City investment should wake up to the value of marketing

I say it, admittedly, with a good deal of wisdom after the event, but there has been a certain inevitability about the Morgan Grenfell saga. First, there was the news that three star unit trusts at Morgan Grenfell Asset Management had been suspended. Then we were told that irregularities were confined to the activities of one trader. Now we are being informed that there is definite evidence of criminal activity in the web of companies supporting MGAM’s investments.

I hardly need remind anyone of what the activities of Nick Leeson and the inertia of his superiors did to the venerable Barings. Just the other day, Robert Fleming let it be known that one of its top fund managers had proved to be a mini-Leeson and had redirected profitable trades to his personal account. Robert Fleming was ordered to pay 12.4m in compensation to investors. Now, the standard of incompetence appears to have been taken up by MGAM.

It is blindingly obvious that there are regulatory issues here. City regulator IMRO is evidently on to MGAM’s dubious investment policy. But it should be remembered that four years ago IMRO was defending its failure to blow the whistle on behalf of the Maxwell pensioners with the lame excuse that determined criminals will always slip through the regulatory net. Much the same was said by London-based regulators in mitigation of the Leeson affair. Doubtless Robert Fleming and MGAM will have us believe likewise.

One wonders how many have to slip through the net before the City concedes that the holes are too big. As I’ve said in this column a few times before, statutory regulation by Government department, replacing the worn-out and inadequate self-regulatory experiment, is the way forward to providing the reassurance that the market for financial services deserves.

But this issue is not merely one of regulation and legislation. It is also one of best-practice marketing. I say this for three reasons: firstly, the market for financial services is too large to be left to City dunces who make it up as they go along; secondly, the wrong services are being marketed; and, thirdly, marketing disciplines could, as a supplement to statutory regulation, improve standards.

Taking these points in turn, the market for retail investment has exploded during the past 20 years. You don’t need a history lesson, but mortgage provision on the back of booming housing markets, the unit-linking of practically every investment instrument, the widening of share-ownership, the portability of pension provision and the diaspora of financial services from the City are but a few of the manifestations of a market that has grown not so much like Topsy as like the universe – and I say this in all irony – since the Big Bang.

I know of no other industry of significant size that shows such contempt for its market. Financial institutions woefully underinvest in their marketing resources, preferring to invest in the means of production – in this instance, making the individuals and the technology that make them (and usually the individuals) wealthy. Corporate resource is invariably directed at the supply end of the equations, rather than at the demand end.

Given the size of the financial services market – and it is now so large that it defies efforts at quantification – the domestic economy cannot survive without it. We simply can’t build more ships or sell more cars to prop up the economy. The manufacturing sector has, for all practical economic purposes, gone. Our service industries (and, admittedly, our information technology industries) are what we depend on. And the greatest service industry of all is financial services.

To make this industry pay, we must defend its reputation in its market. We may never know the total outflow of funds from the unit trust industry as a result of the MGAM debacle. Marketing-led priorities would not necessarily do away with the type of fund manager that gave rise to this state of affairs, but they would at least put the market’s requirements ahead of those of the fund managers.

Which brings me to my second point. Unenlightened self-interest on the part of the institutions has led them to sell what they want to sell, rather than what the market needs. So we have Peps and all manner of unit-linked and equities-supported product, when the nation’s investors are underfunded in their pensions – no-risk investments with a 40 per cent tax-break at the top marginal rate (possibly more under Labour). But then pensions aren’t sexy (and the institutions have managed to undermine that market too with the pensions transfer fiasco of last year).

Finally and self-evidently, marketing has a vested interest in increasing the size of the market and of the market shares within it. The policy that has prevailed to date in financial institutions is to maximise the money made from their financial vehicles. This policy has, as we can see in the Morgan Grenfell scandal, effectively driven the market away.

Marketers have to attract and hold on to a market. This renders them self-regulatory. However, the trader has an interest in exploiting the market. I know with whom I would rather put my money.

George Pitcher is joint managing director of media consultancy Luther Pendragon

Latest from Marketing Week


Access Marketing Week’s wealth of insight, analysis and opinion that will help you do your job better.

Register and receive the best content from the only UK title 100% dedicated to serving marketers' needs.

We’ll ask you just a few questions about what you do and where you work. The more we know about our visitors, the better and more relevant content we can provide for them. And, yes, knowing our audience better helps us find commercial partners too. Don't worry, we won't share your information with other parties, unless you give us permission to do so.

Register now


Our award winning editorial team (PPA Digital Brand of the Year) ask the big questions about the biggest issues on everything from strategy through to execution to help you navigate the fast moving modern marketing landscape.


From the opportunities and challenges of emerging technology to the need for greater effectiveness, from the challenge of measurement to building a marketing team fit for the future, we are your guide.


Information, inspiration and advice from the marketing world and beyond that will help you develop as a marketer and as a leader.

Having problems?

Contact us on +44 (0)20 7292 3703 or email

If you are looking for our Jobs site, please click here