Why is the financial services industry behaving like Harry Enfield’s Kevin the Teenager? The Government and the public companies in which Kevin invests are, meanwhile, cast in the role of his luckless and endlessly patient parents.
These companies work hard to look after Kevin and his friends, while the Government tries endlessly to encourage people to save and to legislate for adequate pension provision for an ageing population.
But do they get any gratitude from Kevin the Fundmanager? Of course not. The world owes Kevin a living and all he has to say in the face of static markets, increasing tax rates, struggling companies and stressed economists is: “It’s sooooo unfair – I hate you!”
Kevin the Fundmanager has most recently been played by Fidelity’s UK managing director, Richard Wastcoat, who has attacked the Government for meddling in the savings markets in an interview with The Sunday Times.
He said: “The Government’s policy on savings is a mess and it will take years to repair the damage.” Richard the Fundmanager then bellowed “It’s sooooo unfair!” before running upstairs and slamming his bedroom door.
I made the last bit up for dramatic effect, but you get the idea. Fidelity’s intervention is actually unusual in this context, because it is generally one of the more mature institutions in this adolescent industry. In fact, Fidelity is usually frightening and aloof – like a teenage genius prodigy, rather than some spotty and recalcitrant oik.
I visited Fidelity in Boston in the Eighties and was briefed on its Magellan Fund, the most successful fund in the history of investment management. Our group never got to meet the fund’s manager, whom we imagined sitting cross-legged in a pool of blue steam, imparting wisdom. There was a rumour that he was forced to retire before he became able to buy the US for cash.
Fidelity in the UK has always been rather more homely than its US parent, but I thought I would make the point that, when Fidelity speaks, people tend to listen. And, in a way, it doesn’t usually have to speak – politicians and regulators have an interest in keeping it happy.
So you might think that matters must have reached a sorry state if Fidelity has been driven to complain. But I have to say that it’s pretty rich for even a company of Fidelity’s stature to accuse politicians of meddling in savings regulation.
Let’s remind ourselves that it’s the financial services industry that, over the past two decades, has brought us scams and scandals such as Barlow Clowes and BCCI. It brought us Home Income Plans in the Eighties, which traded homeowners’ principal assets on the Stock Exchange, and it brought us the mis-selling of personal pensions in the Nineties.
More recently, the financial services industry has brought us “Precipice Bonds”, high-income vehicles sold to older people that have put their capital at risk. It has brought us Equitable Life, on the causes of whose demise the long-delayed Penrose Report is about to adjudicate.
The financial services industry has brought us Scottish Amicable, swallowed by the Pru because it didn’t manage its reserves properly – and Europe’s largest mutual, Standard Life, which has started to talk of demutualisation because of narrowing solvency margins.
Throughout all this, the financial services industry enjoyed spectacular returns and rewards for its managers during a protracted and raging bull market in equities that lasted 18 years – yet less than two years into a downturn, it cannot meet maturity values on endowment policies that have secured the nation’s home-ownerships.
A century ago, there were five people in employment for every one retired; soon that ratio could reach parity. We have an ageing population and a looming pensions crisis – and precious little evidence that our financial services industry has any aptitude for meeting the challenge.
Against this background of rank incompetence and greed, is it any wonder that the investors who constitute the battered and abused retail financial market want more “meddling” by government, rather than less?
The likes of the peevish Fidelity will claim that regulations restrict the options available to investors. But consider this: at the weekend, we learned of secret peace talks between UK companies such as Sainsbury’s, WPP and GlaxoSmithKline and institutional fund managers, such as Hermes, Henderson and (interestingly) Fidelity.
They were trying to reach an accord over their growing spats about corporate governance. But where were these fund managers during the boom years of the Eighties and Nineties? Awarding companies holidays on their pension-provision payments – and themselves seven-figure bonuses – that’s where.
The financial services industry needs to win back some trust in the markets it serves, rather than pointing a finger at the politicians who regulate it and the companies in which it invests. We need the trust put back in investment trust.
And Kevin the Fundmanager needs to grow up and get a life.
George Pitcher is a partner at communications management consultancy Luther Pendragon