The City is rather a woeful place to be at the moment. Not a week goes by
without yet another company issuing that most frowned on of Stock Exchange
announcements – a profit warning.
Quite the opposite situation prevails in the financial services industry,
however. Boring old banks and insurance companies have become the toast of
the City by doing such unfashionable things as growing profits, increasing
sales and paying healthy dividends to shareholders.
I have spent the last couple of weeks criss-crossing the City to attend
one presentation after another. Insurance companies declare results to
their shareholders in the same opaque manner as they declare bonuses to
with-profits policyholders. They like to use terms such as “achieved
operating profits” and “operating profits on a modified statutory solvency
Assuming they are not making it up, the figures look pretty good. Legal &
General has beaten the forecasts and Prudential has come out at the top of
the range. Both have shown their confidence by hiking their dividends.
The banks have been more mixed, preoccupied by consolidation issues and
questions of strategy. Still, they have all managed to improve their bottom
lines, dividends are up and share prices have been responding accordingly.
I am happy to congratulate them. It is pleasing to see some of Britain's
big comp-anies doing well amid all the carnage in the stockmarket. After
all, most of us possess some form of financial services product and that
makes us all shareholders by proxy, so it is good for us. It is also good
for the workforces of the companies concerned and it is good news for the
country in general because of the tax revenue that is produced.
But it strikes me that there is a serious dichotomy between the way
financial services firms are perceived by the City and the way they are
perceived by their customers. It is very illustrative to spend an evening
with people who do not work in financial services or do not write about it.
The tales of woe and real anger towards financial institutions require
little prompting to come out – problems with banks and insurers, shoddy
service and treatment that is often rude.
I myself have recently had dealings with CGNU – or Norwich Union as it
likes to be known in the UK – and Zurich (car insurance) along with Direct
Line (home insurance). It might be all right if the type of grief I have
been having were unusual but it is not. Almost all my colleagues and
friends report similar troubles.
It frustrates me no end that the only way of getting something done is
often by being rude to the poor fool on the other end of the phone. They
are probably young, poorly paid and under orders to mouth platitudes and do
nothing unless a caller is really persistent. Then they refer you to a
supervisor, who does the same thing. Eventually, if you are nasty to enough
people, you might get something done.
This is when I feel genuine sympathy for IFAs. I have a friend who used to
be one and who says trying to get things done by administration departments
of life insurers was like having your teeth pulled.
A friend of mine once regretted how people react with outrage when
companies which make cars or aeroplanes look likely to fall to foreign
competitors but are unconcerned when insurers become prey. The reason is
simple – people tend to feel a certain pride in the former two but, as for
the latter, well…..
Financial services products are not luxuries. They range in importance
from worthwhile to essential. People are steadily becoming aware of how
important these products are, particularly as they get richer and feel the
need to look after their cash more effectively.
But financial services institutions appear to feel this gives them carte
blanche to provide shoddy service. Administration is an unglamorous and
poorly-paid profession. It also tends to attract poor managers and appears
to be being given low priority by institutions.
Price and performance have always been seen as the most important things
to consider when selecting a financial product and institutions which do
these well are attracting lots of business. But it strikes me that one way
chief executives could really earn the six-figure bonuses they are commonly
paid would be to devote some attention to the back office.
Just think of how powerful a story it would be if millions of people in
pubs up and down the land could say: “Sorry to hear that, try my
bank/insurer, they are fantastic.” Think of the goodwill that would
No, that will not work. Just think of the profits.
James Moore is a finance reporter at the Times