AFC Bournemouth and Strategic Solutions extend partnership for 2016/17 season
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September 13, 2019
This is our first blog post...
1 Jan 2015
I was honoured to be asked to write the first Strategic Solutions blog on our new website, but almost immediately I was a bit concerned as what to write about, so I asked the rest of the team. “Whatever you want” was the consensus reply. Not very helpful!
As humans, we struggle with something called the ‘paradox of choice’ or ‘analysis paralysis’. It’s the same when someone asks you ‘Name a film’ or ‘Give me a book title’, the subject matter is too big, so we struggle to respond quickly. My guess is that it has something to do with the application of equal weights to all the options available, even when some are completely irrelevant or unimportant.
We all know what's good about choice, so I'm going to talk about what's bad about it. All this choice has three negative effects on us.
One effect, is that it produces paralysis, rather than liberation. With so many options to choose from, people find it very difficult to choose at all.
Second, is called "opportunity costs." The way in which we value things depends on what we compare them to. When there are lots of alternatives to consider, it is easy to imagine the attractive features of alternatives that you reject, that make you less satisfied with the option that you've chosen.
Thirdly, the escalation of expectations. This hit me when I went to replace my jeans. I wear jeans a lot. And there was a time when jeans came in one flavour, and you bought them, and they fit poorly, and they were incredibly uncomfortable, but if you stuck with them and wore them long enough (and washed them enough times) they started to feel just about OK. So I went to buy new jeans after years of wearing these old ones, and I said, "I want a pair of jeans. Here's my size." To which the shop assistant replied, "Do you want slim fit, easy fit, relaxed fit? Button fly or zipper fly? Stonewashed or acid-washed? Do you want them distressed? You want boot cut or tapered, and so on. My jaw dropped, and after I recovered, I said, "I just want the kind that used to be the only kind." They had no idea what that was, so I spent an hour trying on all these jeans, and I walked out of the store. The truth is with the best-fitting jeans I had ever owned! I actually did better. All this choice made it possible for me to do better. But I felt worse. Why? The reason I felt worse is that, with all of these options available, my expectations about how good a pair of jeans should be went up by so much.
With so many options to choose from, people find it very difficult to choose at all. One very dramatic example of this is a study that was done of investments in voluntary pension plans. Records from a huge American company found that for every 10 fund choices the employer offered, the rate of participation went down by two percent. You offer 50 funds and 10 percent fewer employees participated than if you only offered 5. Why? Because with 50 funds to choose from, it's so hard to decide which fund to choose that you'll just put it off until tomorrow. And then tomorrow, and then tomorrow, and tomorrow, and of course tomorrow never comes. Not only does this mean that people are going to have to eat dog food when they retire because they don't have enough money put away, it also means that making the decision became so hard that they passed up hundreds of pounds per year from their employer, who would happily match their contributions.
What has this got to do with a blog for a firm of Independent Financial Advisers you may well be asking? Well, I see part of our role as trusted advisers to our clients to be the ones who filter down this massive choice for them. To eliminate the irrelevant, to understand what bits are important and what bits are not. To present them with the best option to provide them with the best solution for their needs, and to do it in way that they understand. That is to properly understand; not only the advantages, but also any potential disadvantages of what they are doing. Removing from them the paralysis, allaying any fears over missed opportunity costs and managing their expectations to keep them realistic at all times. Then they can move forward and benefit from this modern world of a million options
So go on then, you have had plenty of time, Name a Film!