“I want to get through to people.”
He has been in finance since the ‘70s, and for almost as long, Erwin Heri has believed people should know more about finance. That is what prompted the ex-banker and professor of finance to produce his own videos on the subject.
You have made a commitment to the fight against financial illiteracy. What exactly do you want to achieve?
Many people don't know anything about investing and finance. They don't even have a basic understanding of economic interrelations. We shouldn't accept that. I want to get through to people. Many of the problems we face today could be solved if people had a better understanding of finance.
What sort of problems are you referring to?
Take, for example, all the young people accumulating debts that they will find hard to pay off. I also encounter a lot of ignorance and misunderstandings about investment products, which inevitably end up in frustration. People also have a lot of expectations and ideas regarding post-employment benefits and pensions that have no base in reality.
How are you campaigning for more financial knowledge?
I primarily want to get young people interested in finance. The young have a long investment horizon ahead of them, which is where financial knowledge is most helpful. That’s why I founded a start-up with colleagues and developed a free online platform. We use short videos to explain the complexities of the financial, business and political worlds in a simple and straightforward way.
Have you set specific goals?
If we can help people learn a bit more about finance, we will have achieved a lot.
You spent years in management positions in the financial industry. What did you learn during that period?
I always wanted to know what investment lessons were applicable to financial theory and vice versa. There's a lot of potential in that. When you go deep into a subject, as I did with the research projects at financial companies prior to applying the conclusions in a practical way, you gain a detailed understanding of processes. I've always enjoyed the challenge of breaking complex things down so anyone can understand them.
Eighteen-year-olds can quote Goethe or conjugate French verbs but they don't know much about finance. What do you think of teaching finance in schools?
I have my reservations. That would make financial knowledge just another subject for pupils to forget about once they've done the exam. You really need to be confronted by financial issues to develop a genuine interest in the subject. That's why teenagers might still be too young for finance and investments.
So young people are particularly ignorant?
They tend to be. In my experience, people tend to think more about finance from the age of 50. That’s when you usually have money put away and start to think about retirement. However, the investment horizon is not as long at that age. Many people have learnt the hard way about investing by starting late. It doesn't have to be like that. Learning by making mistakes is the most expensive way of acquiring financial knowledge.
Info on social engagement at Swiss Life
Swiss Life supports selected institutions working to promote self-determination and confidence. Fintool is one of the institutions supported financially by Swiss Life in Switzerland. Swiss Life wants to contribute to the ongoing improvement of financial literacy in society. Having sufficient financial knowledge plays a big part in preparing properly for a self-determined longer life.
What can financial services providers, for example banks or insurers, do to make people more financially aware?
I believe the financial industry should fund what we are doing. It should be in their interest to deal with people who are competent in finance. It's also about corporate responsibility. Only a well-informed customer will prove a good customer over the long term.
Do financial services providers share your views?
A few of them have understood that investments and finance are in a similar situation to health right now. When you go to the doctor, you seek out more information following your diagnosis and you may want a second opinion. We're going the same way in finance. The industry should support that. Their primary objective should be for people to make financial decisions in their own interest.
Do you sense opposition to your standpoint from the financial industry?
I don't feel much opposition, or support either for that matter. However, if we analyse who watches our 350 videos, we note that about 50% of our 10 000 customers are banks or insurers. So, bearing that in mind, we should receive more support from financial services providers.
What exactly do you need in terms of financial knowledge to lead a self-determined life?
If you want to lead a self-determined life into old age, you should acquire adequate financial knowledge at a young age and be mindful of my eight commandments for investing:
- Invest. Be aware of your obligations. They define your disposable income.
- Don't look for short-term gain – it can prove expensive.
- Don't try to catch the “right moment” – it doesn't exist.
- Don't try to catch the “right security” – it doesn't exist.
- Don't try to know more than “the market”, since “the market” knows a lot.
- Be disciplined and stick to your strategy when things are proceeding as normal.
- Go after the “hot tip” if you want – but only with a small portion of your assets.
- Only buy something you understand. Invest in your knowledge and trust yourself.
About Erwin Heri
Erwin W. Heri (64) is a financial economist, former banker and author. He is also a Professor in Financial Theory at the University of Basel. He has been managing the Swiss internet start-up Fintool since he founded it in 2014. Fintool is a website with over 10 000 users specialising in financial training. The start-up aims to improve people’s knowledge of finance and investing. The team uses short videos to get to the heart of complex economic, financial or political issues. www.fintool.ch
Interview: Fabienne Strobel
Study on “Financial Literacy”
In July 2017, the Organization for Economic Co-operation and Development (OECD), comprising 35 member states, conducted a comprehensive study on financial literacy. The study is available for download here.