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Jobs’ worth


How many of you out there have at least one Apple product? Lots of virtual hands in the air, I suspect. The design of pretty much anything Apple produces is legendary and the functionality is wonderful. The iPhone and iPod are truly must-have items for many people and the iPad could be heading that way. It certainly is a must-have for Chris Cummings, who waxed lyrical about it at Clive Waller’s excellent Investment Network meeting a week or so ago. Anyway, Malcolm Gladwell would be well pleased with Apple which seems to hit tipping point with almost anything it makes – and very quickly too.

My personal experience is top, as they say. Not only does the Shuffle impart added spring to potentially otherwise plodding steps on runs but also the customer service I have experienced in Apple stores has been unsurpassed. It was only a small thing but the fact that they just gave me a new set of headphones for said Shuffle that was (and clearly admitted to them) three months old without a receipt and without even having to queue -yes, just given to me by the blue- T-shirted helper on the floor – represented a big deposit in Apple’s emotional bank account with me. Is there a lesson in this?

OK, I am an Apple fan (like many of you) and I was thus particularly interested to hear that Apple had recently announced that renowned chief executive Steve Jobs would be stepping down from his role to receive treatment for a serious illness.

Apple reported a record quarter, with net profit hitting $6bn and sales up by 71 per cent to $26.7bn. Despite that incredibly positive trading position, the announcement that Jobs was stepping down caused Apple’s share price to fall by 5 per cent across the week, wiping $15bn off its stockmarket value.

For a company such as Apple, the reality is that despite the importance of a personality to building profile and driving innov- ation (clearly so in the case of Jobs) a multi-billion-pound public, global business will usually have a balanced, experienced and professional management team ensuring that there is no single person dependency.

Despite this, the market, the determinant of value, clearly does pay attention to personalities and, as a result, even the biggest companies that have an iconic, or at least very public, leader have to think very carefully about how they disclose the palpable human risk in their accounts.

This is quite a phenomenon. At one level, the immediate and even long-term trading position may not suffer. If the goods and services continue to be delivered to the same standard, the immediate revenue/profit position may not suffer. And if the innovation (as it must) is driven from more than just the mind of the personality, then the risk to growth may also be small.

But there is still perception – market perception – to manage. Hopefully, this (even if it does wobble with the absence – temporary or permanent – of the leader) will stabilise and value will recover when the market realises that life goes on without the leader. And it is arguable that life insurance for value wobble may not be appropriate.

Now, if value wobble is experienced as a result of reduced revenue/profits, then this may well represent an insurable risk. Indeed, it is the essence of keyperson cover.

The cost of insurance on these mega-personalities (if their health even permits insurance) is likely to be substantial. And the way in to do this kind of insurance is almost certainly closed to many financial advisers.

Market exclusion does not have to be experienced in relation to more ordinary SME owners though. In most cases, the people whose absence would give rise to the financial loss (the owners) will already be clients of the adviser.

Here, the risk of finan- cial loss and damage will be real and coverable. The solution options are relatively well known and, in many cases, the issue of financial risk to the business will not have been addressed or at least not recently.

The barrier to doing more of this business, though, is more often than not the lack of the necessary anxiety in the target client. That gut- churning concern (fear even) over the consequences that leads to action to remove the discomfort.

The ability to professionally paint a clear picture of the consequences of inaction for all concerned is an essential skill for any adviser seeking to be successful in this market and this needs to be backed up with the necessary knowhow, confidence and expertise to put in place a suitable solution, with all its component parts working as they should, with tax minimised and an appropriate level of certainty/ flexibility built in.

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