Ever wondered what a country in financial meltdown feels like?

I’ve just come back from a week in Greece, so I think I can help: in my very recent experience, a country in financial meltdown feels very much like an out-of-season tourist destination.  Where we were, down on the Mani peninsula in the Peloponnese (which is absolutely gorgeous, by the way), there was no-one much about;  restaurants and bars were almost completely empty and many hadn’t yet opened for the season;  the roads were largely deserted, and the beaches completely so;  and when we arrived we were the only customers in our very pleasant little hotel.  The picture was similar, although not quite as Marie Celeste-like, at the airport in Athens:  no hustle or indeed bustle, the car-rental car parks overflowing with cars for rent and when we came home on Saturday evening literally nobody except us in the very large and comfortable Olympic Airways lounge.

You’ll have spotted the key question arising from all this:  was everything as it was because of Greece’s financial problems, or because we were in fact in an out-of-season tourist destination?  In fact, I’m pretty sure that the answer is a combination of the two, and, more problematically for the Greeks, that the two are quite closely related.  Several people told us a little anxiously that the season was proving to be unusually “late starting” this year, but of course the trouble with that expression is that it assumes the season will in fact be “starting” at some stage more or less as usual if a bit belatedly.  I suppose that some people in some parts of the tourist industry, like hoteliers, have reasonably good visibility on the outlook for the season, but a lot of others – those running restaurants, bars and shops, for example – really don’t:  they can only wait and hope.

I’m not sure exactly why a country’s financial problems should depress its tourist industry, but I’m pretty sure they do:  in fact, I’m pretty sure that any widely-reported problems depress a country’s tourist industry.  “Prohlems” is just a bad word to be associated with a place where I’m going on holiday.  It may be difficult to see exactly how these “problems” threaten me and my precious week or fortnight, but why take the chance:  there are plenty of places not associated with problems at all, and I think I’ll go to one of those.

Of course there are a few people who are resolutely contrarian on this, and insist that the best deals are to be had in the places with the worst and highest-profile problems.  Friends of mine are always on the lookout for the kinds of problems most certain to terrify tourists:  hardly has the blood been mopped away from the airport massacre than they’re on the first flight to land there, confident in their belief that a) security will be meticulous and b) prices less than half what they were the day before.  It’s a strategy that has served them well over the years.

But most of us aren’t that brave.  The problems don’t have to get very serious before we’re voting with our flip-flopped feet.  Which is why I fear those slightly anxious-looking Greeks are getting to get a whole lot more anxious-looking before the long hot summer is out.

“I’d like to make a comment on the least interesting thing you just said.”

I gave a talk at an investment event on Thursday.  It was a very good event, with a very good bunch of senior, intelligent, opinionated people from different parts of the retail investment industry in attendance.

Like most of my talks about investment these days, its main thrust was that there are lots of very exciting new opportunities opening up in the D2C sector at the moment – but that to make the most of them, a lot of people in the investment world are going to have to get a whole lot better at understanding end consumers than they have been for the last intermediary-dominated quarter-century or so .

To be fair, I don’t think that many of those attending, if indeed any, would disagree.  But here’s the funny part.  After I’d sat down, they pitched happily in to the best part of an hour of animated discussion.  And as far as I can remember, everyone who spoke wanted to comment in some way or another on the idea that despite all this new-fangled D2C stuff, the advised market wouldn’t completely disappear and intermediaries would still have an important role to play.

This is certainly true – I had made the point emphatically in my talk.  But it isn’t very interesting.  Yes, there will be a business-as-usual part of the market toddling along, albeit in a much reduced form, while a thousand flowers of all shapes and sizes start blooming alongside in the direct-to-consumer sector.  But which of these two parallel worlds would you rather think about and comment on in an after-dinner discussion – the exciting new one, or the boring old one?

Me too.  In fact, that’s exactly what I spent 29 of my 30 minutes doing.  But in that gathering,. we’d be alone:

As I say, I think that few if any of those present would openly refute my argument about the new, growing and exciting potential of D2C.  But judging by that discussion, I’m not at all sure that deep down, any of them really believes it.

Sorry, just one final point about this hating Thatcher thing

It’s not really a particularly interesting or important aspect of the whole thing, but I am perhaps unreasonably irritated by this idea that opponents of Thatcher are supposed to hide their animosity for a little while,  “at least until after the funeral.”

The obvious problem with this idea is that in real life, it means hiding their – or rather our – animosity pretty much altogether.  The period between her death and her funeral is the only period in which she’s sufficiently high-profile to trigger such feelings, and the public expression of them.  It would be very odd if opponents had randomly launched anti-Thatcher demonstrations two, or three, or seven years ago, dusting off the old Milk Snatcher posters and marching around some suitably central landmark.  It took her death to bring her back to the top of our minds, and to create a climate in which it seemed appropriate to have something to say about her.  And within a few days of her funeral, she’ll have slid back down to the lower levels of our consciousness again, and it would be as peculiar to show feelings about her as about Ted Heath, Anthony Eden or Lord Palmerston.

So the proponents of hatred-hiding aren’t really asking people to break off politely for a few days from their frenzy of public detestation before going back to business as usual:  they’re asking us not to show how we feel at the only time that it makes any sense to do so.

To hell with that, I say.  As Caitlin Moran said in a brilliant piece in The Times yesterday, all those who she hated and harmed in her years in power, or at least all those who are still around, can finally get to enjoy a triumph over her, and thank goodness it’s a triumph well worth a good deal of celebration.  They’re still alive, and she isn’t.

So when are we allowed to start saying we hate Thatcher again, then?

I’m completely mystified by the view expressed by all sorts of people, and not only from the right, that it’s inappropriate to express our loathing of Margaret Thatcher around the time of her death.

What is the rule of etiquette that’s involved here, and how exactly does it work?  Is it a blanket prohibition which applies to everyone when they die?  Jimmy Savile?  Fred West? Pol Pot?  Adolf Hitler?  And if so, do we have to find nice things to say about them, or are we allowed to make neutral or carefully-balanced statements, like the BBC at election time?  And how long does this period of prohibition last until we’re able to start saying what we really think again?  A week?  A month?  Until after the funeral?  A year?

And then secondly, what’s the point?  I suppose you might first imagine that it’s to spare the feelings of the deceased’s family and friends, but, good heavens, it can hardly come as a surprise to Mark, Carol, Tim Bell and the rest of them that the lady was a little less than universally popular.  And anyway, all of them benefited massively in one way or another from her power and money:  it seems only fair that they should feel a bit of the pain too.

No, I’m afraid that when I hear Tony Blair, among others, encouraging us to “show some respect,” it only makes it all the clearer to me that he’s completely lost the plot.  Although I suppose that in one sense of the word I “respect” Thatcher as someone who could sometimes be a formidably effective political opponent, I detested everything about her while she was alive, I detest everything about her at the time of her death and I’ll go on detesting everything about her far into the future.

And by the way, while I’m on the subject, I’m appalled and infuriated by the idea of some right-wing football club chairmen that there should be a minute’s silence as a mark of respect for her before the weekend’s games.  Given that at least half the fans at the games feel much the same about her as I do, I can’t imagine what right they think these people think they have to ask this of us.  Fortunately Spurs are away, so I won’t be at White Hart Lane:  if I was, and if Daniel Levy was foolish enough to ask for this, I’d like to think that I and a large proportion of those around me would shout, cheer, clap loudly and generally make as much noise as possible for the full 60 seconds.

Damn, that clever Dominic Sandbrook has had the same idea about Thatcher as me

I bow to no-one in my hatred of Margaret Thatcher, and I see no reason to moderate my views just because the ghastly old trout has finally snuffed it.  But if there’s one thing I will admit – a thing which largely explains why I hated her quite so much – it is that she was undoubtedly effective, albeit in what I still think to be an entirely negative and despicable way.

The measure of that effectiveness, I suppose, is that well over thirty years after she came to power, and over twenty years since her fall, this country is still overwhelmingly Thatcher’s Britain – despite the goodness, and good work, of many millions of people, culturally a selfish, greedy, money-driven society, obsessed with material reward and success, contemptuous of public service, hostile towards foreigners both within the EU and more generally, arrogant, self-regarding and prone to fits of inexplicable and violent rage when our desires are thwarted.

What’s even more remarkable, of course, is that all this remains true despite the fact that for 15 of the 22 years since her fall we had a Labour government.

Dominic’s and indeed my idea stems from this state of affairs:  things changed so much during her time that it’s worth asking what our country would be like today if she hadn’t ever become Prime Minister.

Sandbrook, having asked this intriguing question in an article on the BBC website (http://www.bbc.co.uk/news/magazine-22076886), answers it very unintriguingly, basically saying that by 1979 the country’s problems were such that anyone coming to power would have had to do much the same things.  But – despite the fact that he is perhaps the best modern historian of his generation and I’m just a marketing bloke – I simply can’t agree with this.  I think that perhaps the horrible, directionless, weakmindedness of the political scene in the 70s had gone on so long, and had depressed us all so much, that the country was gagging for stronger, clearer, more positive leadership.  But that doesn’t mean that Thatcher’s kind of leadership was the only option available.

What other options there might have been depends on how you draw up the rules of the game.  If you allow only small deviations from what actually happened, then you have to introduce Michael Heseltine as Prime Minister – after all, he very, very nearly was.  If you allow bigger deviations from the historical script, then you can imagine that Denis Healey became Labour leader, not Michael Foot (which again he very, very nearly did).  Or that the rise and rise of the SDP continued unchecked, and the 1983 election was won by David Owen.  Or …well, whatever alternative scenario tickles your fancy, really.

But the thing is, it’s not impossible that any or all of these, not to mention a whole bunch of others, could have led a strong and purposeful government that could have set a badly-needed new direction that would have been utterly different from Thatcher’s.  And if they had, then the country today might be a very different and possibly very much better place – it seems to me, for example, that in their various ways none of the other Northern European democracies, the Scandinavian countries, Germany, Holland, found it necessary to walk anything like so far away from their social democratic principles to establish a viable economic. social and political framework for the last part of the 20th century and the 21st.

Anyway, aspiring novelists and modern historians.  My mate Dominic and I agree that there’s a book, either fiction or non-fiction, to be written imagining a Britain today in which Thatcher had never happened.  Dom’s book is rather boring – he says things would still be pretty similar.  Mine says they’d be very different.  What would yours say?

 

 

Adviser charging: it seems nothing’s changed. And yet of course everything has.

In the first report of its kind that I’ve seen, Skandia has said today that in the first quarter of 2013 around 97% of their clients have been paying their adviser charges out of the product – in other words, 97% of the time, Skandia has been paying the charges to advisers out of the clients’ investments, usually their cash accounts, rather than the clients actually making payments from their own bank accounts to their advisers.

To most of us, this is no big surprise – it is, after all, the business-as-usual option.  In the run-up to RDR, when it became clear that the FSA didn’t have a problem with so-called provider-facilitated adviser charges, the adviser community breathed a large sigh of relief (or at least those who weren’t hopelessly confused and mystified by the whole RDR thing did).  They realised that given that most were intending to set their adviser charges at pretty much exactly the same levels as their pre-RDR commission levels, things really weren’t going to change very much in real terms for their clients or for themselves.  Ultimately, at the minimum, the practical change consisted of adding a question mark to turn the key message on charges from a statement to a question.  “I’m proposing to charge you 3% upfront plus 0.5% per annum” became “I’m proposing to charge you 3% upfront plus 0.5% per annum?”.

That, I suspect, is the reality behind Skandia’s 97% figure.  And with that figure now available, many will say this proves that the RDR represents a quite preposterous amount of upheaval and cost in return for the addition of a single question mark.

In fact, though, I’d still argue that while the change is insignificant in practical terms, it’s hugely different in terms of defining the nature of the market.  The key is that it’s now the adviser’s client and not the product provider who, no matter how unwittingly, sets the adviser’s level of remuneration.  What’s important, ultimately, is not so much that the client is doing it but more that the product provider isn’t.  We all know that fundamental rule from game theory that in any game involving three players, two will inevitably gang up on the third:  the change in payment arrangements creates a strong probability that in the new world, it’ll be the client and the adviser who gang up on the product provider, rather than the adviser and the provider ganging up on the poor old client as for the last 25 years

If so – and it really does seem like a very strong probability indeed – then this at a stroke will amply justify the cost and complication of the whole process.  And elsewhere in the trade.media, we’re starting to see evidence that it is indeed the case:  for example, we’re already seeing signs of a major switch in recommended investments away from overpriced, underperforming active funds (which paid more commission to intermediaries) and towards much lower-cost passive index trackers (which have always been handicapped hitherto by the fact that they paid little or none).  Developments like this – forecast by me, I must say, about four years ago – are reported without much comment in the trade media, but actually there is a good case for some more opinionated journalism.  It wouldn’t be wrong to cover the story with a headline saying “Advisers decide to stop conning consumers out of billions in pointless charges and recommend some decent-value investments for a change,” although it’s not just the length of the line that makes me think I’m unlikely to find it in Money Marketing any time soon.

So.  It’s an unusual situation – pretty much unchanged, as I say, in purely practical terms, with advisers getting much the same amounts of money in much the same way that they have for many years;  but, at the same time, fundamentally transformed conceptually, in  a way that is entirely good for the client, bad for the provider and mainly just strange and different for the adviser, who has to start thinking of the client as, well, the client and not just the mug punter

Many say that when the FSA, or rather as it now is the FCA, starts seeing data like Skandia’s and realises what’s actually happening in the post-RDR market, they’ll be unhappy with the lack of practical change and will move towards an RDR 2 in which provider-facilitated charging is banned and clients have to make real payments of real money in return for the advice they’ve been given.

If the FCA is really determined to sever the link between products and payments – so that payment relates, and is unmistakably seen to relate, to the provision of advice rather than the arranging of products – then I can see there’s a case for this.

But if, on the other hand, the regulator’s main priority has been to end that deeply dubious era in which providers and advisers ganged up to the emormous detriment of consumers, without completely dismantling the existing financial services marketplace, well, I’d say it may conclude that so far, things are going rather well..

I’ll argue with anyone, me. Including myself.

I’ve been thinking about the holiday job I had many years ago, way back in the late seventies, at Grants of St James’s wine bottling plant at Slyfield Green, near Guildford.  It really was an eye-opener.  I think it’s probably true to say that absolutely nothing we bottled there was what it said it was on the label – and a fair bit of it was truly disgusting and undrinkable, to take just one example the “chablis” which was actually (as a result of a tanker-unloading error) 20% amontillado sherry and 80% Bulgarian white wine.

I’m not sure if I realised this at the time, but it subsequently became clear to me that the reason for all this terrible behaviour, as in the punchlines of the jokes about why so many Californians like to see psychiatrists, and rather more demotically why so many dogs like, um, how can I put this, to lick their b*****cks, is simply “because they can.”  Since no-one knew anything about wine in the late seventies, you could ship out this disgusting brew confident that no more than a handful of people would complain.

(It occurs to me, by the way, that a rather similar situation applies in coffee these days. It can only be the same kind of under-educated tastebuds which explain why people choose the filthy beverages served up by Costa, and to a slightly less filthy extent by Starbucks, when there’s usually a very palatable Nero, Pret or AMT alternative available within fifty yards.)

Although the huge majority of people are still far from Jancis Robinson-like in their appreciation of wine, they’re not quite as willing as they were in the late 70s to glug down genuinely horrific concoctions;  and at the upper end of the market, there is a reasonably large number of genuinely quite discriminating consumers who would protest very loudly and embarrassingly indeed if served with our Slyfield Green “Chablis.”

So what’s happening here, has happened in a lot of other markets and may happen before too long in takeaway coffee is that as consumers become more knowledgeable and discerning, they exert a positive pressure on providers to offer products and services which they find acceptable (or, to put it another way, they would exert a very negative pressure on providers if they didn’t).

That being clearly the case, and clearly a good example of a “virtuous circle,” why am I so insistent that a huge commitment to financial education is not the way – or even part of the way – to go about raising standards in financial services?

I’m not sure I have a very good answer to that question, which is why it’s one that’s well worth asking.  The best I can do is to say that it seems the positive-consumer-pressure method only works with fairly simple products and services where large numbers of not-very-engaged consumers are nevertheless just about engaged enough to have some reasonably sensible feelings on the subject.  You really didn’t need to be a Master of Wine to realise that that Chablis was undrinkable.  But in more complex sectors – automotive, say, or technology – the large majority of consumers are never going to be engaged enough to play the role of keeping the industry honest.  As I said in a previous blog – and if this sounds patronising, it isn’t meant to be – the majority of car buyers are more likely to complain about the absence of cupholders than about unsatisfactory suspension geometry.

That being so, it just seems unrealistic and unhelpful even to try to build that level of financial engagement and expertise among the broad mass of consumers (although I certainly accept that a highly-engaged and critical “hobbyist” minority has a part to play already, and could, if properly mobilised, have a much larger one).

But even in writing these words, I worry that they sound a bit weak, a bit defeatist.  All the best and healthiest markets – from fruit and veg to haute couture – bring together knowledgeable, engaged and enthusiastic buyers and sellers, so that each brings out the best in each other.  Am I sure that such a thing could never happen in financial services?  Well, yes, I am, actually.  But am I really sure I’m sure?