We were going to proclaim that insight matters – and even though we firmly believe it does – we decided to be careful when we realised that Insight Matters is a psychotherapist practice in Mountjoy Square, Dublin.
It’s no coincidence that the English language has selected similar monikers for hindsight; insight and foresight – past; present and future. But there are key distinctions. Hindsight looks backwards where foresight ponders the future; while insight is an invaluable tool for the present. Insight displays a deep understanding of a subject and is astute and percipient. Insightfulness stems from the recognition that all may not be as it seems. Extensive soul searching, when the solution seems obvious to others, often leads to insightful epiphany moments.
The financial world as it affects consumers is regularly accused of being boring and staid – lacking innovation and using the same old jargon. While the “Wall Street” types, who populate the wholesale investment markets, are creative in the extreme. On occasion when the two stereotypes collide consumers tend to suffer. Think of the sub-prime mortgage derivatives that were created in the early 2000s for professionals by professionals but were ultimately dumped on unsuspecting retail investors.
Although financial regulation exists to protect consumers it is hopelessly overwhelmed by ingenious individuals who spend their day trying to dupe the unwary. This is the same in every walk of life where the force of the personal survival instinct outweighs the common good. But it should not always be so.
Insightful regulation could take a completely different lead. Unfortunately, to most regulators regulation means restrictions and prohibitions. It invariably involves hindsight reactions after the horse has bolted. It almost never involves insightful thinking. The latest MiFID regulations are a case in point. The regulations are aimed at constraining activities in certain financial instruments in certain financial markets. They take no account of the goings-on of consumers in the real world. The language (translated from French) is turgid and unwieldy – not consumer friendly.
One of the “breakthrough” prescriptions is a 3-page note called a Key Information Document. It is supposed to describe the financial instrument in a way that is readily understandable to retail investors. Nobody involved in the process has been insightful because the resulting explanation is the proverbial “dog’s dinner”.
MMPI has conducted a simple test amongst 100 consumers (target audience selected by a market research company). The participants were asked 5 simple questions about a product using only the Key Information Document as the reference point. Nobody got all 5 questions correct and the overall score was an abysmal 28%.
If clever people with insight set out to describe a product they would use graphics and pictures and smiley faces. They would use visual impacts and colours to draw attention to critical aspects of the product design. The resulting document might look more like a child’s school book. Sadly when legislators mix it with the legal rulebook the outcome is like an instruction manual. Some insight would help a lot!