I recently read an article by a wine expert that resonated with me.
The wine expert makes the point that she (a genuine expert with numerous appropriate qualifications and 35 years experience) has to shout louder and louder to be heard in a world inundated with a 24-hour news cycle and endless social media. There are an ever-growing number of so-called experts out there promoting gimmicky ways of doing the things many people with genuine expertise are trying to help their clients do.
Here’s an excellent example from her Financial Times piece. Apparently human beings can only identify two or three flavours in a single liquid:
“Back in 1989, the Australian taste scientist David Laing, from the University of New South Wales, conducted an experiment in which he demonstrated that humans have great difficulty in identifying more than four different flavours in a single liquid. And when in 1996 he tried a similar experiment on experts who smell and taste for a living, they were better than amateur tasters at identifying mixtures of two and three components but did no better when it came to four.”
Despite this evidence, there are wine-tasting notes available to consumers that list up to 10 flavours ‘supposedly’ identified by the experts writing the pieces. The wine expert was educated and cultured so she doesn’t quite put it like I’m about to, but let’s call these notes complete rubbish! They are aimed at helping wine manufacturers sell more wine rather than genuinely trying to help consumers.
Sadly, there is just as much noise for consumers in our space, especially when it comes to investing.
Expertise and gimmickry
When I was in the gym the other day and the CNBC show Mad Money, hosted by Jim Cramer, was on the TV right in front of my exercise bike. Now personally, I have to declare that I’m in the camp that says fund managers won’t outperform their benchmarks after fees most of the time and that predicting the ones that can (and will continue to do so for 25-30 years) is totally impossible.
But let’s be honest, this is the worst marketing story in the world.
As I pedalled furiously on my stationary cycle and watched Jim Cramer, I thought this is first-rate entertainment. It was brilliant and really helped me pass half an hour.
However, as an industry insider I also had to laugh. There was a four-person panel of white men in ties and stripy shirts. Two of the ‘experts’ expected one particular stock they were discussing to go up, while two others thought it would go down. Who should viewers believe? But it’s great entertainment right, so who cares about what actually happens to the stock and they sell a shedload of investment-based advertising off the back of it.
I was reminded of the story told by Paul Zane Pilzer, the economist, about what all stockbrokers learn on graduation. I’m paraphrasing his words:
Buy a list of 10,000 names. Write to 5000 people on the list and tell them Apple stock will go up in the next month. Write to the other 5000 and tell them Apple stock will fall in the next month. At the end of the month, you’ll be right with 5000 people from your list.
Then do the same again for BP next month (2500 people get told the stock will rise, 2500 that the stock will fall). After 6 months you have a list of 156 people who think you are a genius; correctly calling the price movement of half a dozen stocks in succession. There’s your client list for getting started as a stockbroker.
Expert?
Have we earned the right to call ourselves experts? We have spent many years trying to evidence to our expertise; we are Wimbledon’s only firm of chartered financial planners, we are the only firm to hold the CISI chartered firm status in Wimbledon and both Gareth and I have obtained the highest level of financial qualification from our professional body. However if we stop there I think we lose the right to call ourselves experts. Financial products change, tax laws change so we have to too and evolve to be worthy of the title expert.
