“Information assymetry,” or, in this entry, IA for short has turned out to be one of the FSA’sÂ more resilientÂ pieces of jargon, right up there with “principles based regulation” and “clear, fair and not misleading.”
What the FSA means by it is that we consumers know much less about financial services than the experts we go to for information and advice.Â And this imbalance – very stupid consumer, very knowledgeable adviser – is one of the main reasons, if not the main reason, why things go wrong in the advice process and we get boxed up with useless rip-off products that offer the adviser huge commissions and offer us, well, more or less nothing at all.
It’s on the basis of this analysis that the FSA thinks one of the most important and urgent challenges for itself, for the industry and frankly for anyone with any significant amounts of money to spend is a massive and sustained programme designed to improve “financial capability” – in other words, to make us so much more knowledgeable about the world of financial products and services that assymetrical advisers can’t pull the wool over our eyes.
Like most of the FSA’s favourite ideas, the whole concept of IA, and of financial capability as the antidote,Â is completely wrong, and pitifully easy to disprove by reference to almost anything in life outside the world of regulated financial services.
The fact is, gigantic information assymetries exist in absolutely all sorts of relationships between people.Â It’s easy to think of lots of other commercial examples – vodafone shop, kwik-fit centre, PC World, snooty posh bird in Joseph, sommelier at Gordon Ramsay.Â But actually, many of the most important and most universal relationships far away from the world of commerce are based on the biggest IAs of all – boss/employee, doctor/patient, teacher/pupil, parent/child.
There areÂ too manyÂ dodgy doctors, teachers and parents, but by and large most people in these roles manage to avoid conning, cheating and manipulating their assymetrically-informed counterparts.Â There is no suggestion of a nine-figure budget being spent to make patients almost as knowledgeable about health matters as their doctors, or toÂ putÂ university students on a par with their lecturers.Â There is, of course, regulation – much of it the law of the land – designed to restrain those with a tendency to bad behaviour, but there is no suggestion that IA is a problem that needs solving in itself.
No, as far as I can see, financial services is the only field in which it is assumed that anyone with greater knowledgeÂ is automatically and inevitably pre-disposed to rip off anyone with lesser knowledge, and that the only effective answer to this is to transform the people with lesser knowledge into people with greater knowledge.
I couldn’t tell you exactly what this says about the morals, ethics and personal standards of behaviour of people who flog financial products for a living, but I fear it isn’t anything very good.Â