“Minds over markets”? More like vice versa.

It’s churlish to quibble about the copywriting in any of the pitifully few investment ads appearing in the current climate, but I must say I am struggling quite a bit with Jupiter’s latest effort (headline as in my headlne above).

I have in front of me Jupiter’s one-year performance figures.  All 29 of the funds on the list have fallen in value over the period.  Three have fallen by singe-digit percentages, but 10 have fallen by over 25% and the worst by just a shade under 50%.

It may well be that in relative terms Jupiter’s performance is pretty good over the period, even to the extent that perhaps the headline “Minds over markets” can be justified.  But as that great fund manager Nils Taube famously, if a little cryptically, said, “You can’t eat relative sandwiches”:  investors who have lost a quarter of their money in a year aren’t hugely impressed to hear that this is in fact a relatively good outcome.

We are now in a world where the only performance claims available to 99% of funds and fund managers are of the “our investors have lost less of their money than average” kind. Claims like these, it strikes me, are hollow at best and – as Jupiter aptly demonstrates – very irritating and counterproductive at worst.

When you say “the long term,” just how long do you want?

When Labour came to power in May 1997, the FTSE was at about 4400.  It’s now rather more than 10% lower. 

Once upon a time, when we said that equity investment delivered better returns “in the long term,” we used to show 5-year figures as the basic unit of currency (in fact, that’s still what the FSA insists we do).  Then those figures started showing hopelessly negative returns, so we moved to 10 years.  Now those figures are showing negative returns too, so we could move to 15 years:  but actually there isn’t much point, since although the 15-year returns are positive they’re not very positive and nothing like as good as cash, so really it looks as if we’ll have to go straight to 20 years.

I don’t know about you, but I don’t think I can sell an investment that’s unlikely to outperform cash until you wait 20 years.

Don’t blame me, mate, I just make the stuff.

Manufacturers of financial products are not alone in trying to shrug off the blame when their products are badly used.  Glue makers resist taking the rap for sniffing.  Motorcycle manufacturers assert that their machines are perfectly safe when ridden sensibly.  Gunmakers say it’s people who cause shootings, not guns.

But sometimes, I must say, the self-justification of financial product providers is particularly hard to take.  At a conference recently, I saw a presentation from one of the largest manufacturers of Payment Protection Insurance (PPI).  This disgraceful product is, basically, the way that providers of personal loans have made big profits over the last ten years:  the loans themselves make a bit of money, but extortionate premiums for rubbish PPI cover that’s more than likely not to do what the borrower expects are the way they really cash in.

Basically, the thrust of the presentation was that PPI is in fact a good and useful product which has been ruined by greedy, cynical and incompetent distributors.  According to the speaker, these distributors – mostly banks making personal loans – have charged far, far too much for it, and provided useless and completely inaccurate advice about it partly by accident, because their staff are untrained and incompetent, and partly on purpose, because if people understood how rubbish the product was they wouldn’t buy it.

The speaker expressed the hope that maybe, under pressure from a huge range of bodies from the FSA through to large numbers of MPs, the OFT, Citizens Advice and the Consumers’ Association, these wicked distributors may see the error of their ways, reform and usher in a new golden age in which PPI is fairly priced and properly sold.

I think I can honestly say that this was the most astonishing, infuriating and despair-inducing presentation I have ever heard.  

Of course there are dodgy fifth-rate manufacturers of crap products who join with fifth-rate crap retailers to conspire against the public in every industry – take, for example, those Chinese baby milk companies who’ve apparently been cutting their product with melamine, which turns out to be not, as I thought, a kind of plastic which you use to make picnic crockery, but a very nasty poison.  But this presentation was from a division of a leading global financial services company, which has been distributing its PPI through many, if not most, of our High Street financial institutions.  And while nothing that the latter do to shaft their customers surprises me any more, I’m still naive and idealistic enough to be astounded by the see-no-evil attitude of the manufacturer.

I’m not even going to bother to make a point about the ethics of turning a blind eye to the uses that people find for your product – no melodramatic analogies with land-mine and cluster-bomb makers here.  I just want to make a point about brands.

Among the major players in every other sector of the global economy, where else could you possibly find a manufacturer who cares so little – in fact, who cares not at all – about the effect on its brand when its products are hideously badly retailed?  If Coca-Cola found that its eponymous product was being sold for £20 a can as a miracle plant fertiliser, don’t you think they might express a hint of dissatisfaction to the retailer?  If Mercedes-Benz found that their smallest car was being sold for £100,000 as a heavy lorry, do you think they might review their supply arrangements with the distributor in question?  If iPods were being falsely sold as microwave ovens, do you think Apple might choose to intervene?

These organisations care about their brands, and they realise that bad retailing is one of the greatest risks to their brands that they have to manage.  This PPI manufacturer – although a global corporation of not dissimilar size and scale – couldn’t be more dissimilar in its attitude towards its brand.  It knew perfectly well that its product was being overpriced by several hundred per cent and mis-sold and misdescribed to customers – and it happily carried on providing its distributors with the product until the authorities effectively banned its further sale.  

I know that one of the things the FSA most wants to do is to find a way of preventing manufacturers of financial products from being able to wash their hands of abuses perpertrated by their distributors.   I do hope they find a really good way.  Really soon.

Honestly, has no-one smashed that bloody glass ceiling yet?

I’ve just spent an agreeable and rather unusual 16 hours or so taking part in a meeting of The Women’s Insurance Network.  (Yes, yes, obviously, I know, I’m a bloke, but they let me in because I was speaking at it.)

It was a good session, with some thought-provoking presentations.  And it was cleverly structured so that some of the subjects discussed were very gender-specific, but equally quite a few weren’t.  Which is all good.

What did surprise me a bit, though, was the nature of the discussion in the sessions that were about gender issues, and especially the ones about gender-in-the-workplace and gender-in-the-consumer-economy issues.

I don’t want to be rude, but it really was such a time-warp.  If I compare what I’ve just been hearing with the things we used to hear way back in my long-distant student days, when women’s issues were a much more mainstream part of social and political consciousness, it honestly feels as if nothing’s moved on at all.  As far as the workplace is concerned, that bloody glass ceiling is still alive and well,  and the key issue is still that male-defined corporate hierarchies and career progressions still don’t sit well with women who want much more flexible and less linear ways of working.  And as far as the consumer economy is concerned, there’s still the same cake-and-eat-it attitude that used to irritate me 40 years ago, that on the one hand we’re rightly furious when we’re patronised and belittled, but on the other hand when we’re buying a car what we really want to know is whether it has heated seats, cup holders and a place to put our handbags, not whether it’s petrol or diesel and front- or rear-wheel drive.

I could hardly have been more amazed by this flashback to the debating subjects of the 60s and 70s if, say, I’d been invited to a meeting of the Football Association and found they were still arguing about the rights and wrongs of dropping Jimmy Greaves during the 1966 World Cup. 

Which isn’t to say that I think the group was wrong to be focusing on these much-debated questions.  If they’re still unresolved, it’s important to keep focusing on them.   But in this switched-on, high-speed, fast-tempo, low-attention-span society, it is absolutely bloody incredible how long it still takes to actually resolve anything important.

Welcome to the mad factory.

People in creative agencies understand some clients’ businesses better than others.  Naturally, the ones we understand best are the ones that are most similar to our own.  And in financial services, that means, first and foremost, fund managers:  fund management businesses are very similar indeed to creative agencies.

In what way?  Well, principally in that they’re both businesses in which serious, sensible, disciplined people try to build a stable and sustainable corporate structure around a completely unstable and all too often unsustainable core.  This being, of course, the “factory” of the business in question:  the creative department in an agency, and the investment department in an asset management firm.

The fact that both of these are populated by overpaid, difficult, egocentric prima donnas isn’t the major problem.  The major problem is that they’re populated by such erratic and unreliable prima donnas.  There are only a few creative people who deliver consistently excellent work, and only a few fund managers who deliver consistently excellent performance.  Naturally these small minorities are much in demand, and if you’re lucky enough to employ one or more then there’s a constant threat of losing them:  if you’re not lucky enough to employ any, then unless you can poach one or two from your competitors, you have to build your proposition around some very much less important dimension, like quality of service or strategic thinking.

There are, of course, quite a few other kinds of business with mad factories.  Football clubs, record labels and publishing companies come to mind.  Managing any of these is no job for the faint-hearted:  or for the person who likes an orderly and predictable working life.

Is saving in banks better than saving in pensions?

I mean “better” in the sense of socially, or maybe even morally, better – more to be encouraged by society as a whole, and by Government in particular.

I only ask because it seems that in the current financil crisis, bank savers are being treated so incredibly much more kindly than pension savers. 

Compare, say, an interest-rate chaser who put £100k into an Icelandic bank, and a pension saver whose adviser chose a fund that invested the same amount in the same bank’s shares.  Every penny of the rate-chaser’s money is safe, whereas the pension saver has lost everything.  Yet the fact is that the rate-chaser must have know that the higher rate on offer signalled a higher risk, while the pension saver may well have depended entirely on the judgement of an adviser and/or a fund manager and made no personal choice at all.

This seems a) so obviously unfair, and perhaps more importantly b) so incredibly discouraging for pension saving, that it’s almost impossible to believe it’s a sustainable position for the Government to adopt.

Almost, but not quite.  There are so many weird things going on in the financial world just now that it may be a long time before qualities like logic, balance and consistency make an appearance.   In fact, it may be a very long time indeed.

What’s the ugliest brand in Britain?

You may have your own candidates – indeed, you may have several – but I have just one:  the discount retailer Carpetright.  I speak of this with some insight – not to mention some strength of feeling – because not long ago a branch opened a couple of hundred yards from where I live.  Now, every time I go past, my spirits sink a little at its sheer intrusive ugliness.

I can’t find any images on the net that do justice to its hideousness, but if you look at www.carpetright.co.uk you’ll get a vague impression.

I would like Lord Harris, the founder of the business, to know two things.  First, I want him to understand that he and his colleagues are doing as much as any dog owner, fly tipper, hoodie or junkie in North London to degrade our urban environment.  The loathsome luridness of his stores takes just as much away from the quality of life as any amount of dogshit or rubbish on the streets, or graffiti on the walls, or needles in the parks – if anything perhaps more, since there’s always hope that someone might clear up the dogshit or spray over the graffiti.

And second, if I ever find myself down to bare, splintered floorboards scattered with chunks of broken glass, I’d rather walk over them in my bare feet than cover them with Lord Harris’s carpets.  And I say that 50% out of principle, but also 50% out of complete conviction that all the carpets he sells in his horrible cheap shops must be shoddy synthetic foam-backed nylon, churned out by slave labour in factories in the developing world to be bought only by slum landlords running multiple-occupancy benefit scams for busloads of east european immigrants.

This is actually what’s so odd about Carpetright’s massive and consistent investment in ugliness.  Carpets are products you need to feel good about.  Unless you are indeed a slum landlord, you want to feel you’re buying a bit of quality, a bit of style, a bit of flair.  Yes, carpets are expensive and you like to believe you’re getting a good deal.  But all Lord Harris’s repellent graphics don’t make me believe I’m getting a price any better than John Lewis:  they just make me certain I’m getting a worse product.   In fact, in a small rational corner of my mind, I’m pretty sure the carpets the noble lord sells are perfectly all right – overall, across the range, much the same as John Lewis’s.  But just by placing them in Carpetright’s stores, ads and website, you leach out all the quality.  As they pass through the door, they turn into cheap, nasty tat.

There’s a chill wind blowing through the scuzzier end of the high street at the moment.  MFI nearly went down a week or so ago, and another of the dodgy fitted kitchen crooks – can’t remember which - went not so long ago.  I live in hope that Carpetright will quickly go the same way.

“Did ‘e say owt about a pot o’ paint?”

Another of those punchlines from a more or less forgotten childhood joke where I think a bloke dies in the most tragic circumstances, and a heartless neighbour only calls on his grieving widow to collect a borrowed pot of paint.

Anyone with half a brain will have instantly understood the analogy with the currently-evolving economic armageddon:  civilisation as we know it seems to be dying in the most tragic circumstances, and the only thing I care about is the effect it’s all having on financial services brands.

Of course the effects should be profound.  Particularly in banking, brands have undergone the most dramatic – and in many cases traumatic – transformations possible.  Some have gone bust.  Some have been nationalised.  Some would have gone bust if they hadn’t been rescued by competitors.  Some have been effectively dismembered.  Even those that currently survive are hugely weakened, still threatened, just waiting for weakest-wildebeest syndrome (see below) to afflict them.   (Scarily, it looks this morning as if the latest animal to fall those lethal 50 paces behind the pack is RBS, bankers to both my family and my business.)  I’m sure that no branded market sector has ever experienced such broad and deep damage in such a short time.

So how has this affected the way people think and feel about the brands involved?   At a rational level, I’m sure some perceptions have changed:  savers have been quick to understand, for example, that savings in Northern Rock are guaranteed by the government, so it stands for a level of protection higher than any other bank.  And emotionally (and rationally too?) the whole question of the safety of their money is on people’s minds in a way that it simply wasn’t before:  research we commissioned recently shows that about one in seven upmarket adults claims to have moved money around over the last few weeks to reduce their risk.

But beyond this, has the way that people think and feel about individual banks really changed?  Do different things come into our heads when we walk past a Barclays branch, or see an HSBC commercial, or use a NatWest cashpoint?  I could be wrong, but I don’t really think so.

Brands are very complicated things that we don’t understand very well.  The effect of all this turbulence on our perceptions of brands in the financial sector has the potential to be one of the most illuminating case studies of perceptual change in the history of branding.  I do hope someone out there is doing the work.

If you can remember the 70s, does that mean you can’t have been there?

It’s a joke that’s usually made about the 60s, but having been seeing the Newton/BNY Mellon 30th Anniversary ad campaign in consumer and trade press over the last few weeks I’ve been wondering whether maybe it applies to the 70s as well.

The ad I have in front of me has the headline “Performance Never Goes Out Of Fashion,” and a picture showing a platform-soled shoe captioned “1978” and a rather more elegant modern shoe captioned “2008.”  The first sentence of the copy then begins “The 1970s – platform shoes, flares and plenty of polyester.”

Well, I must say, I hope Newton are better investment managers than they are cultural historians, because I’ve never seen such a mish-mash of confusion in my life.

The ad’s key mistake is trying to link a bunch of cultural references to the very early 70s – platforms, flares, polyester – to the foundation of the company right at the end of the 70s, in 1978.  No-one would have been seen dead in flares or platforms in 1978. If they hadn’t already died as fashion items, along with glam rock, by the mid-70s, they were definitively laid to rest by the arrival of punk in 1976.

Given that the ad as a whole is a confusing, half-baked mess (it veers off in its second paragraph, bewilderingly, to bang on about the way today’s credit crunch results from poor risk management on the part of banks), the inaccuracy of its recollections of the 70s comes as no great surprise.

Does this matter?  Not hugely.  But it is a campaign that makes me, for one, think a little worse of the advertiser, not a little better.  And I don’t think that can be what was intended.�

What is it about the word “education” that I don’t understand?

I went to an excellent seminar earlier today, organised by the Life Trust Foundation, the pro bono arm of our longevity specialist client Life Trust.  The subject – not, one has to say, a completely unfamiliar one – was the whole ageing population/rethinking retirement/need for bigger pensions/cost of long term care/end of the welfare state thing.  And if there was one thing that pretty much all the panellists and speakers from the floor all agreed on, it was that the most important part of the solution to all of this is better consumer education.

It’s difficult to know what people mean when they say this, but I suspect very strongly that if this is indeed education, Jim, then it’s not as I know it.   I’m honestly not quite sure what it is that we’re imagining here, but I think it’s something to do with reprogramming people – probably adults rather than children – to understand that they have a huge responsibility for their long-term financial security, they’re likely to live much longer than they think and that the quality of their lives in their later retirement will depend a lot on how much money they put away over the years.

This kind of social reprogramming, beneficial as it might be, seems to me to be not just quite unlike what I think of as education, but also more importantly incredibly difficult to achieve. 

I say it doesn’t bear much resemblance to what most of us think of as education mainly for the obvious reason that I don’t think it can have much to do with learning things in classrooms.  I have no difficulty with the idea of teaching children some things about the workings of financial services in classrooms, or indeed about the realities of increasing longevity.  But you’d have to be an idiot not to recognise that if what you want is major attitudinal and behavioural change, then a few financially-oriented sessions within the PHSE curriculum are going to do very little indeed to make it happen.  General background information, acquired by children at the age of, say, 14 or 15, is going to make little if any difference to their attitudes or behaviour ten or twenty years later.  For one thing everyone will have forgotten it all, just as I’ve forgotten about photosynthesis and the Wars of the Roses.  And for another thing, by the time they actually have a use for the knowledge, it’ll all have changed, in the same way that everything that I might have learned about pensions in my distant schooldays – lifespans of 75 years, the prevalence of final salary schemes, the need to prepare for a future where four-bedroomed houses might cost as much as £50,000 – is all totally wrong today.

Turning away from the classroom and thinking of this change in attitudes and behaviour as a challenge for communications activity of one sort or another, I’d position it right up at the far end of a scale of difficulty for socially-desirable-outcome campaigns.  There can’t be much doubt that it would be far harder than persuading people to eat five portions of vegetables a day, wear seat belts and not drink-drive, and indeed some way beyond discouraging them from carrying knives, taking drugs or having unprotected sex.  It would belong right up there at the top end, along with other things we haven’t even started to try campaigning about yet, like encouraging parents to stay together for the benefit of young children, or trying to persuade people to give up their cars to reduce global warming.  

That doesn’t mean it’s impossible.  People do change, and social pressures of one sort or another can be among the main reasons why they do so. Many were not always, for example, the reckless credit-fuelled spendaholics they’ve become in recent years.  If we’re very clever, we may be able to identify the levers you need to pull to achieve this kind of zeitgeist-driven change, and then pull them deliberately in such a way as to change attitudes towards long-term saving.  But we’re less likely to be able to do this if we confuse ourselves by misdescribing the process involved as “education.” �