So you want to be a trader?

I often get asked, or see people asking, how they should become a trader or fund manager? The short answer is in this diagram:

Don't worry there is a bigger version of this later

.... but that probably won't make a lot of sense unless you read the rest of this post.

The four kinds of trader

 

When I speak of a "trader" I'm going to include both those who actually do the buying and selling, as well as those who make the decisions to buy and sell, since they won't always be the same person. So fund managers are 'traders' even if they have someone else to do the actual clicking of the button (or nowadays, an execution algorithim). I'm also including systematic traders who outsource both the decision making and execution to computers, but have to design and manage the system.

Broadly speaking there are four kinds of trader:

• Proprietary ("prop") trader (someone who trades the firms capital)
• Institutional, buy side, portfolio manager (trades other peoples money, makes the decisions or designs the system, may or not do the execution)*
• Institutional, sell side (eg investment bank options trader, uses bank capital but not primarily a risk taker)
• Self funded independent trader (someone who trades their own capital)

Note that the 2nd and 3rd categories are salaried traders; they get paid a salary which is normally pretty good, plus a bonus. Prop traders normally only get a percentage of profits, though there might also be low base pay in some of the better shops. Independent traders eat everything they kill; and also stump up for losses.

I feel qualified to write this as I've worked in 3 out of these 4 jobs (portfolio manager, sell side and independent), although I have never been a proprietary trader (I do know quite a few though, so I'm not writing in complete ignorance).

An important caveat: I'm mostly ignoring the distinction between discretionary and systematic trading** here, or between asset classes. However the educational background required to be a systematic fixed income options trader is clearly different from what a discretionary spot FX trader needs; so bear that in mind. 

* in the interests of clarity I'm excluding 'execution traders', who execute buy side trades but do not make decisions as to the size or sign of the total order. This is not done for any particular reason other than making the picture above close to readable, and it's a relatively niche job; I'm not suggesting execution traders aren't real traders or anything like that... some of my best friends are execution traders...

** Systematic high frequency traders normally trade prop capital; but their career path is more similar to a systematic buy side portfolio manager so this where I categorise them.

Why do you want to be a trader?

 

This is the first question to ask yourself. The answer to this will determine if trading is really for you, and also help you decide which of the four categories you should be aiming for. Typical answers include:

• Money (financial security)
• Prestige (impressing people of the appropriate gender and sexual orientation at cocktail parties)
• A deep interest in the financial markets
• A fast paced working enviroment
• Working with intelligent and interesting people
• An interest in an academic subject (eg maths, computing, economics, pyschology ...) and the chance to use this in real life.
• A high degree of autonomy 
• Being judged on results, not subjective BS
• Short working hours (at least compared to other finance jobs, and being say a doctor or something)

You should probably think hard about your answer. Don't say "yeah I want to work with intelligent people", if the real answer is money. This isn't a job interview. Be honest with yourself.

If you say "money", then why? Is it financial security you want, or do you want to be able to buy a flashy lifestyle and thus gain "prestige". Would you be happy as the "millionaire next door", financially secure but outwardly thrifty?

http://doesyourbaghaveholes.blogspot.co.uk/2009/07/what-cars-do-wealthy-drive.html

Or do you need to be the guy or gal turning up to a school reunion in a red Ferrari?

If you fall into the latter category I highly recommend reading Affluenza if you haven't already done so.

Which type of trading is best for me?

Now I'm going to discuss each type of trader in turn, to see how they match up to the different motivations above. Note that (a) this is all my subjective opinion and (b) things vary considerably within categories - what I'm showing is an average here. So for example whether your job is academically relevant depends more on your academic interest, and the type of trading you are doing, than on if you are on the buy side or sell side. Also working hours for salaried traders are more correlated with experience - juniors tend to do more - than with category.


First though a word about money.

Money

In general traders are paid like footballers. To be more exact there is a massively skewed or if you like pyramid distribution of income for both "professions" (although top traders earn much more than the best footballers; and the mean salaried trader probably earns more than the mean professional footballer). At the top end are the likes of Wayne Rooney* (perhaps £20 million including sponsorship deals), and the likes of George Soros, Ray Dalio and Steve Cohen (£1 billion plus). Then there are lower paid premiership players (£1 million upwards) comparable to mostly buy side and a smaller number of sell side high earners, with perhaps a handful of individual and proprietary traders (tens of millions). 

* apologies for the UK football centric figures here; feel free to transpose to your own preferred sport and country

Mr Rooney, no doubt wishing he was a hedge fund manager. http://www.theguardian.com/football/blog/2014/aug/13/wayne-rooney-manchester-united-captain-louis-van-gaal-robin-van-persie

Then we gradually descend through the lower ranks of professional footballers, at the bottom of which are bottom end league 2 players on about £30,000. Somewhere in the professional leagues are the equivalent of the average buyside and sellside traders; with average proprietary traders coming in closer to the bottom (in relative ranking, if not in actual equivalent pay).

We then have the part time and amateur footballers. Note that no footballer earns a negative number, although an amateur might end up spending a couple of thousand a year on membership, kit and travel costs. In contrast the majority, and perhaps up to 90%, of independent traders lose money. Some might be getting through five or six figures a year (though one hopes this is not for very long).

Averages are meaningless with such skewed groups. A better way of summarising is to look at ranges. First I've put a normal range which I'm reasonably confident covers about two thirds of people in each group. I've also put an extreme range, which I think 98% of people fall into (with some extremes at the upper and lower end). Apologies for putting these figures in GBP, but all the readers of this blog can probably do currency coversions in their head.

• Proprietary trader: Normal range: £20K to £100K. Extreme range: -£10K (cost of a training courses) to £2 million.
• Portfolio manager: Normal range: £100K to £500K. Extreme range: £50K to £10 million
• Sell side: Normal range: £75K to £300K. Extreme range: £50K to £2 million
• Independent trader: Normal range: £-5K to 0K. Extreme range: -£50K to £500K

Notice that some parts of the profession have a wider range than others; and that the salaried traders (sell side and portfolio manager) have higher minimums.

Proprietary trading

Success in prop trading is proportional to how many screens you have. Apparently.
Source http://cn-chillies.com/

Good for: fast paced,  judged on results

Okay for: money, prestige, interest in finance, autonomy, working hours
 
Bad for: co-workers, academic relevance

Being a prop trader means it's all about your p&l. Nothing else matters. You're only job is to trade the firms money. No staying late at the office to score political points. If you're an adrenalin junkie, there's no better enviroment. If you're not then working with hyper competitive people for several hours a day might be a little draining. Also forget about using your econometrics phd. It's just like playing a computer game.

I have never been a prop trader, and wouldn't ever want to be. But I do know some poor deranged souls who are.

Portfolio manager

John Paulson. Hugely successful hedge fund manager. So good, he can trade with his back to the desk.
www.businessinsider.com

Good for: money, prestige, interest in finance, co-workers, academic relevance, judged on results

Okay for:fast paced, autonomy, working hours

Bad for: I can't think of anything. Which is why this is the most sought after kind of trading job.


Oh yes, to be a fund manager, especially at a hedge fund collecting 2 and 20 rather than long only getting a mere 0.5 and 0. The best of these jobs are very pleasant indeed, and very, very, very, well paid. There is often the chance to spend lots of time thinking interesting thoughts, and little doing boring stuff. The only people you have to answer to (unless you've made enough money) are outside investors, and annoying risk managers.

Anyone with any sense would prefer this to any other kind of trading job, which is why they are insanely hard to get.

The author's last real job was working as a hedge fund portfolio manager, specifically at a systematic CTA.

Sell side

Tom Hayes, LIBOR fixer extraordinare. Currently the most famous sell side trader in the world. But perhaps not the best role model.
www.telegraph.co.uk

Good for: money, prestige, interest in finance, fast paced

Okay for: academic relevance, co-workers, judged on results

Bad for: autonomy, working hours


This is what most people think of when they think about traders: some guy in a bank barking 'buy! sell!' down a phone whilst snorting a line of coke as an exotic go go dancer shines his shoes with their naked derriere.

Now for reality.  Nobody has used an actual phone on a trading floor since 2006; it's all done electronically or on Bloomberg IM unless you are doing some insider trading or LIBOR rigging. Also coke and go go dancers may have been de riguer on the trading floors of the 1980's but no longer.

Also being a bank trader is nowhere near as interesting as it was pre 2008. Regulation and compliance mean that proprietary risk taking (rather than just hedging customer flow) is almost absent from banks. As a result although base salaries have risen top bank traders are now very much the poorer cousins of their buy side colleagues (though minimum pay is higher, and there is less variability). Plus the hours in banks were always longer than the buy side; that at least hasn't changed.

The author spent a year and a half working as an investment bank trader, and hated every minute.

Independent

Navinder Sarao. Alleged to have caused the flash crash (complete nonsense IMHO - Free #NavSarao). Currently the most famous  independent trader in the world.
cnbc.com

Good for: autonomy, working hours, judged on results,

Okay for: interest in finance, academic relevance, fast paced (but varies)

Bad for: co-workers, prestige

Terrible for: money

The main downside of trading independently is it's the only job in this post where you can get paid a negative amount; and indeed most people who try it manage to do that. And you don't get to work with interesting and intelligent co-workers, just some bozo who sits at home all day, probably just wearing his* boxer shorts (that's you)**. And it isn't that prestigous; since anyone in the know will realise (a) you probably don't make any money and (b) you're just some bozo who sits at home all day in his boxer shorts.

* if you don't wear boxer shorts, put the name of your favorite trading clothing here
** you could of course join a trading arcade; but that just means you'll be hanging around with other bozo's, though hopefully wearing slightly more.

The upside is you can, depending on your trading style, spend very little time on actually trading and lots about thinking interesting thoughts about the financial markets (though you're going to be a little out of the loop compared to those working in the febrile atmosphere of a real trading floor). You can use your obscure phd in neural networks to predict prices if that is your wont (though be warned, it probably won't work). And you never have to take any s*** from anybody. Except your wife, asking why you don't have a proper job anymore, and if you're home all the time anyway; perhaps you could do some chores?

In the interests of full disclosure the author of this post is currently an independent trader.

The map

We're now in a position to return to the map.

The various 'trader' boxes should now make sense. Within the buyside and sellside I've included additional boxes for the front and back office. I've also broken out 'unprofitable' prop and independent traders; these are a stop on the journey rather than the final destination.

The lines on the map show possible routes between boxes. Very thick lines are routes that are straightforward and heavily travelled; thinner lines less so (though this is all relative). So for example it's very easy to become an unprofitable independent trader; but very hard to go from independent trader to fund manager.

If a line isn't there it means I think it highly improbable that those trajectories will happen, though of course they are not impossible.

The lines are also coloured. Each colour represents a different route through the trading "profession", which I'll discuss next.

This is clearly a simplification; and I'll talk through some of the missing nuances below.

The main routes

Lone ranger (red)

It's very easy to become an independent trader. You just need some money and a brokerage account. A few clicks later and hey presto! You're a trader.

It's much, much harder for someone who is self taught, with no relevant experience and probably low starting capital, to become a profitable independent trader; one whom can give up all other work and live comfortably on the net profits from their business; with enough capital in reserve to smooth over the inevitable bad months and years that even brilliant traders will have.

A successful independent trader might want to become  a prop trader, and leverage their skills off a larger capital base. However the business model of most prop shops assumes that you trade pretty frequently to provide flow to brokers for hich the shop receives a kickback. It's very hard to be profitable if you trade a lot independently; surviving independents are most likely to be too slow to interest prop shops.

Even harder is for an independent to launch their own hedge fund. Despite this I often see people saying "I have traded for 6 months and made money, how do I start my own hedge fund". There are some new iniatives that might make this easier. But be warned this route is the one with the lowest chance of success.

Prop bandit (yellow)

It's just as easy to become a prop trader. All you need is some money, which you usually have to hand over to the prop shop for 'training'. There are some more reputable shops which don't require this up front payment, but obviously they are more selective with who they pick.

Not everyone who gets in to the training course will subsequently be chosen to trade the firms capital; and only a proportion of those will last for long enough to make a reasonable steady income.

A good prop trader can probably go independent quite easily; although if they are intraday traders they may need to stay within the fold of a prop shop to keep access to the low commission rates needed to succeed in this arena.

It's slightly easier for a good prop trader to become a fund manager than it is for an independent trader; larger amounts of capital and more trading equate to a verifiable track record. Nevertheless again this is a route which has a low probability of success.

Backroom boy (blue and green)

With many apologies to female wannabe traders, but the alliteration here is too good to miss. In the olden days it was relatively common for people to begin in the mail room (this guy didn't even start there, the mail room was a promotion for him) and work their way up to CEO. Exchange floor traders would frequently start as clerks and runners.

Sidney Weinberg, telling everyone for the like the millionth time that he started as a janitors assistant, and how young people today don't even know they are born.... https://en.wikipedia.org/wiki/Sidney_Weinberg

A modern day version of this parable is to begin in a back office role (or middle office), work hard, impress the right people and hoist yourself up to a front office role. This is do-able, but not easy. You're also going to be a few years behind the cohort who start out in the front office.

You'll also need the right qualifications; if you don't start without them you'll need to go back to school to get them. The reason this strategy makes sense is that it's easier to get a back office role than to go straight into the front office. It is however still a gamble and not a path that many people travel. If you can get straight into the front office (next route I discuss) you clearly should.

There isn't much difference between the buy and sell side; except in general it's harder to get into the buy side from scratch. You can also make a parallel move from sell side to buy side; with the reverse move being slightly easier.

Fronting up (cyan and yellow)

This is probably the most common route into trading; and hence probably the most straightforward.

If you have the right qualifications, land a few good internships, and impress at an interview; then you can go straight into the front office. From here the trading desk is much, much closer. Of course there are fine variations within the front office; some front office jobs are more relevant than others, and the journey to the trading desk will be easier depending on your starting point and the kind of trading you wish to do.

Economists and strategists will fit neatly into global macro type roles, equity (bond) analysts will obviously find it easy to move to equity (bond) trading, whereas quant analysts are a more natural fit for options trading and systematic trading. Good technologists with the right experience can also move into systematic portfolio management roles. Moving from risk management into trading is harder, but I know of people that have moved between those two roles comfortably*.

* If I ruled the world all traders would have to work as junior risk analysts for 2 years before buying a single thing. And all senior risk managers would have to have at least 5 years trading experience.

If you're in an M&A or sales role then it's harder to see how a move into trading would make sense, but then these are worlds I know almost nothing about so I can't really comment.

Again it's harder to get into the buy side, and you can move from sell to buy side; with the reverse move being slightly easier.

Overachiever (dark blue and purple)

A very small number of people will go straight on to jobs on a sell side trading desk (although initially it's likely to be very junior, with relatively small budgets). An even smaller number of people do the same on the buy side.

Clearly this is the dream ticket, but you shouldn't pin your hopes on it. It really is very difficult. You should have a plan B in case this doesn't work out, like another front office job.

You can move from sell to buy side; with the reverse move being slightly easier, yeah yeah you know this by now...

There are some lines that might seem odd on the graph; from sell side trader and portfolio manager back up to independent trader. Well it's pretty simple; these are very well paid jobs. Which means trading independently is possible; and you're probably going to have the skills to do it pretty well (although the move is slightly harder for sell side traders who may find their trading strategies don't work so well when not embedded within the customer flow of a banks market making).

Final advice

If you really want to be a trader the easiest route is as follows:

• Go to a really good university and get good qualifications
• Get a sell side front office role that will put you near the relevant trading desk
• Move to the relevant sell side trading desk.
• If desired a move over to buy side portfolio management can follow
• At this point if you're any good and you don't blow your bank account on frivolous pursuits you'll end up with enough money to trade independently, or spend the rest of your life at the beach if that is your thing.

Finally, if you're curious, and in the interests of full disclosure, below is the route I took:*

* I had a 2.5 year break from finance when moving from the sell side, to buy side fund manager...

Make of that, what you will.

Best of luck to you all in whatever career you decide to pursue.

If fund managers are overpaid then so are chefs (not really)

There is pretty clear evidence that financial investment products do not justify the performance that they offer versus the fees they charge. Generally this is attributed to the greed of overpaid fund managers (and to declare an interest, I was a member of that tribe until last year). It may surprise people to learn that forcing fund managers to earn the same income as say a nurse would not make a huge difference. To realise why we need to think about restaurants instead. 

(I can promise that this bizzare analogy will make sense in about 2 pages time but you are just going to have to trust me until then)

The rip off restaurant meal

I took my wife and children out to a restaurant for mothers day. I can't remember exactly what the bill came to; it was a niceish place in the outskirts of London but we only had a couple of glasses of wine between us so probably about £20 per head. If we had gone and cooked that same meal at home it would probably have only cost two or three pounds a head to buy the food. Were I to be a really ruthless economist and factor in the cost of gas, elecricity and a prorata share of the cost of our mortgage.... it would still be a lot short of £20 per head.

You might assume that the reason it costs so much is that there is a greedy overpaid chef in the kitchen. My brother in law works as an executive chef and whilst he does okay, last time I checked he did not have a second home in the Swiss Alps or a helicopter (He does work ridiculously long hours so he has that in common with at least some people in the finance industry). In fact the hospitality industry is notirousliy badly paid and the proportionate cost of the Chefs wages in that restaurant would only have been a small fraction of my £20. So then the meal was a complete rip off wasn't it?

Its the frictions, stupid

To get back to that £20 a head we need to factor in rent, business rates, VAT, the cost of other staff both front and back of house, deprecation, national insurance, insurance insurance, stationary, all kinds of costs you only find out about once you have run your own business.... and a profit to the owners of the restaurant that might just stretch to £1 per head (although possibly not even that). The difference between the cost of paying the chef plus the pure 'raw' cost of the food, and the total cost of the meal, might be described as a frictional cost.

You might conclude then that it makes no economic sense to pay anyone to do anything, and indeed for it to happen there must be something else going on.

Firstly we could need to bring in the concept of additional utility enjoyed from not cooking the meal yourself. You may enjoy an activity more if someone else does it for you or it may be that the person doing it enjoys it more than you (or at least dislikes it least). Before you start sniggering I am not thinking about what you are thinking about. I am thinking of things like cooking (nicer if someone else does it or the cook may be very passionate about doing it wheras you just want to eat) or plumbing (plumber may dislike it less than you).

Secondly clearly for people who have very high incomes (like greedy fund managers), or for above average income people buying a service provided by somone with a very low income does make economic sense; i.e. there are favourable pay differentials.

Also if you are buying something you simply cannot do yourself then it would make sense to buy it in of course. Like fixing a dishwasher - something most people cannot do. If you are a dishwasher engineer reading this right now, presumably from the comfort of your yacht in the cote d'azure, allI will say is I hope your bilge pump fails so you know how it feels.

(Readers should know by now that by examples are entirely arbitrary and totally unconnected to my real life. And that I have a very highly ironic tone of writing.)

A weaker form of this is that the service is something you can do, but the other person can do better than you. Many other forms of DIY fall into this bracket, at least for me. Painters and decorators all over the country are not worried about not getting my business. I can lift up a paint brush and move it over a door frame but the end result is not attractive.

Finally there are often what economists call economies of scale – it is often cheaper to provide things on a larger scale. Buying 25 kilos of prime steak every day for your restaurant will give you a lower price than buying a quarter a kilo a week.

Lets be honest this is a terrible analogy

Okay the fund management industry is not the same as running a restaurant. When you buy an ISA you are never offered a bread roll or a little bowl of olives. Also in the fund business the amounts of money are larger in absolute terms. A michelin star chef can only deal with a couple of hundred covers before the quality starts to slip; a top fund manager can look after hundreds of millions of pounds as easily as looking after ten million. More of the revenue does to go pay staff, and that revenue is shared more disproportionally than in the restaurant business with fund managers, traders and other big swinging dicks getting a large percentage than the head chef of a restaurant normally would.

So there are even now far more people in finance earning six, seven, eight and very occasionally nine figure incomes than in restaurants (discounting the celebrity chefs who do little actual cooking and so can 'run' a dozen restaurants; and even Gordon Ramsey would not break into a list of the top 100 wealthiest hedge fund managers). This is not then a case of favourable pay differentials except perhaps for the ultra high net worth customers.

Let us take a very simple financial product as an example, an index tracker. This is the most simple product that exists; the equivalent of a salad or pate on toast. To cook this particular dish at home you need access to information about the index, eg the FTSE 100. You need to know what shares are in the index and in what weights. This is available for free on various websites if its for personal use. You then need to buy the shares; and every quarter when the index is changed you might need to buy or sell a bit. You can get an online execution only broker to do this for you for between £5 and £15 per trade and perhaps a similar sized quarterly account fee.

To pay someone to do this for you wouldn't cost that much; its only a few hours a year and frankly it isn't rocket science – you can do this yourself. However arguably not everyone is a finance geek like me and so there may well be additional utility from paying someone else.

The other problem with doing this is that unless you have a lot of money you will need to hold very small, uneconomic amounts of the very smallest companies in the index; where it would cost you a very large proportionate amount to trade them each quarter. So there are economies of scale to outsourcing this activity unless you have a certain minimum level of wealth.

(You could just hold the top 30 shares of course and still get very similar performance, or hold them in equal weights and get better performance, but that is for another post and still requires larger amounts of money to invest than most people have)

So instead you go and buy a FTSE 100 tracker, eithier as a unit trust or ETF. The people running it will try and introduce some rocket science; algorithims to reduce tracking error and 'smart' execution benchmarking against VWAP and other such nonsense. You might have half a dozen people working on this 'alpha generating' activity all pretty well paid. It is all a bit futile since tracking an index of this nature is like joining a queue of people all trying to get into the same shop at the same time and a bit of jostling in the queue isn't going to help. Its better to join a different queue entirely, but thats another story. I don't think then personally that this is something the rocket scientists can do a lot better than Joe Public.

However spread over a several hundred million pound fund these extra rocket scientists are hardly going to add very much to the cost of the fund. If anything there should be some further economies of scale savings since the institutions will be paying lower dealing commissions (though due to their size their total execution bill might be higher). But then we do have that huge slew of frictional costs.

There is a lot of administration in looking after other peoples money; and admin doesn't automatically scale well to looking after larger amounts of money unlike the actual fund management activity. If all those accounts belong to smaller retail customers having a billion pounds than a million means 1000x more accounts; possibly not 1000x more staff but certainly a good deal more. Advertising takes up a big chunk although you wouldn't have thought a simple tracker would need to advertise much, but they still do. Then there are compliance costs; the greater the distrust we have in the finance sector the more people they need to employ to make sure the other people aren't breaking the rules. And they would also have to make a profit; though outside of hedge funds the profits in fund management have never been as good as in say the investment banking industry (rightly so they aren't committing their own capital but just earning off other peoples).

And its also about the intermediation, idiot

One category of costs to the fund management business we haven't talked about is what are euphimistically known as distribution costs. Many retail customers didn't directly invest in funds but went through financial advisors. Until the FCA reformed the industry rather than pay a fair price for this advice the funds paid commissions to the advisors directly, making it quite dificult for the advisors to work out which was really the best fund and which just paid the best commission. These are so called intermediation costs; the costs of not dealing directly with the fund manager but with some intermediary.

(I can show you with a few equations and some data that the best predictor of the performance of any investment are its costs, which are known with a much higher degree of certainty than any other variable. Therefore this was exactly the wrong thing to do. But you don't need the maths, this is common sense.)

Similar kinds of intermediation costs exist with funds of funds (funds that invest in other funds which exist in both the retail and the institional world), 'smart platforms' (that invest in index funds according to some algorithim), with institutional investment consultants, insurance companies, private banks and I could go on. This layering of intermediaries may be adding some value, but any value is dwarfed by the fact you have to pay restaurant costs to each layer. Each layer has their admin, tax, compliance and other costs to pay.

I won't bang on about it because there has been plenty of recent media discussion on this. If I can take just one example from the industry I used to work in; the systematic 'CTA' flavour of hedge funds. Historically these were mostly invested in by rich individuals who went through private banks, financial advisors and/or fund of funds. More recently 'normal' people have been going via so called UCITS funds which are essentially a loophole to allow people to invest in hedge funds except they are often very expensive (loopholes don't come cheap). These multiple intermediations were fine when the products were making outsized returns but once returns dropped (even if still relativelyattractive on a return:risk basis compared to other investments) they resulted in investors seeing poor performance. High returns (especially if they are mediocre returns in an enviroment of low inflation) have a great way of masking high fees.

So the cry goes up 'something must be done'. But what?

Nothing

At least nothing by the government.

This isn't something the government can do for you, although there should be much better transparency around fees and fund manager fees. If you have been reading carefully you will see I don't think increased regulation is the answer. Regulation won't remove restaurant costs. If anything the government might need to think about removing regulations that encourage or force institutional investors to go through intermediaries that add no value.

I am wary of overburdening teachers with more iniatives but we don't help ourselves when we produce consumers that are not all comfortable with maths and have low levels of financial literacy.

The industry itself can also help by providing cheaper simpler more transparent products that do not involve intermediation. But they won't do that without pressure from customers; attempts by the government to force this through in the past have failed (does anyone remember CAT standards?).

It is something you have to do for yourself. Because people are getting older, because of the demise of the paternalistic final salary pension in the private sector; with the end to compulsory annuitisation and with the state pension unlikely to ever cover more than a very modest standard of living. These things all mean you are going to have to take much more responsibility for your own savings and investments. You need to do more stuff yourself, and only outsource when economies of scale really make it much cheaper or impossible to do yourself.

It takes much less time than you think. It is not as complicated as you think; much of the complexity that exists is unncessary. It is easier than you think- not as hard as fixing a dishwasher. And it is not as dull and boring as you might think. It might even be as much fun as cooking.