few things worth having are easy to get” seem to have slipped.

Yes, financial products are complex, but the bottom line is always easy to understand - how much is it going to cost? The simple words of Mr Micawber have always been true: if you try to spend more money than you earn, it will end in financial misery even if you think you’re going to have an “asset” that will make you a big profit. The current scenario is not new, and the dreaded term “negative equity” stung enough people in the 90s for some lessons to have been learned, surely. Ownership is not a god-given right, be it property or that must-have item that’s caught your eye. Everyone needs to get real about that, and while I do accept that some people will have suffered from poor advice, I wonder how many of them ever asked themselves (or their mortgage broker/bank etc) the crucial question about how they would afford to pay? Even if someone else profited from your stupidity (or financial naivety, if you want to be nice about it) it doesn’t absolve you from a basic responsibility for your own actions - saying that you did the wrong thing because nobody prevented it doesn’t stand up as a legal defence in the criminal courts! This is a big reality check for all concerned, if we can get past all the breast-beating and finger-pointing of the “victims”. Perhaps before being allowed to borrow money again in the future, these are the people that should be made to demonstrate a basic qualification of some kind - an understanding of simple arithmetic perhaps?