Some time back, I wrote a short, blunt piece called Simplicity Is The Ultimate Sophistication, built around a Leonardo da Vinci quote and a fairly unglamorous truth about pensions and investments. It's a piece I still stand over completely. The theme came up again on the podcast recently, so here it is in fuller form, with a few things worth adding since then.

Far too often, when a prospective client asks me to run the rule over their financial affairs in Ireland, I see complexity and sophistication — and the negative outcomes that come with it. It is not their fault. It is the fault of 'experts' plying their 'sophisticated' trade.

Where Sophistication Creeps In

Sophistication is everywhere in the pension and investment market in Ireland. I see it week after week: prospective clients come to me needing help to unravel a web of complexity that a previous advisor built up over years. Some examples of where complexity arises:

• Active and frequent trading by an investment manager, with active re-allocation based on market movements and predictions

• Complex unregulated investment products

• Structured investment products with 'capital protection' locked in for several years

• Multiple separate investment/pension accounts with multiple providers, each using a different investment approach

• High-profile investment managers who sell the promise of over-performing the market (alpha)

I understand why many financial planning and wealth management firms encourage clients toward complex and sophisticated approaches. Here are some reasons why a firm might suggest such routes:

• It might make them look smart to clients and peers

• It generates higher initial commissions

• It is easy to sell complexity to clients as 'adding value' or benefitting them, even when it doesn't

• They believe it is what the client wants and will buy, even if it isn't what they need

• They can charge the client more for it and lock them in for years

• The providers they use offer higher commissions or fees for selling complex structures

• It gives the 'expert' more power if the client doesn't understand what is actually going on with their own affairs

• They have convinced themselves that sophisticated approaches will genuinely be better for clients

The motivations and biases are rarely anything to do with improving things for you as the client, and mostly to do with furthering their own position. If you'd like to see what that actually looks like, I've broken down what financial advisor commissions in Ireland really add up to in a separate piece that puts real figures on it.

Why It Costs You More Than It Promises

The reality is, sophistication and complexity in your investment and pension planning, as Leonardo warned us, is not the ideal. Here's what that actually costs people, in real cases I've worked on:

• Sustained underperformance, year after year, costing real money in lost returns

• A single bad year alone wiping out a substantial chunk of value

• Someone locked into an underperforming, high-fee structured product for years to come, with little way out

• Investors left worried, stressed and totally bewildered by the myriad of schemes they are left with by unscrupulous advisors and investment managers

It is the last of these that often grates me the most. Missing out on investment returns is bad enough, but when the advice and 'expertise' also leaves someone worried and totally unclear about their own financial affairs, that is an even greater insult to their dignity.

What 'Simple' Actually Looks Like

Simplicity isn't a euphemism for doing less, or for a smaller plan. In practice, a simple pension and investment structure tends to share a few traits, regardless of how large the portfolio is:

• One clear, evidence-based strategy, not a patchwork of products picked up over successive advisors

• A total cost you could state in one sentence, not a cost you have to reconstruct from several documents

• Funds and structures you could name without checking a folder

• A regular review built in, rather than a plan that sits untouched once it's set up

It's a case of a simple, practical test: if you cannot explain your own investment or pension structure back to a friend in two or three plain sentences, that's worth a closer look. Genuine sophistication, in the da Vinci sense, is the discipline to strip a strategy back to what actually matters, not the accumulation of moving parts.

A Move To Simplicity

I'm not being over-dramatic here, the above are real cases and real outcomes of complexity that I see on an almost weekly basis. When someone engages me to complete a full analysis and strategy, my priority is to correct the underperformance, but just as importantly, to give them real clarity and comfort about what they are doing and how they are financially positioned from then on. Why move to simplicity?

• Transparent and clear in terms of strategy, partners and service fees

• An evidence-based investment strategy that is consistent and delivers the returns investors deserve

• Clarity on where an investor's money actually sits, and how it is protected and assured

• Peace of mind and confidence for the investor

I'm glad to see that an awful lot of investors are starting to acknowledge that simplicity works better than sophistication. Knowing that a move away from sophistication is prudent is one thing; doing it is another. It's the same principle behind why reducing investment risk before retirement isn't always the simple default it looks like: a decision made deliberately, by you, beats a decision made for you by a scheme default, every time.

Ultimately, if you find yourself on the wrong route, take the less-than-easy decision to engage a professional who can and will show you the way to freedom and betterment.

I hope this helps.

Paddy Delaney QFA RPA APA