Improving financial literacy requires becoming comfortable with numbers

When studying finance, you need to become comfortable with numbers.

Just as you need to understand the difference between interest rates and yields, percentages are always present in daily life, such as bank interest rates and inflation rates.

In this era where fraud is rampant, I will consider the necessity of becoming comfortable with numbers in order to properly acquire and practice financial literacy to protect yourself.

The necessity of becoming comfortable with numbers

I believe it is particularly important to understand and interpret percentages well.

Percentage = Numerator / Denominator × 100

What is a numerator?
What is a denominator?

Suppose a headline like "5% increase!" jumps out at you in a newspaper or online news article, even though it is only 10 characters long. Are you being swayed by numbers without knowing what the denominator and numerator are?

When you read the details of the news carefully, there are cases where that 5% is obvious, or cases where the axes of comparison are not aligned, making it a figure that should not be debated.

Do not use numbers below the decimal point as a denominator

One thing to be careful about is not to use small numbers as a denominator. Also, do not calculate by comparing percentages with other percentages for both the denominator and the numerator.

Division is an appropriate calculation method for comparing two items, but it becomes meaningless, especially when the numerator is too small.

However, when financial institution sales personnel who are good with numbers want to get consumers who are weak with numbers to deposit money into their products, they intentionally use this division.

Tactics of major securities companies

I will introduce one of those tactics.
Suppose there is information like the following.

I will introduce the tactic used when a major securities company approached me when they established an online bank called XX Next Bank.

◇

Major securities salesman: "Mako-san, XX Next Bank has been established. It is very convenient as you can operate it online, how about it?"

Mako: "I already have plenty of banks, so I don't need another one."

Major Securities Broker: "No, no, the interest rate is actually 100 times higher! You can't afford to pass up such an amazing offer."

Mako: "Look, even if it's 100 times higher, it's still only 0.1%, right? That means 1,000 yen on 1 million yen. You know my assets, don't you? I'm telling you there's no point in opening a new account."

Major Securities Broker: "It's 100 times, 100 times! Why would you say that???"
Major Securities Broker: "Actually, for a time deposit, it's 150 times higher."

◇

The securities broker keeps saying 100 times or 150 times until the end, never mentioning the actual 0.1% or 0.3% interest rates. And they go to great lengths to avoid converting it into actual monetary amounts.

This must be the sales pitch written in their manual. Consumers who are weak with numbers and the elderly are likely to fall for this smooth talk.

100 times the savings account rate is
0.1% ÷ 0.001% = 100 times

150 times the time deposit rate is
0.3% ÷ 0.002% = 150 times

Even 2 or 3 times would be an unbelievable figure, so when it comes to 100 or 150 times, you should pay attention to what the denominator and numerator are. You shouldn't use division to compare percentages. Besides, the base number is so small that it's meaningless.

I want financial institutions to stop using tricks to deceive the elderly and instead focus on the needs of their customers.

This tactic is not fraud. And since it's just about opening a new bank account, it's not a big deal.

However, it is clear from this tactic that major securities companies only think about themselves and put their customers second. This is also confirmed by comments from several friends who have retired from financial institutions.

I wish the Financial Services Agency would strictly control the promotional codes of financial institutions.

By the way, the advertising and promotional codes in the pharmaceutical industry where I used to work were very strict, and all manufacturers complied with them. From that perspective, the advertising methods of major financial institutions look almost like fraud.

It's not fraud, but the rules are so loose that there are products like fund wraps that can deceive amateurs. Fund wraps are at the top of the list of products you should never buy. However, since they are advertised in full-page ads in the Asahi Shimbun, few people would doubt them.

I want such advertisements to be regulated ↓
Fund wraps: Leave everything to professional management. Are you aware of the high fees?

It is easy for those with knowledge to deceive those without it

It is easy for those with knowledge to deceive amateurs. In other words, it looks like financial institution sales personnel are intentionally deceiving ignorant consumers.

When we look at medicine, medical professionals such as doctors, pharmacists, and nurses always think about patients who lack knowledge, stay close to them, and fulfill their accountability to explain things.

There are no medical professionals who would treat patients with an attitude like, 'You won't understand anyway, so just take the medicine as you're told!'

Why is it that people working in financial institutions approach consumers while ignoring them, with an attitude like, 'You won't understand anyway, so just buy this investment trust!'?

I know the conclusion.

It is simply that financial institutions are acting for their own profit. Medicine puts the patient's health first, so the medical institution's profit is secondary. That is likely the only difference.

This means that we consumers who purchase financial products must have the skills to decipher sales talk.

If you want to build assets, improving your financial literacy is essential.

Actually, ignorant consumers are the biggest problem

I can understand the feelings of financial institutions that use such tactics. I have written some harsh things, but in this day and age, each financial institution's compliance is strict, and they should be explaining things thoroughly to customers. After all, meetings at the counter are recorded by surveillance cameras.

This means that there seems to be a major problem on the side of the consumer who does not try to understand the content at all. Or rather, I think that is everything.

Perhaps financial institutions have no intention of deceiving consumers, but they are likely fed up with dealing with customers who won't understand no matter what they say.

Since they won't understand no matter how much you explain, it is not unreasonable to think, 'I'll just sell them the product my boss told me to with some excuse.'

If I were to follow the financial institutions, I would sympathize with them, thinking it can't be helped since they are for-profit companies. Therefore, the consumer who does not try to understand at all—that is, you—is the biggest problem.

If you have the skills to compare vegetable prices at the supermarket or check their origin, you should at least check the fees for investment trusts.

Collection of tactics used by major securities companies↓

2022
💰 10/22 ”Corporate Profit > Customer Profit” A bad example of a major securities company
💰 10/23 ① Major securities companies just want to make money ~Consultation on retirement money~
💰 10/24 ② Major securities companies just want to make money ~Reasons for going to a securities company~
💰 10/24 ③ Major securities companies just want to make money ~FP and IFA~
💰 10/25 Pharmaceutical company customer orientation ~Differences in attitudes toward explaining to customers between finance and medicine~

2023
💰 9/20 Fund wrap where you leave everything to professional management: Are you aware of the high fees?