Kerrranggg! What was that? No, not the opening chord of a heavy metal anthem, but the sound of exalted reputations hitting the concrete.
I hope that hasn’t added to your Covid Lockdown Blues (which, maintaining the musical theme, sounds rather like a John Lee Hooker track). But it’s quite remarkable the number of individuals and corporates who have recently suffered catastrophic, and in some cases terminal, damage to their standing.
From Prince Andrew to Harvey Weinstein, Facebook to Uber, anyone in government involved in the coronavirus crisis to Lance Armstrong, the once-mighty have suffered a salutary come-uppance in the court of public opinion. The financial advice industry is no exception, to wit Neil Woodford and Unregulated Collective Investment Schemes.
For individuals, it is perfectly possible to rebuild a damaged reputation, as Boris will doubtless be hoping. For business it is far more difficult – as Warren Buffett once said: “‘Lose money, and I will forgive you. But lose even a shred of reputation, and I will be ruthless”.
A sentiment which will never be lost on Gerald Ratner, whose chain of 330 jewellery shops went bust after he famously described one of their decanter sets as “total crap”.
And if you’re in the mood for a bit of knuckle-chewing, buttock-clenching embarrassment, go onto YouTube and key in Alasdair Thompson, who was head of a New Zealand employers’ association and gave a TV interview in which he expounded his Neanderthal views on ‘ladies’ problems’, completely trashing his credibility and subsequently losing his job.
There will be more than a few IFAs who will wonder if a recent report from the FCA applies to them. It highlighted those who advised clients to transfer out of final salary pension schemes into the bracing climes of the open market. In an FCA survey of 235,000 savers, 69% had been recommended to walk away from a guaranteed retirement income when, in the Authority’s judgement, it was not in their best interests to do so.
That will be no surprise to thousands of British Steel workers who were persuaded to switch out of their defined benefit pension scheme. And you really don’t want to give duff advice to the sort of character who knows how to handle a large vat full of molten metal.
It’s not necessary to be a sophisticated investor to understand the potential risks, and possible rewards, of moving, for instance, into a well-managed SIPP.
Indeed, my own IFA spotted that a pension scheme held outside my SIPP was rather heavily invested in commercial property. Not where you want to be when it seems likely that big, glitzy offices will be distinctly passé now employers realise they don’t need all their staff working on site. One of the few upsides revealed by Covid and the dawn of the Zoom age.
The FCA has told a number of IFA firms to look at their client book, and ‘fess up to those who may have been mis-sold. Which will be painful, but far better than being exposed down the line as an outfit which really doesn’t care about reputational damage.
Consumers may be prepared to forgive a company which occasionally transgresses (Ryanair, anyone?) but when it comes to looking after a lifetime’s savings, IFAs who let their clients down will suffer terminal damage to their reputation.
Not a jolly thought as they embark on their summer hols. Enjoy yours.