ALEX BRUMMER: Savings are precious, so it is worrying that those who are trusted to care about our interests care so little
- At times large battalion insurers and asset managers act with astonishing arrogance
- Many L&G customers have been amazed to learn that they are being kicked off by Chef Nigel Wilson and his lieutenants
- Customers will be transferred to Fidelity for an undisclosed amount
Britain’s major battalion insurers and asset managers like nothing better than climbing high horses when it comes to ethics.
But sometimes they act with amazing arrogance, passing on customers’ savings as if they were hot gold jewelry at a Bradford jeweler.
When customers put money into a product managed by Legal & General, they do so for a reason. It offers a safe haven, a flexible selection of index funds, and easy-to-understand, low-cost, single-fee investments. Decisions are made over the long term.
Safe haven: When customers put money into a product managed by Legal & General, they do so for a reason
Mostly, this is why L&G has managed to suck up large defined benefit company pension funds that corporations and trustees no longer want to manage.
It is surprising to find that in this aggrandizing scheme of things, the individual investor has become too burdensome to deal with. For many years I have chosen to use my ISA allowance to invest in index funds managed by Legal & General. The performance wasn’t exciting, but I benefited from the US indices, exposure to pharmaceuticals and an investment in Japan.
The mix of assets was straightforward. The principle of the average cost investment has been calculated. Regular savers continued to be exposed to equities through shocks such as the 2008-09 financial crisis and the lows of the pandemic. Stocks raised at lower prices through the doldrums should do well in better times.
This cautious approach is the opposite of what happened this year. The social media Reddit craze combined with “free” deals on the Robin Hood platform resulted in astounding swings in Gamestop stocks.
As a result, L&G customers were baffled to receive 60 pages of documents showing that the insurer no longer maintains ISAs that are passed on to Fidelity. No doubt Fidelity has wonderful systems and a veritable supermarket of funds. But the savers have not signed up.
It’s not just ISA savers who get the momentum going by CEO Nigel Wilson and his lieutenants.
Over 300,000 customers with ISAs, junior ISAs, mortgage ISAs, investment accounts, cash ISAs and maturing fixed-term investment products valued at £ 5.8 billion will be sent to Fidelity at an undisclosed price. So much for transparency, which is a key element in investing in ESG.
The carefree approach reminded me of an experience in the past when I had passed the parking savings. Many years ago I was advised to buy endowment insurance from old Yorkshire Insurance. Over the decades, these policies have seen a terrible odyssey, including private equity ownership with buyers hiding behind the trusted Pearl name.
Eventually the insurer was thrown on the Amsterdam Stock Exchange with a mountain of debt. It was saved by Resolution that rose from the dead as the Phoenix. My policy paid off a long time ago, but the experience has left scars. It would have been enough to create a less robust savings connection.
L & G’s investment director, Michelle Scrimgeour, started the business with Fidelity with a gobbledegook – a “positive step” for our “direct-to-consumer business”.
Moving billions of assets onto another manager can make Scrimgeour’s job easier, but it does little to benefit savers. Return to the fine print and L&G investors will find that after a year, Fidelity will have the option to charge, although the immediate cost structure remains unchanged.
Savings are precious, the accumulation of a life in agriculture, often at the expense of lifestyle. It is troubling that those who are trusted to care about our interests care so little.