The Victorian Government has unveiled a plan to offer Victorian households $50 to visit a new electricity comparison site. On average, people are expected to save $330 in the first year alone.
Victorian Premier Daniel Andrews said power companies banked on the fact people were often too busy to shop around and get a better deal.
So why does a government need to offer someone $50 to help them save $330?
It’s called status quo bias.
Status quo bias is an emotional bias we all have to the current or default position. It’s a preference to stay the same by doing nothing. Furthermore, any changes from the status quo is perceived as a loss - even though it may not be.
Unfortunately we humans can be pretty passive decision-makers. That’s why, despite knowing it makes sense to shop around, we need a $50 nudge to shop around and save money.
The banking royal commission is revealing some terrible stories. A lot of these relate to bad advice, but others fall into the category of status quo bias. Individuals are going with the flow of their current investment strategy, potentially at their own peril.
If you’re waiting for the banking royal commission’s findings before you act, you’ll be waiting a while. The interim report isn’t due until September this year, with the final report due in February 2019. Then it will take months, if not years, for the recommendations to filter through the system.
So what are your options?
If nothing else, find out the answers to these two questions:
These are two questions everyone wants answered, so if it’s hard for you to find out, it’s because someone doesn’t want you to know.
If the people currently managing your investments charge a premium for their service but they don't consistently outperform the market then, put simply, you’re overpaying for under-performance.
I was at the SMSF Expo at the Melbourne Convention and Exhibition Centre last weekend and time after time the people I spoke with said that they had come to the event because they were fed up. They were disappointed with the lack of transparency and aware of the conflicts. They had trusted their money to someone and, after doing a little bit of research, they discovered how much they were paying for their current service and the returns they had received. This is important because excessive fees simply erode the power of compounding returns.
The people I spoke with had visited the SMSF Expo to learn what other options are out there. They were putting an end to their status quo bias.
Whether you have an SMSF or not, you need to make sure you’re getting value for money for the fees you’re paying on your investments.
If you're concerned about investment advice you’ve received, then try Six Park for a free second opinion - you can click the "Get started" button at the bottom of this page. No obligations. It will only take a couple of minutes - we won’t give you $50, but it could save you tens of thousands, if not more.