Some years ago I reasoned that people most often got ‘high stakes’ financial decision making wrong.

On that assumption and with nothing but ‘experience’ and a naively optimistic intent – we opened a financial planning practice, to provide quality advice and service. What we hadn’t considered was the question – ‘if individuals, or families were inclined to poor selection and decision making around high stakes financial decisions – what made us think their rationale and choice of financial adviser would be any different.’ (peoples decisions around important aspects of KiwiSaver have not to any extent debased this premise)

We now know from behavioural science that frequency of purchase matters. We consider “buying lunch (daily) milk and bread (twice weekly) and clothes, then cars, and properties, careers choices and spouses. We do small stuff often enough to get it right but when it comes to choosing a home a mortgage, or a job, we don’t get much practice or opportunities to learn.” Thaler: Misbehaving.

When it comes to saving for retirement – we do that exactly once. Because learning takes practice, we are more likely to get things right at small stakes than at large stakes. If learning is crucial, then as stakes go up, decision-making quality is likely to go down.

This is what we thought intuitively and practically in the 90’s when opening for business and it hasn’t changed – we just know the theory and science better and actual experience and evidence has corroborated it.

I got to thinking then – how about the ultimate decision, our health (do we make good decisions in general – don’t think so). If we go see the GP and he only charges us $50 for the visit. There must be a conflict of interest somehow (perhaps from the drugs he prescribes or subsidies received) for him to be making a decent living after expenses – unless of course he has the ultimate sausage factory and patient visiting times are limited. But does he have the time to change our habits – or does he simply prescribe a product.

As the financial services sector undergoes investigation the conflict of interest debate flourishes, driven by commission levels, and incentives. Are the interests of the client paramount! If one sector of society is being called to account (and I’m not opposed to accountability – the financial sector remained under regulated for too long) A) are the assumptions correct (That commission levels are inappropriate or product churn may not be in the best interest of the client) B) are there sectors which should undergo similar investigation. Such as Health. Let’s be really clear here. The financial sector is an open and competitive market. Remuneration is transparent and suppliers set the commission and incentive levels. The Health sector is a government controlled monopoly and the remuneration far from transparent. Both Health and Money are of paramount importance to people as they age. Life and lifestyle are at risk and there is minimal time with which to change course if, the diagnosis and prescription was wrong – what about accountability for the transaction of product without advice. Drug companies and banks directly deliver products by the squillions both in quantity and price – are the interests of the client really paramount. Why does it matter then if people can buy direct. Can the GP when sourcing the appropriate drug to prescribe or the financial planner when arranging mortgages, insurances or investments ever win the argument about placing the interests of our clients first – except from a personal level of principle and value. After all, the great religions and great politicians have been debating this question for hundreds of years. What to believe, what bias, what ideals. Economic theory espouses optimising choice but behavioural science has enlightened us. We are poor at this element of our lives and hence we tend to follow strong personalities as opposed to strong purpose or principle. The Pastor, the politician, the planner, the health practitioner or we go online and buy whatever we like! There is a certain dichotomy here.

In my experience women get this better than men. Women make a decision around which doctor to consult for themselves or their children through discussion with other women. They are also more likely to use medical services more often (frequency) and thus their experience is greater than that of men. But that doesn’t explain women’s choices around taking financial advice. Such as sticking with financial advice and financial adviser, tending to question ‘the plan’ or ‘the portfolio’ less than men (after initiating the plan). They are harder to convince about ‘the plan’ on the strategies necessary to achieve it but remain focused to their decision when convinced of its efficacy as long as the value / service is maintained.

They live longer than men on average too – so they get health right as well. Perhaps that’s the answer. They understand their need will be longer and at a time they are likely to be on their own.