If there is one company that encapsulates almost everything that has gone wrong with the UK’s financial services industry, it is that most iconic of names, Prudential. This remains a share to be found in almost every institutional investment portfolio and a company with its own giant funds administered on behalf of millions of savers and investors.
Yet the company has not only served those savers and investors poorly, it has failed its shareholders and has never provided the leadership that it could and should have provided for the UK savings sector.
Much of this was the result of its cultural schizophrenia. In the early 1970s, when the Pru’s head office was its Gormenghastian monstrosity in Holborn, it was infamous for the demarcation of management hierarchy.
Status was reflected not just in size and location of office but in quality of carpet, whether your morning coffee came with a chocolate biscuit and which of a set of executive dining rooms you were entitled to ask guests to.
Having dined there in that era (journalist: second class), I can confirm that the quality of discussion was, as one chronicler put it, like high table at an Oxbridge college (where most of its actuaries who ran the company came from) and the talk scarcely if ever touched on the grubby matter of collecting small sums of cash from millions of working- class folk on council estates, which was the Pru’s core business.
A management so out of touch with its customers lost them fast once they joined the wave of upward mobility that began in the Sixties. Instead of reinventing its proposition, management battled with the salesforce unions and undertook serial reorganisations of a workforce that shrank from 20,000 in 1970 to under 5,000 when the salesforce was finally terminated.
All this under the leadership of poor bosses, one of whom chose to star in the company’s TV adverts, despite being overweight and plummy, and another who was so overweight the company had to spend vast sums rebuilding his executive suite.
A company that once accounted for half of the UK’s long-term savings now registers as a blip but this serial decline did not matter to the City. What counted was that the Pru had so much money to invest that as banker, broker or almost anything else, you had to be in its favour. So broking analysts continued to report favourably on a business doing its best to follow the dodo. The Pru’s power of patronage – exercised with other people’s money – allowed it to get away with being rubbish at its job for three decades.
Only its purchase of M&G brought sufficient clout and credibility in investment to prevent the Pru sliding into irrelevance.
Its IFA-facing business has since become keen and professional with its investment propositions, including that old stalwart the with-profits fund. But now the group is doing its best to destroy the remaining value of its brand by talking about moving its HQ to the centre of its booming Asian operation in Hong Kong to avoid EU regulations.
If the Pru wants to become a bit racier and speak Mandarin, I know what they ought to do with a redesign for the UK’s Pru logo – give her a Zimmer frame.
Chris Gilchrist is director of FiveWays Financial Planning, edits the IRS report newsletter and is the author of the Taxbriefs Guide, The Process of Financial Planning