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Independent View

Almost a decade ago, I had a rather heated discussion with a colleague about the problems inherent in corporate America and my concerns over accountants taking over the world – then it was the big six but now there are five, soon to be four or perhaps three.

My fears have been vindicated, with the WorldCom scandal being just the latest and biggest in a spate of corporate collapses involving greed on a grand scale. There is the temptation to sit back smugly, say “I told you so” and congratulate myself on my incredible foresight. But I will not because I know that what I said back then was based more on my personal views and prejudices than true insight. Then again…

The question is what next? Expert analysts will be only too ready to give you their opinion, for what it is worth. The truth is no one really knows. However, I think it is safe to say that it is not over yet and there is a good chance of fallout here.

After all, the UK, more than any other country in the world, has looked to the US for direction and bought into the very best and very worst of what it has to offer – unfortunately, I find it far easier to rattle of reams of the latter (suggestions are welcome for the former).

Regardless of whether companies here in the UK come up smelling of roses or not, there are still problems ahead. Already battered, investor confidence has taken yet another severe knock from which it may be some time before there is a recovery.

This does not just affect new business, it also impacts on current funds under management, which may have contracted over the past year or so. I am certain that there will be a recovery and, in the meantime, IFAs with well-diversified businesses will be generating revenue in other areas to compensate.

It spells even more bad news for with-profits funds. Companies are already pumping millions into their life insurance subsidiaries following an unprecedented third year of poor stockmarket performance. There are likely to be even more losers but I do not believe it will spell the end for with-profits.

It does, however, highlight the need for greater scrutiny of the with-profits funds currently on offer. Of course, it will also provide sufficient bad news to keep the media happy for months.

Lessons will be learnt from WorldCom and its ilk. But, more than anything, it should teach us about ourselves and our tendency to seek safety in numbers. Our need for consensus is not new but what has changed is the speed with which information can be transmitted so that what is local can very swiftly become global.

This ability to communicate quickly over large distances has led to the homogenisation of modern society into a super-herd, which is at the root of many current problems and has been driving the increasingly short-termist attitude prevalent in the world today. Where this short-termism is most marked is in financial markets, even though it is the arena in which many of the lessons about the dangers of such thinking have been most publicised and most harsh. Has anybody out there been listening? Short-term approaches invariably result in quick fixes and quality is sacrificed in exchange for yet another fad – consumer dream, human nightmare.

Undoubtedly, measures will be put in place in an attempt to prevent a recurrence of recent events. Inevitably, this will involve even greater levels of reporting, making life more difficult for us all.

Increased reporting and regulation can and do help eliminate past abuses but rarely will they stop future mistakes. Only a change in human nature will do that and, ultimately, that is in the hands of the individual, not the collective.

It is hard to stick one&#39s neck out and go against the crowd but, invariably, those who do achieve a level of success that others can only envy.


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