I miss curling up on the sofa with the weekend papers. Having them delivered to my Kindle isn’t quite the same. There again, I seriously feared disappearing under a mountain of newsprint if I didn’t make the switch. No wonder you don’t don’t see children delivering papers on their bikes any more; you’d need a van to deliver more than a dozen copies of a “quality” Sunday newspaper. Financial journalism.
The irony is that when you start looking through all those different sections, there’s actually not a great deal of genuine news or editorial comment to be had. Most of it, directly or indirectly, is advertising. There’s the luxury lifestyle section, sponsored by the luxury goods industry, the motoring section paid for by the car industry and the personal finance section funded by.. Well, I think you know where I’m heading.
I actually have a great deal of sympathy for financial journalists. Unlike many of my fellow advocates of evidence-based investing, I suspect the vast majority genuinely want to help their readers make better investment decisions. Most would be offended by any suggestion that they give their advertisers an easy ride. The problem is, it’s financial journalism itself (as opposed to the individuals who work in it) which is inherently conflicted.
The bottom line is that we don’t really need money sections at all. Good investing (and personal finance generally) is essentially dull, boring and not very newsworthy. Instead, week after week, teams of just two or three journalists are having to produce a whole section between them. Even with all the adverts, that’s a lot of column inches to fill in such a short space of time.
Of course the challenge is, What do you fill all those pages with? Well, essentially you have two options. The first is to talk about the markets; for example, Why have they gone up or down? Or, more to the point, What are they likely to do next? The problem with that (apart from the fact that nobody knows where markets are heading) is that one of the keys to successful investing is to ignore the ups and down of the market; you’re only more likely otherwise to do exactly what you shouldn’t and react to short-term volatility.
The second option that money sections have is to write about products, which is why the fund industry bombards journalists with press releases about its latest wares every day. Again, the problem with focusing on products is that it’s not particularly helpful to investors, especially if they haven’t addressed more important issues such as, What am I trying to achieve? What is my capacity for risk? And how should I manage my risk exposure accordingly?
Also, the products that newspapers are most likely to discuss are not the low-cost, passively managed investments that consumers should primarily be using. Index funds, let’s face it, aren’t exactly exciting. With active fund management, on the other hand, there are always new funds, new personalities, new ideas to talk about. You can hardly blame journalists for focusing on those.
There is, though, a simple solution for improving financial journalism, so that it helps investors rather than hinders them, and that’s to have less of it. Why not halve the number of pages to fill each week? Or perhaps make do with a shorter, monthly supplement instead? Better still, why not incorporate investment stories into the general news or business pages?
All right, we wouldn’t need so many journalists. But those that remain could concentrate on producing articles that genuinely benefit readers. For example, the investment industry is crying out for the sort of serious investigative journalism that many newspapers no longer have the time or resources for.
As Michael Johnson from the Centre for Policy Studies has pointed out, journalists have an important role to play in investor education. Free from the pressure to fill pages with speculation or advice from conflicted “experts”, journalists could teach readers the basic principles they need to understand, such as the importance of investing in early adulthood, market efficiency, reversion to the mean or the damage caused by compounding fees to long-term investment returns.
Sadly, I don’t expect newspapers to embrace the “less is more” solution to the ills of financial journalism any time soon, and the reason is simple. Like financial PR and advertising, financial journalism has itself become an industry in its own right. It’s no secret that newspapers are in crisis, and money sections are a vital revenue generator.
I’m sure there are some personal finance editors who feel just as uncomfortable about stories of the “5-top-funds-to-invest-in” variety as I do. But the need to fill column inches means they have no choice. It’s hard to bite the hand that feeds you, no matter how principled or how good a journalist you are.