Whilst I might have worked the '1980's City look', red braces and all, for longer than could be deemed fashionable (I call it 'retro'), I'm less well known for my reserve.
I've made a career out of talking markets for the last 30 years (and counting), but I've been less vocal on the issue of financial education. But it's an issue that has always been close to my heart, and I've been going into secondary schools of all shapes and sizes, and universities, for the best part of my career. Financial education in primary schools has an important role, but for me, getting to grips with money concepts the closer you get to adulthood, and during those university years, is more crucial, and I say that as someone who learned the hard way at university. If you think that subjects like pound cost averaging and compounding are too complicated for young people, think again. The incredulous laughs when I've explained 'herd like' behaviour (investing at the top of the market) is absolutely infectious (“but I'm always told not to do things just because other people are!”). Quite.
I've never met a young person yet who isn't interested in money, and unlike most adults, they tend to like talking about it too. Going into secondary schools and universities to talk about money and investment is just something I've always done, because it's always felt intuitively the right thing to do and it's second nature. But talking about it, when there are millions of people across the country tirelessly giving their time to worthwhile causes without fanfare, has never been for me.
But last month, 7IM, the company I co-founded, has kick started a 'we need to talk about' campaign, launching a discussion paper which questions some of the old assumptions about retirement planning – derisking the closer you get there – a concept which we think really does belong back in the 1980's. It's thought that around £100bn is still invested in funds which do precisely that, and many people won't even realise that their pension is being derisked as retirement approaches. It might still be right for some, but it absolutely won't be right for everyone. The world has changed, people are living longer, and money has to work so much harder. People need to be in a position of knowledge.
There's a huge education job to be done which needs to stretch beyond the classroom through to the workplace and around the coffee table. Any new Government needs to devote some real time on this issue and whilst lots of adults don't like to envisage an old age where the money has run out, nor do MP's (and nor do they have to, some might argue, with their final salary schemes.)
We stress-tested a range of scenarios – the good times, the not so good times, bull markets, the credit crunch, taper tantrums, the eurozone crisis. Even when we simulated scenarios worse than those in recent history, we found similar results; the moderately cautious investor ran out of money ahead of the balanced investor. And to try to avoid self interest, we modelled this on our moderately cautious and balanced funds, rather than using hypothetical indices.
It's time to get talking, and it's time for a national conversation. People need to be in a much greater position of knowledge about what's happening with their retirement pots – they might not need to know every holding they are exposed to, but they do need to know if they are being automatically derisked. When it comes to financial education, I've always believed in action, not words. Now I think it’s time for both.
Justin Urquhart Stewart
Co Founder and Head of Corporate Development
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