The bookshelf in my home office tells a strange story
It’s fair to say that among the social psychology tomes, crime fiction and financially related publications you’ll find a pretty mixed bag!
In there I’ve got a book about two blokes in a caravan touring the UK trying niche sports (my personal favourite – shin kicking), A biography of the Beatles and a book called “100 great breads” by an apparently pretty famous baker with a name which fantastically combines a relatively ordinary fist name with the glamorous sounding location based surname (no, not Simon Cannes, or Fred Venice….but Paul Hollywood).
My bookshelf is also in a state of flux.
It gets added to pretty regularly but only after I’ve read the book does it make it to my bookshelf. Apart from that book about bread. I really don’t know why that’s there!
One book I’m enjoying immensely at the moment, and will absolutely end up on my bookshelf, is Ben Goldacre’s Bad Science.
Ben (if you don’t know) is a Doctor, writer and investigator of the ways that science is misused.
From Homeopathy, to Cosmetics, to the pharmaceutical industry Ben aims to explain why much of what we hear in the newspapers, on adverts, and even by medical professionals is based on flawed data.
However I’m finding one of the most fascinating parts of Bad Science is where Dr Goldacre talks about the power of the placebo.
In the book, he talks about studies where people were told they were doing more exercise (but actually were doing a similar amount to the ‘control group’) lost more weight than the comparable group, how studies have shown that sugar pills can be a powerful alternative to anti depressants and how treatment, even if it is with sugar pills and water is shown to be more powerful based on dose (apparently 4 sugar pills are more effective than 2 sugar pills when clearing up gastric ulcers), how it’s administered (an injection has more ‘healing power’ than a pill due to it’s perceived severity) and even what colour the pills are!
The placebo effect is interesting.
It shows that if we’re being treated it’s likely to improve some ailments regardless of whether the actual treatment contains no actual medication!
Not because of the medicine being provided (a placebo helps too) but due to the fact that treatment is given, even if it’s just sugar or salt water.
Which got me wondering…
How much of what we do in financial services is placebo?
In other words, how much of what we do has a positive impact, not because of the actual action but the reassurance it gives our clients that someone is looking after their hard earned cash?
I’m sure that every financial planner or adviser has a different ‘desired outcome’ for their job.
With me and for most of my clients one my ideal outcomes is providing my clients with sufficient peace of mind.
If that’s an ideal outcome for the clients who work with me surely a combination of practical actions which are designed to help their financial situation (medicine) and actions designed not to improve their financial situation but instead ensure that they just feel better (Placebo).
However I’d be interested to know whether this ‘placebo’ has a positive practical financial impact too.
You could argue that people who feel better about their financial affairs (through actions by their financial adviser or planner which are pure placebo) mean they worry less.
Which means that they are less likely to take actions detrimental to their wealth as they are less likely to panic.
Which means that the act of financial placebo has made someone practically wealthier, due to the fact that they are less likely to make knee jerk reactions with their money which might have a detrimental impact.
So (and now I need your help)….
Do you think much of what we do as financial advisers and planners Practical or Placebo?
Are both the practical and the placebo as important as one another?
How much time do you spend on the practical and how much on the placebo?
What do you think your clients care about more?
Why, oh why, have I got a book about bread on my bookshelf? (I’m still wondering why!?)
As ever I look forward to hearing your thoughts.