Britain’s big battalion insurers and asset managers like nothing better than climbing on high horses when ethics are at stake.
But at times they act with astonishing arrogance, passing around life savings of customers as if they were hot gold trinkets at a Bradford jeweller.
When customers place money in a product managed by Legal & General they do so for a reason. It offers safe harbour, a flexible choice of index funds and easy-to-understand, single fee, low-cost investment. Decisions are made for the long term.
Safe haven: When customers place money in a product managed by Legal & General they do so for a reason
That largely is why L&G has succeeded in vacuuming up large, defined benefit corporate pension funds which companies and trustees no longer want to manage.
It is surprising to find that in this aggrandising scheme of things the individual investor has become too much of a nuisance to handle. For many years I have chosen to use my ISA allowance to invest in index funds managed by Legal & General. The performance hasn’t been exciting but I have benefited from the US indexes, an exposure to pharma and an investment in Japan.
The mix of assets has been uncomplicated. One has counted on the average cost investment principle. Regular savers remained exposed to equities through shocks such as the 2008-09 financial crisis and the lows hit in the pandemic. Shares picked up at lower prices through the doldrums should come good in better times.
This cautious approach is the opposite of events this year. The social media Reddit craze combined with ‘free’ dealings on the Robin Hood platform to produce amazing gyrations in Gamestop shares.
So L&G clients will have been stunned to receive 60 pages of documents telling them that the insurer will no longer be administering ISAs which are being passed to Fidelity. Doubtless Fidelity has wonderful systems and offers a veritable supermarket of funds. But savers did not sign up to it.
It is not just equity ISA savers being given the heave-ho by chief executive Nigel Wilson and his lieutenants.
Some 300,000 plus of customers holding ISAs, junior ISAs, mortgage ISAs, investment accounts, cash ISAs and matured fixed-term investment products, with a value of £5.8billion, are being transferred to Fidelity for an undisclosed sum. So much for the transparency which is a key element of ESG investing.
The cavalier approach reminded me of a past experience of pass the parcel savings. Many years ago I was advised to buy an endowment policy from the old Yorkshire Insurance. Over the decades this policy went on a terrifying odyssey including private equity ownership with buyers hiding behind the trusted name of Pearl.
Eventually the insurer was dumped on the Amsterdam stock market with a debt pile. It was rescued by Resolution which rose from the dead as Phoenix. My policy paid out long ago but the experience left scars. It would have been enough to give a less robust saver conniptions.
L&G’s investment chief Michelle Scrimgeour descended into gobbledegook in justifying the deal with Fidelity – a ‘positive step’ for our ‘direct-to-consumer business’.
Dumping billions of assets on another manager may simplify Scrimgeour’s task but it does little to benefit savers. Revert to the small print and L&G investors will learn that although the immediate cost structure will remain the same, Fidelity will have the opportunity to raise charges after a year.
Savings are precious, the accumulation of a lifetime of husbandry, often at a cost to lifestyles. It is disturbing that those trusted to look after our interests care so little.