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Pop group ABBA have been downgraded and are now touring as AC/DC - news article image

Pop group ABBA have been downgraded and are now touring as AC/DC

28 Aug 2020

5 minute read

Having stepped back from the weekly ramblings from the isolation of a home office, the recent exams fiasco rekindled my love of a good mental ramble.

As the father of an 18 year old waiting for A-level results during a pandemic, results day and the following fiasco were far from funny. Since then I have read more maths than at any time since I left school and have upskilled my statistics knowledge immensely. In amongst all the data, one thing that became very apparent was that there was a dislocation between the outcome that students, schools and parents thought the system was due to produce and the outcome which the designers of the algorithm were asked to produce.

Reading the detailed Ofqual publications, and the easier to understand analysis by statisticians, actuaries and economists who were far better placed to understand some of it than I, the difference between what schools were asked to do and what the standardisation model was designed to do were miles apart.

Schools were given masses of guidance on what evidence to look for on individuals in order to best estimate their likely performance in an exam. The algorithm looked to remove individualistic elements in favour of historically equivalent national based grade allocations. Not even as close as chalk and cheese.

Ofqual was effectively asked to produce a question to fit the answer they had been given. Schools had been given the questions to ask and were expected to come up with an answer.

One of the really important things which this demonstrates with any form of planning is ensuring that everybody involved is aware of the objectives, of what the planning is supposed to deliver, of what success looks like and what is expected of them as their part in the planning.

As financial planners it is very easy for us to “do an Ofqual”. To assume that we know the answer and look to design the plan to provide the answer that we have decided on. This could be based on what other clients have wanted; it could be based on theoretical models; it could be based on what other planners are doing; it could even be based on ourselves, our own objectives and biases.

Take a simple question such as “how much should I keep in cash for emergencies”. A trainer on a course might suggest X months’ expenditure to fit with how many months before an Income Protection policy started to pay out if you were too ill to work; personally we might be happy to have enough for a couple of months’ mortgage payments plus the cost of a new boiler; most of our other clients may think £10,000 is a nice round figure to keep aside; other planners may warn against holding “too much cash”, especially when interest rates are low.

The answer is quite probably none of these, but as financial planners we could easily deliver one of these as a standardised answer. The danger then is that when something happened, either personally or in the wider world, which caused you to need to be sure you had enough cash not to worry about it, if you’d effectively been downgraded then the comfort and security that you needed wouldn’t be there.

So we need to know that our clients feel able to tell us what they want to achieve and we need to always remember that our job is not to standardise our clients’ objectives but to gather all the evidence to enable us to describe those objectives and fit the plan to them rather than them to the plan.

Pop group ABBA have been downgraded and are now touring as AC/DC - news article image


Ed Gibson

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