Welcome to the first edition of Friday Fiver, H&K’s Financial and Professional Services team’s guide to the things you really should know about this week in the world of Financial and Professional Services in the media, Westminster and online.
The elephant in the room… Bankers’ bonuses have been agenda item number one this week. They were always going to be given the appearance of Bob Diamond, the Chief Executive of Barclays, at the Treasury’s Select Committee evidence session on Competition and choice in the banking sector and the Government’s apparent climb down from tougher regulation.
Described in some quarters as a masterclass in persuasion and others as typical of a man sunbathing in a tropical tax haven batting away beach-sellers (I wasn’t sure of that analogy either) whatever the truth, the Boston Red Sox man was always likely to divide opinion. The reality is banker bonuses are a perennial communications issue.
With a global industry like banking whose fortunes are reliant upon the talent of individuals, any attempt to discriminate between markets will result in ceding competitive advantage. In short, banker bonuses are a necessity. However, to the man in the street or the average tax payer (who only recently bailed out the banks) these bonuses look sickeningly out of synch with the fortunes of others. In reputational terms it is an annual time bomb that will go off like a New Year hangover every year. The solution is unclear, but making the role of bankers more transparent, showing them as the experts that they are and painting a picture of the good that they do, would be a start.
Elsewhere in the world of Financial and Professional Services… accountancy firm KPMG is offering to pay university tuition fees for its intake of trainees from this autumn. The proposal will see 75 students through a six-year scheme with the firm, leading to a BSc degree in accounting at Durham University as well as the ACA qualification. With tuition fees set to rise dramatically from 2012, this is a great initiative from a firm to recognise that many bright and able A-level students will seek out alternatives to higher education. Could this set a precedent for others in the private sector to follow suit when it comes to talent recruitment?
Labour has won the Oldham East and Saddleworth by-election… with a majority of more than 3,500 in what will be seen as a boost to Ed Miliband’s leadership and a blow to Nick Clegg and the coalition. Under the circumstances of Phil Woolas’ election win overturned for ‘misrepresentation’ and his subsequent ousting from the Labour Party, the Liberal Democrats would have been hoping, perhaps even expecting, to win in normal circumstances. As everyone has pointed out this week, unlike General Elections, by-elections tend to be a barometer for the popularity of Government’s as oppose to a verdict on how the country should be run and the spell of fiscal austerity we are currently under and the pending cuts are not (we hope) normal or indeed, popular.
Incidentally, as the Spectator pointed out earlier in the week, the fates of Ed Miliband and Nick Clegg appear inextricably linked; one it would seem cannot succeed without the other one having to fail. Ed Miliband has made a combative start to the year, his new comms team are clearly having an influence on Labour’s economic message, demonstrated in Ed Miliband’s article for the Times this week, where a more coherent riposte to the ‘Conservative-led coalition’ as it is now referred, seems to be forming. He followed this up with an improved performance in PMQs too (see Iain Martin’s summary here, worth reading for the penultimate paragraph alone). This has all been in spite of the Shadow Chancellor being unable to recall the rate of National Insurance live on TV. Still, it is Alan Johnson, and I can’t help but think this could further endear him to the British public.
So congratulations to Debbie Abrahams, new MP for Oldham East and Saddleworth!
Straight talking on pensions
Yes I know, pensions can be a very dull subject for many, but this week the Government tried to do something about it. Next year a major new project will be launched called ‘auto-enrolment’. In a nutshell this means every employee will have a pension plan setup for them and will pay 4% of their salary each month into it. It’s designed to get the whole country saving for retirement, but if you don’t want to, then you can quit the scheme after three months.
Now here’s the important bit – pensions are considered the dullest of the dull. That’s in no small part due to the language used to describe them which is full of horrible jargon (I could have referred to ‘contribution rates’, ‘opt-out’ or ‘defined contribution scheme’ in the paragraph above for example).
To combat this, the government has unveiled their ‘phrasebook’ for auto-enrolment. This is a guide for anyone involved in the project (HR managers, pension providers etc) which explicitly tells them which words they can and can’t use when describing the project to employees.
It’s a bold move, and one that critics will claim has been tried many times before. But before you join the list of dissenters, take a look at the pdf and decide for yourself – this time, it really could work.
Takeover talk… In an earlier blog post my colleague Jonathan Henderson, took a look at the problems occurring at fund manager Gartmore towards the end of last year.
As was widely predicted at the time, without the firm’s “star managers”, the business was likely to struggle to retain investor confidence. Sure enough, this week larger rival Henderson Global Investors (no relation) announced a £1.7bn deal to take over the business.
This is not the first time Henderson has picked up a manager in distress. The company took on struggling New Star for a nominal amount back in 2009. It will be interesting to see how this latest deal benefits Henderson but according to Citywire the jury is still out on whether the purchase makes sense.