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Chris Gilchrist: The Pru’s object lesson in decline

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


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There are 2 comments at the moment, we would love to hear your opinion too.

  1. Be assured that if the Pru goes East they will be watched by the followers of our industry to see how it gets on. The rest will start to follow suit and before too long the regulators will have a ration of 1:1 for the regulated. I dont blame management of the Pru for looking far-a-field. UK & EU are bleeding this country of all financial services entrepreneurial expertise. We all know we need regulated but should be done proerly and with a sense on decency and integrity towards the indusrty and advisers – not just create a “consumer cant loose out at all culture” if fund values drop 0.00000008% in ten nano seconds. Strangulation by regulation is the name of the game until the preverbial hits the fan and some huge players in our industry up and leave whilst putting thousnds more out of work. Still not worr,eh?

  2. Excuse me if I have taken anything out of context, but the article does seem rather contradictory, praising the IFA-facing side of Pru’s business and its with-profit fund, but decrying the value which the business has delivered to its customers?

    However, as an IFA who has used Pru on many occassions over many years, I am so relieved that I have, given that their products are robust and largely fit for purpose in a world which is increasingly looking to try and reinvent itself to the failing of its consumers…I give you the most recent of these debacles…Absolute Return Funds!

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