Less From the Pulpit, More From the Pew

The Church of England's terrible muddle over pay day lending shows that it's out of touch with the details in the payday lending market. Just as we've seen in other markets, pontificating from the top down is no substitute from working on problems from the customer's standpoint. So, a little less output from the pulpit's point of view and more from the pew's would be no bad thing.

As mentioned previously, the challenge for borrowers who need or want to borrow short term is finding a combination of speed, convenience and affordability. In March, the OFT's own research revealed that 90% of online customers found the it "quick and convenient" to get a short term loan and 81% said such loans make it easier to manage when money is tight. Customers expressed their satisfaction in terms of decision speed (36%), convenience (35%) and customer service 27%). The majority of payday customers (72%) only borrow for a month. So, the critical issues seem to be how to ensure the other 28% are better able to understand the risks of rolling over short term loans, and how to avoid it; as well as cutting the overall costs for those who use short term financing. 

The root causes of these problems do not lie in the cost of payday loans. Short term borrowers are often working amongst the contractual fine print of late fees, cancellation notices and so on. Allocating money to debts 'just in time' is a high risk occupation. One slip can make life hell in a non-financial sense - maybe the kids won't have school shoes, there will be no heating or the landlord will finally lose patience. Credit cards, debit cards and cheques are useless from this sort of timing perspective, because they don't tell you how much you have left to spend at the time you use them. There can also be an accounting lag between when you pay and when the transaction lands on your account, so you can find yourself 'surprised' by a payment you thought had been accounted for days or even weeks previously. And the amount of interest and other charges is only known when it appears on a monthly statement. We hear a lot of noise about APRs, but not so much about the timing problems or the scale of fees payable when you get on the wrong side of bank products - these are far more relevant to short term borrowers, and why many remain 'unbanked' by choice.

In these circumstances, rather than playing money-lender, it would be better if the Church could foster the development of an application or other means of presenting to a borrower the most affordable short term finance option, based on the analysis of the borrower's own transaction data from existing creditors (including cancellation rights and late fees), and the costs of different finance products (including charges for missing a payment). This really only requires a commitment on the part of all the typical creditors and financial services providers to make their product and pricing data available in machine-readable format, which the government has been pushing them to do as part of the voluntary 'Midata' programme. That data can then be analysed and the results made available either online or physically, via mobile phone, computer or print-out. 

No doubt the Devil is in the detail underlying such a service. But surely the Church isn't bothered by that?

Banks To Repay Cash-ISAs When Teaser Rates Expire?

The government's ISA programme has become a victim of its own success. The Treasury estimates that "around 45%” of UK adults have one or more Individual Savings Accounts. The total amount held is estimated at £400bn, half of which is in either regulated bonds or shares while the other half is held in cash deposits that are being eaten by inflation. 

In 2010, Consumer Focus found that the £158bn which was then held in cash-ISAs was earning an average of only 0.41% interest after initial ‘teaser’ rates expire. They also found that 60 per cent of savers never withdraw money from their account. 

Since then, there has been a campaign to get banks to tell customers when teaser rates expire. But what has been the banks' response?

To cut the 'teaser' rates on cash ISAs (even though the government subsidises lower lending rates).

Meanwhile, the Treasury has also resisted calls to expand the range of assets included in ISAs, which would enable savers to diversify and boost innovation and competition in the retail finance markets, as explained here. 

The implicit message from the government is that consumers only have themselves to blame if they don't move their savings to get the best deal. But the government can't have it both ways. It can't introduce an artificial tax incentive and then ignore the systemic issues that incentive creates. The government should either take responsibility for the behaviour that is driven by its incentives, and re-design them accordingly. Or it should withdraw the incentives.

So, short of opening up the cash-ISA market to real competition, what more can be done to remind people to switch their ISA cash?

The last straw would be for all cash-ISAs to be term deposits which can only last for the duration of the 'teaser' rate. When that rate expires, the cash would have to be paid into the customer's nominated 'ISA holding account', from which it can be re-allocated as the customer sees fit. 

Maybe this will lead to 60% of ISA cash deposits earning no interest at all. But only then could the government really claim that consumers who don't seek out the best return only have themselves to blame.

Towards A Diverse, Sustainable Financial System

It's not every day you get to brainstorm ways to bring diversity and sustainability to Britain's ailing financial system amidst a broad cross-section of officials, economists, entrepreneurs, think-tanks, technology suppliers and advisers. And yesterday's Finance Innovation Lab workshop was a golden opportunity to do just that.

While the Lab will report the output in due course, I thought I'd share a summary of my notes from the breakout sessions in which I participated. These looked at regulatory barriers and lack of financial awareness. Others explored the unfair advantages enjoyed by estalished providers and ways to encourage innovation. We operated under the Chatham House Rule, hence the absence of names or affiliations.

The UK financial system is neither diverse nor sustainable. 

There is plenty of evidence that the UK's financial system is suffering from a lack of innovation and competition, and is unsustainable in its current form. Rates of market entry and exit are low, relative to other industries. Few customers switch and customer trust is lowest for financial services on several leading surveys. The unit cost of intermediation remains high in financial services compared to other retail markets, while management and staff have reaped the benefits of any increased operational efficiencies (even while legacy systems remain prevalent). Banks rely on a huge back-book of deposits on which they pay little or no interest to finance loans to fund trading in financial assets rather than loans to productive businesses. After all, a single giant property loan does more to grow the bank's numbers than lending the same amount of money to thousands of small firms. 

Regulatory barriers

 

Against this background, we concluded that the current regulatory framework, including subsidies and incentives, is essentially designed to both protect the 'financial system' and 'customers' - i.e. to minimise the risk that consumers and small businesses, in particular, will be mis-sold 'products' by unscrupulous suppliers. 

In effect, however, that framework obliges policy officials (Treasury) and regulators (FSA) protect the system as it is, rather than to ensure that it evolves to encourage and accommodate innovation in line with customer requirements. That's because the framework and those who police it are organised in silos according to existing product types and types of suppliers, and not according to types of customers' and their day-to-day activities. 

The customer protection regime mirrors this approach, being organised according to limited sets of product types and types of suppliers, as well as types of promotional and business activities in which suppliers are engaged (not their customers). As a result, the impact of regulation, complaints and potential for changes are all viewed through the lens of existing products and firms, and any actual changes reinforce those lines of distinction. 

The perverse nature of this can be seen in the fact that, if I want to allocate £100 to a project that I'd like to support, it's easiest for me to donate the money, a bit more complex if I want the money repaid with interest (as a loan), very complex if I want to be able to freely trade that right to be repaid with interest (a bond) and the most complex thing of all is to receive an equity share in the project. This discourages diversification and the search for opportunities to get a decent return on surplus cash; and limits the availability of funding to new businesses, on which most new jobs depend.

Hard-wiring the markets according to types of products, suppliers and ways of dealing with them also artificially limits the number and range of suppliers, product types, and the corresponding markets. In addition, taxpayer guarantees and subsidies in the form of savings and pension incentives are aligned with existing regulated suppliers and product types. Therefore, the regulations and incentives work together to enable the suppliers in the regulated markets to charge higher fees, make higher margins, reward staff more generously and pay more for marketing - resulting in less innovation and competition.

The overall result is a financial system that is not designed to evolve in line with the requirements of consumers, small businesses or even big business. It is designed to suit incumbent suppliers - those who play well with the system, regulators and policy officials. Yet there is no single set of policy officals or regulators tasked with understanding how the regulations, subsidies and incentives actually work together as a whole or whether they distort any aspects of the financial system within or outside the regulated areas.

A broad range of solutions were suggested, as you can imagine, and the Lab will report on these shortly, and include them in a submission to the Parliamentary Commission on Banking Standards. However, suggestions included: 

• creating a Parliamentary Select Committee to focus on encouraging financial innovation;

• limits on market share by product type;

• controls on gross leverage; 

•  separate banks' credit creation process from financial intermediation (the process of allocating that credit);

• central bank guidance to banks on how much to lend productive firms;

• levelling the playing field on subsidies and tax incentives/allowances;

• a target of 200 new local banks by 2016;

• publishing details of national banks' regional/local banking activity;

• making it easier to get low risk financial businesses authorised;

• publishing the amount of the subsidies to major banks and oblige them to set aside a proportion of their subsidy for future crises;

• treating payments systems and credit reference data as utilities (i.e. public goods).

Lack of financial awareness

The scale of financial mis-selling across many different types of products and lack of diversification by investors suggests a widespread lack of understanding of financial services. This was seen to be caused by a lack of financial education, on the one hand; and by product complexity on the other. In turn, product complexity is driven by both regulatory complexity and an unwillingness to invest the extra effort required to simplify products and better align them with customer requirements.

The lack of financial education is essentially a failing of our education system. Yet there is little faith that the Department for Education accepts any responsibility for delivering a sound financial education. It's also clear that no other government department sees this as part of its mission. Rather, financial education seems to be a specialist area confined to universities and business schools or professional bodies. It was felt that this will only change with a determined effort by the Department for Education to measure financial 'literacy', collect best practice for teaching it and including those measures in the national curriculum. Measures of success would include improvements in financial literacy exam results, fewer complaints to the Financial Omudsman Service and improved diversification amongst savers and investors.

Removing product complexity requires a commitment to reducing regulatory complexity, the removal of the regulatory barriers to innovation and competition discussed above, as well as incentives that drive both simpler products and diversification, rather than the concentration of funds into a few regulated asset classes.

In short, more pragmatism and less politics should go a long way.

Dead Simple Financial Products

Little wonder that the UK Treasury is still trying in vain to persuade financial institutions to supply 'simple' financial services. The recent report shows that the government is relying on the same old players and the same old view of the marketplace to come up with the same old result. The challenge for new entrants will be whether they will be able to cut through the wall of spin and marketing noise to reach consumers with truly cost effective services that are adapted to their day-to-day activities.

The Simple Products Steering Group's recent interim report continues to view the financial services market through the lens of traditional products, providers and consumer segmentation. Its working groups are drawn exclusively from existing providers. The report refers to the so-called "mass market" and believes that simple products "should not be tailored to individual needs". It equates 'choice' with complexity. It seeks to balance “a fair deal” for consumers with “a viable commercial proposition for [existing] providers". Perhaps worst of all, for simple financial products to succeed the Steering Group believes “it is essential to improve the awareness and financial capability of UK consumers.” The report recommends two types of savings accounts (at-call and 30 days’ notice) and life cover. Apparently, millions of us will pile into these things on the basis of a little consumer education, a kite-mark, feel-good messaging and… certain choices embedded in default settings.

Hello?

If retail banks and life insurers were capable of delivering cost effective, useful financial services, there would be no need for the Simple Products Steering Group.

When will the authorities realise they’re flogging a dead horse?

As explained here, the route to simplicity and transparency lies in first understanding the complexity of the consumer problem being addressed, then figuring out the simplest, most consumable service that will solve it. That's the role of a facilitator. By contrast, those producing complex products are unlikely to be focused on the consumer's problem in the first place, let alone understand it - they're focused primarily on solving their own problems at consumers' expense. Trial and error, testing and learning, flexibility and adaptability are vital steps in this process. Yet our financial services framework is intolerant of them. A new service should be able to launch and undergo several iterations in the time it takes to get through today's authorisation process. Tiny factual differences have seismic regulatory implications in the type of permission or licence needed, and this adds to the time-lag and legal advice involved.

We must figure out how to make the process of decent innovation easier.

Image from Worth1000.

Who's Greg Smith and WTF is a "Structured Product"?

Another mysterious product warning

Yesterday came the 'news' that sales of "structured products" by investment banks to retail and small business customers have soared, in spite of FSA warnings about them. Today, in perhaps unrelated news, came Greg Smith's resignation letter from Goldman Sachs, where he was executive director and head of the firm’s US equity derivatives business in Europe, the Middle East and Africa:

"I don’t know of any illegal behavior, but will people push the envelope and pitch lucrative and complicated products to clients even if they are not the simplest investments or the ones most directly aligned with the client’s goals? Absolutely. Every day, in fact." 

Which begs the question what a "structured product" actually is, and whether small business customers and their advisers had any idea what they were buying - or that they weren't supposed to be buying them.

The explanation of "structured products" at the official MoneyAdviceService is not terribly helpful (a general comment on the site that I've made before). We're told these products involve a 'note' and a 'derivative'. But under the bold heading "How Your Capital is Protected" it says rather ironically that:

"Even if a product offers ‘capital protection’ it can sometimes fail, causing you to lose some or all of your original money."

Oh come on, you say, the Money Advice Service?! Surely the global investment banks aren't going to be selling to 'Moms and Pops'!

But that's exactly the concern. I'm sorry, but just how sophisticated do you believe the average owner/director of an unlisted business really is when it comes to finance deals involving derivatives? One chap said his firm was sold "a £601,000 amortising, enhanced collar swap" and thought it had the same effect as a household mortgage. Yet businesses are being told to go to court against investment banks if they think they've been ripped off, rather than look to the regulator.

But does the regulator really understand these products well enough to be of any help? It seems to be speaking another language altogether. The first footnote to the FSA's industry consultation paper on the subject purports to explain structured products, but somehow I doubt the average banker would understand exactly what qualifies and what doesn't, let alone its customers:

"This publication deals with structured investment products (capital-at risk and non-capital-at-risk) and structured deposits.

We define a structured capital-at-risk product (SCARP) as in our Handbook i.e. as a product, other than a derivative, which provides an agreed level of income or growth over a specified investment period and displays the following characteristics:
(a) the customer is exposed to a range of outcomes in respect of the return of initial capital invested;
(b) the return of initial capital invested at the end of the investment period is linked by a pre-set formula to the performance of an index, a combination of indices, a 'basket' of selected stocks (typically from an index or indices), or other factor or combination of factors; and
(c) if the performance in (b) is within specified limits, repayment of initial capital invested occurs but if not, the customer could lose some or all of the initial capital invested.

A non-SCARP structured investment product is one that promises to provide a minimum return of 100% of the initial capital invested so long as the issuer(s) of the financial instrument(s) underlying the product remain(s) solvent. This repayment of initial capital is not affected by the market risk factors in (b) above.

We define a structured deposit as in our Handbook i.e. as a deposit paid on terms under which any interest or premium will be paid, or is at risk, according to a formula which involves the performance of:
(a) an index (or combination of indices) (other than money market indices);
(b) a stock (or combination of stocks); or
(c) a commodity (or combination of commodities)."

All clear then?
 
Image from HappyPlace.

Pay As You Go Financial Services

Thanks to Dave Birch, of Consult Hyperion, for the link to this fascinating paper by Ignacio Mas and Dan Ratcliffe on the success of M-PESA, the African payments system whose mission is to lower the cost of access to financial services. There are great insights for serving both the 'unbanked' as well as bank and other financial service customers. And given how grumpy we tend to be with our banks, it's revealing that the UK’s Department for International Development was instrumental in funding M-PESA's initial development by Vodafone and others.

As previous research for the UK's Financial Inclusion Taskforce (archived here) demonstrated, the challenge of financial inclusion is not how to draw low income earners into the existing banking system, but how to make financial services more useful, convenient, cost effective and faster. And that seems best encapsulated in 'pay as you go' models, since you 'know where you are' in terms of cost and usage/availability which is in itself convenient. M-PESA makes an interesting case study because virtually all M-PESA's 9 million pay as you go users rate the service better than the alternatives on these factors. And that's not only the view of low income earners. The Mas & Ratcliffe report says M-PESA users are more likely to have a bank account than non-users, as well as being wealthier, more literate, and better educated.

Here are some more stats from the report, as at January 2010:

• "16,900 retail stores at which M-PESA users can cash-in and cash-out, of which nearly half are located outside urban centers.
• US $320 million per month in person-to-person (P2P) transfers.
• still under two P2P transactions per month.
• US $650 million per month in cash deposits and withdrawal transactions at M-PESA stores.
• The average transaction size is around US $33, but Vodafone has stated that half the transactions are for a value of less than US $10.
• US $7 million in monthly revenue (based on the six months to September 2009).
• 27 companies use M-PESA for bulk distribution of payments. Safaricom itself used it to distribute dividends on Safaricom stock to 180,000 individual shareholders who opted to receive their dividends into their M-PESA accounts.
• Since March 2009, there are 75 companies using M-PESA to collect bill payments from their customers. About 20% of the electric utility's one million customers pay through M-PESA.
• two banks are using M-PESA as a mechanism for customers to either repay loans or withdraw funds from their banks accounts."

While M-PESA has been marketed very well, the report suggests the real key to its rapid, widespread adoption and frequent use is the decision to launch with a low cost mobile payment infrastructure, rather than a savings or credit product. This allowed the business to follow the usage-based pre-paid mobile airtime model, so that each transaction was profitable from day one, and no potential customer or transaction size was excluded as 'unprofitable'. It's free to register, pay money in, and there's no minimum balance. Now that so many people are on the system generating income, it's easier and more cost effective to respond to their demand for other suitable financial services and functionality.

Banks, on the other hand, "tend to distinguish between profitable and unprofitable customers based on the likely size of their account balances and their ability to absorb credit." I'd suggest that not only does this mean banks need to limit their customer base and rate of service adoption, but having made so many assumptions about the services to be provided and customers who might want them, it also becomes ingrained that banks must control the product rather than allow customers to shape the services they want. For example, MetroBank's launch strategy seems to assume you want the same type of banking services and delivery channels, but with merely longer branch opening hours, free coin-counting and immediate in-branch card delivery. Hardly the "revolution" it claims, compared to what's happening in Kenya, or even in the UK...

The success of M-PESA prompts comparisons with PayPoint, and how it's pragmatically solving parking payment problems using a mobile platform (see PayByPhone). And it's consistent with the adoption of pre-paid cards, amongst which the Oyster card and O2 payment card are interesting examples. Away from payments, and at the higher end of the market, the pay as you go approach is reflected in Zopa's person-to-person lending fee structure: borrowers pay a one-off upfront fee with no charge for early repayment, and Zopa lenders only pay a servicing fee based on the amount they have lent out at any one time.

There's definitely a future in pay-as-you-go financial services.

Dear Gordon

Thank you for my tax code for 2010-11. May I say how delightful it is - nay, what an honour and a privilege it is - to be given the opportunity to donate further to your profligate public expenditure programme. With any luck, some of my money might even go towards your last personal expenses claim!

Best
SDJ

Improve Financial Capability - Simplify Products

The FSA says, "Financial Capability is about being able to manage money; keeping track of your finances; planning ahead; choosing financial products; and staying informed about financial matters."

The implication is that financial services don't have to change - you do. And the FSA provides a dazzling array of data to bamboozle you along the change curve.

This approach is doomed. Adult learning research has emphasised that the older you are, the less likely you are to learn. Of the 20-24 age group, 61% say they are learning now or have been recently. For the 55-64s, that statistic is 31%, and for the 65-74s, it is 18%. We have an ageing population and a ballooning pensions deficit.

So financial services must change, not you. Products must become simpler and cheaper, and it must be really easy for investors to develop fully diversified portfolios that produce sustainable returns.

Why can't I put suitable financial services in a shopping cart, like I can buy other stuff?

To make financial services simpler and more consumable for more people, providers and intermediaries must do much more to make it easy to find, compare, choose and buy products that contribute towards sustainable returns for the investor rather than scandalous profits for the provider. I'm not talking about the price comparison sites that simply list the same old stuff, by product type, by price. I'm talking about far more automated services that make the detail available to those who want it, but simply deliver diversification without the average person needing to understand more than the concept of not putting "all your eggs in one basket".

To support this, the clear objective of the financial regulatory regime should also be to deliver simple, low cost financial products that are accessible to us all. Currently, regulation funnels investment opportunities and funds into a zone in which relatively few firms are permitted to operate, enabling them to charge excessive fees and related compensation. In other words, regulation designed to protect the consumer is actually underwriting "fat banking". But what we need is a regime that fosters the growth of low cost 'facilitators' such as those who've allowed us to unbundle flights and hotels, music tracks and other one-size-fits-all products to create our own personalised, lower cost alternatives.

Diversification Challenge

Some of us have been discussing the need to diversify more.

There are numerous tips on how to make sure that not all your eggs are in one basket. But they all assume that you have a great deal of time and a pretty sophisticated understanding of finance and financial services.

Like it or not, even with plenty of time on his/her hands, the 'man on the Clapham omnibus' is no financial giant.

So most people need diversification explained as simply as possible, and in a way that enables them to achieve it easily and conveniently.

What is diversification? The eggs in one basket idea is pretty simple, but needs some numbers: you are less likely to have all your eggs broken if you have 10 eggs in each of 10 baskets, rather than 100 eggs in one basket. Following this principle, you become automatically better off every time you add another basket for the same number of eggs. So you’d be much better protected against egg breakage if you had 5 eggs in each of 20 different baskets.

An interesting challenge would be to start with what a truly diversified portfolio of assets looks like, based on using a small amount of money. For argument's sake, one could start with a figure of £10,680 - the most the government allows you to salt away without locking it up til you're 98 years old, or paying tax on the returns.

But such government policy actually prohibits diversification, yet heavily subsidises regulated investments at the expense of alternatives.

That’s because most people with surplus cash should use up their tax-free allowances first, and few will have anything left over. Research cited by the Guardian in June 2011 suggests the average UK person can afford to save £97.10 per month.

The list of asset classes is long, yet the money allocated to those tax-free allowances can't be invested in the full range of potential assets, even by putting their money in the hands of managers who can invest more widely. Generally, you may only invest your tax-free allowances in regulated investments. And all sorts of rules, policies and other restrictions limit the types of assets in which regulated fund managers can invest. So even regulated fund managers are unable to adequately diversify the investment pots they manage. This must necessarily affect the value and performance of the funds they manage. Such effects may be market-driven and/or behavioural.

Then there's the tricky subject of asset correlations: if all the assets you've invested in behave the same way at the same time, then you aren't diversified. Apparently the correlation in the performance of assets has been increasing of late, but may be about to unwind in some cases.

First step along the way to meeting the diversification challenge should be to figure out a reasonably detailed list of asset classes. Then we should modify the regulatory framework to enable people to invest at least their tax free allowance in each of them. The list of assets can divide and divide, but I don't think we start out with a sufficiently granular picture. In reality, I think such a list might look like the following - note that I include different types of 'funds', and separate regulated from unregulated, because their performance can be affected by the differing levels of regulation and permitted classes of investments they can make. However, I'm not including instruments like spread bets, contracts for differences or futures, since these are merely contracts that get you exposure to the various assets. Am I right or wrong?

1. cash
2. savings accounts
3. fixed interest savings/bonds - government, corporate
4. person-to-person loans
5. shares listed on a regulated or 'recognised' exchange
6. shares not listed on a regulated exchange
7. exchange traded funds (ETFs) listed on a regulated exchange
8. ETFs not listed on a regulated exchange
9. regulated managed funds
10. unregulated managed funds
11. regulated hedge funds
12. unregulated hedge funds
13. venture capital funds
14. venture capital trusts
15. regulated funds of funds
16. unregulated funds of funds
17. commercial property
18. rural property
19. residential property (owner occupied)
20. residential property (buy-to-let)
21. perishable commodities (e.g. cocoa, wheat)
22. non-perishable commodities (e.g. oil, gold and other precious metals)
23. art
24. classic cars
25. fine wine
26. currencies

Back to Basics - Financial Capability Starts Here

While I have a basic competence in Mathematics, passed statistics and even got my Six Sigma 'greenbelt', I've never quite had a 'feel' for it, like some people I know.

In fact, Maths was the one subject at school that annoyed and disappointed me in equal measure (sorry, double that for Physics), as did most of the people who purported to teach it to me. They did little but drone on about their subject, instead of... well, I just never knew how they could've made it interesting. And, like most lawyers I know, I've often flippantly boasted of having 'no head for figures at all' - probably because it sets us apart from accountants... ;-)

However, increasingly aware that this 'phobia' is rather silly, I recently Googled something like "explain mathematics to me now!" and ended up buying a copy of Mathematics Explained for Primary Teachers by Derek Haylock.

Fantastic!

Derek patiently explains Maths from the beginning - in words - missing no step in the logic. So one is never left with that "Huh? You lost me" plunge into the chasm of uncertainty so common in Maths classes. While he's very clear on the formal steps required to solve each mathematical riddle, critically for the under-confident, Derek also carefully explains - and firmly validates - all the informal routines that one might go through in an attempt to grapple with a problem. There may be one right answer, but I was stunned to learn there's no "right approach". And what seems an "easy" way for one person is quite likely to look a bit screwy or "wrong" to another who's never had things properly explained. The point is neither deserves a clip over the ear and five minutes facing into a corner of the classroom.

As someone who has taken many apparent slices into the rough before joining the rest of the class on the mathematical green, this was a joy to discover. A great fog of cringing uncertainty is lifting. In fact, reading this book for the first hour did more for me than the 3 hours a week I spent observing dull, well-intentioned people scratching around on blackboards for 12 years.

Of course, the Derek wrote the book because many teachers and potential teachers of Maths suffered the same experience in their Maths classes at school. As a result they won't teach it, or won't teach it very well for lack of confidence in how to explain it to kids who demand greater understanding of the subject. So, increasing their confidence is key to persuading them to educate our kids in a far more effective way. Derek deserves a medal.

While finance is but one application for Maths, one can't help thinking that we would all be much more financially capable if more teachers - and perhaps parents - read Mathematics Explained for Primary Teachers. Did you know, for example, that subtraction is now taught differently, and that parents and grandparents are often, tragically, an unwitting source of confusion as a result?

This is the role of the Personal Finance Education Group, which has been doing great work in this area - arming teachers with the self-confidence to teach Maths in a financial context. Let's hope this also has a broader impact.