“Sorry madam. I’m a professional, not an expert”
The lady on the other side of the counter blinked in bewilderment.
Her face cycled through a range of expressions, before settling on “does not compute”.
“I don’t understand?” she enquired.
Moments earlier the customer had marched into the photo lab, carrying a camera worth more than the average used car. She complained that despite having equipment that would make the average paparazzo envious, her photography produced decidedly disappointing results.
By that point I had developed and printed over a million photos during my time working in the photo lab.
A few of them were breathtakingly good, National Geographic worthy. The vast majority were not.
Processing all those photos had taught me a great deal about what not to do.
Why a particular approach or technique will yield a given outcome.
What people commonly get wrong.
But here is the thing: that is not the same as knowing how to achieve amazing results!
Timelessly recording those magical moments when hopes and dreams are fulfilled.
To perfectly capture the essence of a person in a single frame.
Conscious of my knowledge gap, I took a photography class at school.
In between imparting wisdom about f-stops and shutter speeds, the photography teacher lobbed the occasional truth bomb like:
“Photos are forever. If you must appear in nudie pics, ensure only one of your face or your pink bits is visible in a single frame. Never both!”
This course taught the basics about how cameras worked and a little bit of photographic theory. This allowed me to credibly answer most frequently asked questions.
There is a commonly held misconception is that a professional is an expert in their field. This could not be further from the truth.
The Oxford dictionary defines a professional as someone who:
“engaged in a specified activity as one’s main paid occupation rather than as an amateur”.
No mention of expertise there, the only requirement is finding somebody willing to pay you to do something.
Sometimes that definition gets extended to:
“a person competent or skilled in a particular activity”.
Competence, a quality rare enough to be considered a superpower, is a world away from expertise.
Under those definitions, I was a professional photographic printer because I derived my principle source of income from that activity.
Unfortunately most customers mistakenly assumed they were being served by photography experts, who for some inexplicable reason benevolently chose to work for minimum wage in a photo lab.
“I just can’t understand why my very expensive camera is failing to accurately capture what I am seeing through the viewfinder”
I quickly flicked through the envelope of photos the lady slid across the counter, and for once the problem was obvious: she had forgotten to remove the lens cap!
Careful whom you ask
Similar misunderstandings about the skills and abilities possessed by professionals play out every day.
Have you ever asked a clerk at a hardware store about a DIY project?
A shop assistant is not a carpenter or an electrician, professions which undertake building projects for a living.
A store clerk does not require any experience in the building trade. This lack of knowledge would seldom prevent them offering an opinion, as the primary function of their job is to make the sale.
How about asking your tax accountant about wealth management decisions?
Working with financial figures all day does not mean they know anything about wealth management.
Diversification strategies and deciphering the content of a Key Information Documents fall well outside of their core competency.
Would you ask a chef for nutritional advice?
Chefs are paid to create mouth-watering culinary masterpieces. The good ones deploy a cunning combination of chemistry, physics, and graphic design to dazzle the senses and delight diners.
Their job description doesn’t require the counting of calories, controlling portion size, nor conforming to recommended daily intakes.
What made you think those professionals knew anything about your subject of inquiry? These were easy mistakes to make, examples of overestimating the actual competencies of a given profession.
Most folks wish to appear helpful.
Few people are comfortable admitting ignorance.
The service industry generates income by providing services to paying customers. No service equals no sale, which in turn means no profits or commissions.
Which professional would be best qualified to credibly answer questions about what happens after we die?
Or a probate lawyer?
Sometimes the answer isn’t obvious.
Be alert to self-selEcting advice
Irrespective of whether those services on offer are in the customer’s best interests, many service providers will attempt to sell the customer something. Customers who pay for advice seldom stop to question whether they are seeking that advice from the right person or profession.
There is an old cliché that you should never ask a barber if you need a haircut. The inherent conflict of interest is obvious.
Similarly, if you talk to an insurance salesperson, regardless of what your question is, the answer will be more insurance!
This advice isn’t bad necessarily, but the choice of professional the customer engages with often makes the guidance received self selecting.
For example if you spoke to a “financial advisor” at your local bank, then you can be certain the universe of products that advisor might recommend will be limited to those offered by their institution. There can be no pretence of independence or objective advice.
The advisor will be participating in a performance-based incentive scheme, where they receive different levels of financial reward for various financial products you may purchase.
A credit card is easy to sell, with a comparatively low reward.
A mortgage is a harder sell; requiring more time, effort and paperwork. However the mortgage will likely be more profitable for the bank, so the incentives on offer to the advisor are larger.
Choose the right tool for the job
Talking to an independent mortgage broker would be a more prudent financial move, as the good ones canvas the whole market to find the products that best meet the customer’s needs.
However as with talking to the enthusiastic insurance salesman, engaging a mortgage broker means the decision about whether a mortgage is required, or is a good idea, has already been made. It is not their job to talk their customers out of taking on a mortgage.
Mortgage brokers don’t start their consultations with: “how much do you need?”.
Instead, they ask “how much do you earn?”, which leads directly to discussions about how much a customer can borrow.
For many people this naïvely sets their housing budget. This often results in them being financially stretched and house poor from the moment their house purchase completes.
Just because you can borrow a lot of money, doesn’t mean you should!
The recent Australian Royal Commission into misconduct in the banking, superannuation and financial services Industries recommended that trailing commissions on mortgages be outlawed.
The commission recommended that the borrower should who pay upfront for mortgage broking services, and broker should not receive incentives from lenders.
Unsurprisingly an army of lobbyists representing the mortgage broking industry was deployed.
Roughly a month after the recommendation was initially accepted, the government caved to pressure from the industry and performed a backflip.
Trailing commissions remain.
The obligation for mortgage brokers to act in the best interests of their clients was rescinded.
Underperformance by design
Wealth Managers are another profession where there are often misaligned commercial interests.
What is good for the manager is seldom good for the customer.
- an entry fee of up to 5% of their capital
- an ongoing annual fee of 1.85%
- an exit fee of 6% when they wanted to leave.
To put those figures into perspective consider an investor who handed £1,000,000 to this manager. If the wealth manager did no more than hold onto this money for a year and a day, then when the customer closed their account they would receive back just over £875,000!
That sounds more wealth mangling than wealth managing to me, but there is nothing illegal or underhanded about this.
Much like smoking cigarettes or texting while driving, the fault lies with the customer. They failed to do their homework, and chose poorly whom they sought guidance from.
Obviously not all wealth managers are as expensive as this one, but high fees create a significant headwind for portfolio performance.
This means wealth managers need to take more risks just to match the performance of a humble low-cost index tracker.
That is hardly a compelling value proposition!
The wealth management industry is the poster child for professionals who are not experts.
Fortunately, it appears the Financial Conduct Authority is finally waking up to some of these ridiculous fees. They are talking about capping, or possibly banning outright, platform exit fees.
That won’t solve the problem of unwary customers being overcharged for services that underperform by design, but it is a step in the right direction.
Owning your decisions
The harsh truth is that few of us are genuinely experts in anything.
It is a rare thing indeed for a single person to be an expert in more than one thing.
Those who describe themselves as experts, gurus, or thought leaders are invariably not. There is a very good chance that they are trying to sell you something however. You have been warned!
It is logical for us to seek advice from those who should know more about a given topic than we do.
However before we seek guidance, we must first determine what it is that we wish to know, and then assess which profession is actually qualified to provide that advice.
If you want photography advice would you be better off asking the winner of the Wildlife Photographer of the year award, or the sixteen-year-old kid working for minimum wage at your local photo lab?
Both are professionals in their respective fields. Both derive their incomes from photography.
Both will undoubtedly be willing to offer advice if asked.
The validity and value of that advice may vary.
Once you have identified the correct profession, inevitably there will be a vast spectrum of competency levels amongst practitioners.
At one end will be the person who literally wrote the book, defining the profession. Think Jack Bogle or Tim Berners-Lee.
At the other are the people who find their professional accreditations in a cornflakes packet, and fulfil their continuing professional development obligations on a golf course.
Both are professionals, in the sense that they derive their income selling services to paying customers.
Both might even be competent.
Always do your homework before you engage with a professional. to ensure you have a good idea of exactly what you are letting yourself in for.
A cheap and cheerful service provider might be exactly what is needed to change your car tyres. A different approach may be called for when selecting a barrister to defend you in a criminal trial, where the downside is a custodial sentence.
The take away from this is:
- Research your problem sufficiently to discover what you don’t know.
- Identify the profession who is actually qualified to answer questions about your problem.
- Determine your own thresholds, limits and comfort levels. Don’t let incentivised salespeople do this for you.
- Run the numbers to understand the full cost and implications of any advice you receive. Sometimes the price of the solution is more than the problem is worth.
- Bucak, S. (2018), ‘Wealth fees laid bare: a spotlight on 15 firms‘, CityWire
- Coorey, P., Kehoe, J. and Gillezeau, N. (2019), ‘Coalition backs down on ending trail commissions for mortgage brokers‘, Australian Financial Review
- Hayne, K (2019), ‘Australian Royal Commission into misconduct in the banking, superannuation and financial services Industries‘
- Kollewe, J. (2019), ‘FCA plans to ban or cap investment platform exit fees‘, The Guardian
- Natural History Museum (2019), ‘Wildlife photographer of the year‘
- Powell, R. (2019), ‘The problem with SJP’, The Evidence Based Investor
- Rovnick, R. and Williams, A. (2016), ‘How much do you really pay your money manager?‘, Financial Times