Page last updated at 17:08 GMT, Tuesday, 2 February 2010

City Diaries: "Mark"

Man looking at a falling graph

"Mark" (not his real name) works for a stockbroker outside London.

He is commenting on developments in financial services based outside the City of London.

19th March: What should be in the next Budget?

"Mark" (not his real name) works for a stockbroker outside London.

Lord Ashcroft
" I hope that the non-dom issue will be cleared up"

I love the budget. No, I really do. It is a day when politicians pull out all the stops to win over voters. They bicker, criticise, confuse and at the end of it all alcohol is more expensive and petrol is more expensive. The hauliers will be up in arms, the pubs going out of business and the consumers going to all conquering supermarkets for everything.

The television cameras will be meeting families on sink estates that are worse off because their daily intake of cigarettes has increased while increases in tax credits are eroded by the fact that alcohol is more expensive. Small business directors will accuse the government of stifling growth while the hauliers will be on, again, telling us that petrol is just too expensive and they are going out of business, again. A slight bible misquotation, but the "chancellor giveth, and the chancellor taketh away".

Green economy

For me, I want the budget to be about those that attempt to avoid tax. I am hopeful that the non-dom issue will be cleared up and the HMRC are given greater powers to chase those that have significant wealth from the UK but reside in other areas to avoid the UK tax. As everyone jumped on the (very fast) Lewis Hamilton band wagon and he earned millions from patriotic Brits, it always troubled me that he chose not to live and pay tax in the UK. However, I appreciate that the government dithering and recent rulings make it difficult to fully understand UK tax!

I'm in favour of green taxes but I want to see sustainable development rather than just taxing the polluters

As the general election is just around the corner, we might see green taxes in favour of the usual suspects such as a 1p on beers, wines and spirits. I am in favour of the push to a greener society but I want sustainable development rather than just tax polluters. There has to be something done about the unemployment levels among 18-24 year olds and I would like a link between the push to greener solutions and reducing unemployment. After all, we are supposedly saving the world for the generation to come - shouldn't they be part of the solution?

Finally, if I had one wish, it would be that someone with charisma delivered the budget. I realise it is a serious subject, but get someone like Michael McIntyre or Jason Manford to tell us what is in it, it would be much more entertaining.

11th Feb: Addressing the deficit
Greek protesters in central Athens on Wednesday, Feb. 10, 2010
An economic crisis looms over Greece

It was interesting to see George Osborne promise to reduce the UK's £178bn budget deficit ... and then the news that MPs are paying back more than £1m in expenses claimed. Perhaps there is more to run on this story than we first thought. Perhaps George Osborne's plan is simply to make them pay back everything! Joking aside, it is a bold statement that Mr Osborne makes on behalf of the Conservative Party and certainly one that interests those in the business community. It becomes even more important with the crisis that is Greece and warnings from the likes of Simon Johnson, ex-IMF chief economist.

The news that the UK is officially out of recession will be a welcome boost for many. Although this is a mindset enforced by the media, it is tempered by further news that personal insolvency has hit a record high. Added to this is the news that the Bank of England has stopped its quantitative easing programme, and there is, for many, a genuine state of confusion. With an election only a few months away, the Conservative Party is circling like a vulture over the embattled Labour Party and is courting business leaders with its views.

I feel the onus is on the public to realise their personal mistakes

Personally, I think it will be relatively easy for either party, or indeed another party, to reduce the budget deficit. This is what happens, it is part of the cyclical nature of an economy. It is not quite boom and bust but generally, as we exit recession, the budget deficit falls. It is, for me personally, about how we learn about the last 18 months and ensure it does not happen again. Names like Zaavi, Woolworths and MFI are now historic names in British business, but we have to ensure that more names are not added to the list in the future.

Blame culture

Tax and spending cuts are the ways we will reduce this budget deficit and the question that will be asked is which tax should increase and which cuts should be made. I find it difficult to comment on this with too much authority, mainly because I do not see the granular-level numbers, but my overall principles have been to help savers and reduce our dependency on credit. The NHS, education and defence have to continue to grow, and for me these are no-go areas. Taxing the rich is popular with most and Labour, while reducing the likes of CGT is popular with the rich and Conservatives. It is a terribly difficult balancing act that we ask our politicians to undertake - the same politicians that are so dishonest in their claims from the public.

Although government will have much to do with further recovery and reducing our budget deficit, I feel the onus is on the public to realise their personal mistakes. We should not save simply because it is easier to save, or spend within our means simply because credit is more expensive, we should do this under our own steam! I understand the public outcry over the bailing out of banks, however, many of us were happy to take cheap credit when it was available. Is it not double standards to complain? We live in a blame culture and as long as we can blame someone else, we will absolve ourselves of blame.

13 January: Bonuses

Bentley Continental Flying Spur (L) and a Ferrari (R) in a showroom
"People have this idea we are buying new Ferraris"

Just before Christmas, I received into my bank account my annual bonus. As it is, I am unlikely to see very much of it. Save the usual income tax and national insurance, I am, like a lot of married men, also subject to wife tax! My wife has been calculating what she can spend the bonus on since it was announced. To be honest, most of it will be dropped into a savings account for the foreseeable future, as I really don't think we have turned the corner yet. Popular opinion would also see a further tax, a windfall tax, a tax because others in other parts of the industry have made huge mistakes. This hugely irritates me.

Embarassment

My bonus is non-contractual discretionary bonus which is based on my performance during the financial year. In many ways, it is a profit share. If my division is profitable, a percentage, is paid to me for my contribution. Some of it is paid in shares, some of it in cash. In terms of shares, this encourages long-term commitment for the staff but also, ensures that decisions are based on the long-term. A significant proportion of shares in my firm are owned by the staff, which must be encouraging for the shareholders.

Although I feel I have done very well this year and I can demonstrate real value for the firm, I will not mention my bonus to anyone, not even family. I have almost become embarrassed by the fact that I actually get a bonus and generally, duck the question of bonuses when it comes up. I do, always, get asked if it makes me work harder.

Motivation

Personally, I don't think I do. I think I would work hard regardless. Over the last two years, my bonus and pay rise have dropped by over 50%. This is not based on my performance, which has been consistently high over the period, but the general profitability of the firm. Prudent management has seen the board reduce the pay awards which is very important for the long-term security of the company. Despite the pay freeze that I endured last year, I would say I worked as hard as ever, perhaps even harder, because I knew long-term it would be in my interests as a shareholder.


At this moment in time my bonus feels like dirty money

For some of my colleagues, as in any firm, the bonus is the main motivation to work. This is no different to my time in retail, where a profit share scheme was also in operation. This is simply because money motivates people.

However, at this moment in time, it feels like dirty money. The press coverage, in the same way as the coverage of the run on Northern Rock, often does not provide a balanced argument. Some of my colleagues do not even earn the national average, even with their bonus. Yet if they mention working in financial services and a bonus, people immediately have this idea they are buying new Ferraris when in reality, it is keeping their family going. Yes, there are big earners in every firm, as there are in every industry, but it is ridiculous to think that every firm has been bailed out and every employee is picking up hundreds of thousands.

2010 is likely to be pivotal year in the world economy. I am glad to go into it with a modest bonus payment and a moderate pay rise. I will continue to work hard to reward my employers for their faith in me but no doubt I will have to worker hard to convince people I am not a stereotypical banker!

24 December: Pre-Budget Report

Alistair Darling
"The PBR could well be the last testament of an exiting Chancellor"
The pre-Budget report could well be the last testament of an exiting Chancellor. Mr Darling, as with Labour, have sunk badly since the days when pop stars flocked to be pictured in 10 Downing Street with "celebrity" Prime Minister Tony Blair. Gordon Brown just never had the same feel and you have a sense that there will be a changing of the guard sooner rather than later.

It was therefore, disappointing that Mr Darling could not use his last address to instil confidence into the economy, instead, rather making a mockery of his position.

I base my synopsis of his speech on one phrase, one phrase which just blew me away and basically, assumed I was not interested or taking in anything he actually said.


Bingo Tax

It was the phrase "we say this from a position of strength". Obviously, the opposition laughed, but I think the country laughed as well, those in financial institutions laughing louder, albeit nervously.

It was just the sound bite that the Conservative Press Office would absolutely love. I simply fear for the future.

The crisis that engulfed the world was not Labour's fault, or Mr Brown's, or Mr Darling's, or any individual one person failing but to come out with such a ridiculous statement does make you wonder.

Bingo sign
Bingo Tax was cut to 20% from 22% in the PBR
I could write thousands of words on an analysis of the Budget but you have probably heard from much more learned individuals than myself.

Therefore, I will focus on the reduction in Bingo Tax. Perhaps the most bizarre thing I have ever seen in a report and certainly, very strange giving this might well be the deciding pre-Budget report before an election.

Obviously, working in financial services, I spend a lot of time in bingo halls and therefore, can positively say this will be a great benefit to the economy. Ethel and Doris, my bingo partners, are delighted!

Our armed forces have poor equipment, hospitals need better equipment, the economy needs boosting. We don't have the money but at least we can enjoy a game of bingo!


7 December: Bank charges

Bank statement showing overdraft charges
"We have to change our attitude to spending outside of means"

The ruling from the Supreme Court on bank charges has caused uproar and cheer in equal measures. I must admit, I think they are right and I think that this was a popular cause only because of the TV exposure the likes of Martin Lewis, the self-styled "Money Saving Expert", got on daytime television. I do wonder if he will be so prominent when people had banked on a different ruling are now facing increased charges (as they did not pay previously) and possibly legal costs?

A number of people seemed to forget that these were charges the customers agreed to. It was in their contract that they were asked to read and to sign, in return for free banking. Had the ruling gone against the banks, and therefore, for those that had signed the contract and then decided it was unfair, we might all have faced the prospect of paying for banking. This would affect everyone with an account, not just those that overspend.


People seemed to forget that these were charges the customers agreed to

I have written in past City Diary entries that we have to change our attitude to spending outside of means. Had the ruling gone in favour of the consumer, it would have encouraged people, in the same way as cheap credit, to overspend. Economies need credit but not bad debtors. I realise that this will not be a popular opinion and that in some cases, genuine people have been stung. I once got caught out when a forgotten direct debit came out a day before pay day. It would have pushed me past an overdraft limit. One quick call to the bank, overdraft extended by the required £25 pounds and no charges. A similar story with a colleague at work, but they had heard all about the challenge to charges and did not bother contacting the bank because "they will have to refund me in the future". £35(ish) charge later, I wonder if they wish they had made the call?

I often watch football on Sky Sports. I pay an agreed subscription price to Sky for the service. Do I have the right to challenge this if I don't think it represents the true cost? Energy costs are constantly in the headlines. Do I have a right to challenge my supplier and tell them I want costs refunded? If Martin Lewis started a campaign, we would probably think we could. I realise banks are slightly different and that they are an essential service, but I never understood why we felt they should be challenged. Had those that have got into difficulties with charges spent as much time and effort reviewing their finances as they have done complaining, we might never had needed the legal challenge in the first place.

24 September: G20

Bankers
Are bankers facing a witch-hunt over excessive salaries?

I am not usually a Daily Telegraph reader but having stayed away on business last night, I found the paper outside of my door as I rose this morning. As it was a freebie, I thought it would be rude not to read it. Immediately, the business sections headline "G20 bonus agreement in the works". This was immediately next to an article relating to ITV's impending appointment of Tony Ball and a graphical illustration of the "Top FTSE 100 Compensation Packages". Perhaps this is why I don't read the Telegraph. Compensation? Does this mean Tony Ball will be employed on a no win, no fee basis?

I found it very interesting that both articles were next to each. We are told "frantic" negotiations are taking place within the G20 to stop excessive salaries. It is a clear message to the banking industry that this will no longer be tolerated.

Switching back to the ITV article, we are told Tony Ball will earn a basic salary of £1m a year with his total package set to be an estimated £21m over five years. I looked, but there was no reference to the G20 trying to stop excessive payment to media executives. Hmmm, strange. Perhaps £21m over five years is not considered excessive? It is to me!

Back to the first article and we are told the G20 will be attempting to introduce a way of clawing back bonuses when individuals have been responsible for losses and payment should be in shares to create a vested interest in long-term success. I check back to ITV but it would seem that should Tony Ball make losses at ITV, he should be OK.


Quite simply, the best talent will earn the best salaries.

Now, I completely understand why banking is such an important sector however, it has to be a complete witch-hunt to target one industry in a such way. It was not that long ago that a slovenly comic and a monkey were fronting a thing call ITV Digital, which ultimately went bust, costing numerous people their jobs and their homes. Setanta was allowed to rise and fall, with further losses, but again, no further regulation. Yet still chief execs can pick up some £21m. It would seem the message to anyone wanting a career with, in my opinion, excessive earnings should simply switch to the media sector. Pay check unchecked

Quite simply, the best talent will earn the best salaries. We operate within a free market and market forces are there to determine things such as salaries. Yet, we are suddenly allowing governments to try and regulate these markets more tightly. However, do they necessarily have the experience to make these decisions? Do we trust them to make these decisions? It seems like asking the criminals to run the jails. UK politicians for example have recently been accused of acts tantamount to fraud. Moats cleaned on expenses? I bet even the bankers would not do that!

Change needs to occur but I worry the G20 are not the group to do this...

9 September: Aftershock

Flowers and woman preparing for Chelsea Flower Show
Will the green shoots of recovery soon bloom?

Those green shoots of recovery seem to be growing nicely and before you know it, will be blooming into a fantastic flower that we can all enjoy. Put correctly, the economy is now back on track. Although, it is probably a little early for this, I get a sense of "Oh no it isn't", "Oh, yes it is". Pantomime season may well have started early!

The media have a fantastic influence over our lives in this digital age we live in and contradicting stories or new stories based on new facts are consistently coming to air. I have read the crisis is over, the crisis continues and the worst is yet to come. "Airline losses hit '$1bn a month'" reads one BBC Business headline, sitting nicely next to "Bristol broker battles downturn", a story on Bristol-based broker Hargreaves Lansdown 20% profit increase, a fantastic result in the current climate.


"Is the worst over?" is the question I am consistently asked by family and friends

"Is the worst over?" is the question I am consistently asked by family and friends. I really have no idea is the only thing I can say. Does it look and feel better? Well, yes, actually it does feel better. For one, I am calling business contacts and actually getting them, rather than "Sorry, Joe Bloggs has left the firm". However, it really depends on what you read. I could fill the rest of my diary with quotes from prominent economists across the world and give you a number of contrasting views but I think the bigger question is not where we are but what we have learnt?

A former mentor of mine use to always say "You learn more from what you do wrong than what you do right". I am sure he was not the only one and I am sure you have heard this type of thing before, but it also, probably rings true with us all. I read with interest the Personal debt dips for first time article published Tuesday. We (and I use the royal "we" to encompass the world) got into the crisis because of our willingness to spend and the banks' willingness to lend, sometimes without due regard to circumstances. I was therefore, slightly encouraged that about £600m had fell off the personal borrowing of £1,457,000,000,000 (I add the 0s for emphasis), or £1.457trillion.

You can read the excellent Stephanomics on the BBC Business site to understand why a fall in personal debt can be bad but forgetting all of the economics information, I think it shows a trend towards living more within our means. Credit is an important and vital part of the economy and it does not need to be reduced to nothing but it is important that is it managed. Personally, in the last year, I have paid off all debts except my house and car, I aim to pay off both early. I did not have huge debts, a buy now pay later deal for a TV and a bit on a credit card, but when the threat of redundancy was looming large, these worried me. Businesses have to change to cope with the way credit is now being made available and the consumer has to as well. This should help us recover and stabilise for the future.

22 July: Life on TV

There was a lot of hype regarding last week's BBC drama Freefall, which starred Sarah Harding of Girls Aloud fame. Harding was hardly in the drama, gracing us with her presence for a few minutes in a 90 minute documentary but it was enough to have people falling over themselves to advertise it in the television magazines. I was more interested in the content, as it was based on the experience of those working in financial services.

I will briefly summarise Freefall and spare you the torture of watching the show on the BBC iPlayer:

Sarah Harding and Dominic Cooper
We are all looking for a scapegoat to blame the crisis on. Freefall chose the high-pressure mortgage salesman

A mortgage broker sells an unsuitable product for bigger house to security guard with wife and family. After one year, the rate goes up, the security guard cannot pay. The mortgage broker still enjoys life but the security guard commits suicide. Thought provoking? Actually, no. It was sensationalism of the highest order. The broker, played by an actor from Mamma Mia, was all 'gimme, gimme, gimme' in terms of money while the poor security guy, with his wife and two kids, was left facing his own Waterloo.

The BBC's excellent One Show recently sent its consumer champion on to the high street to talk to people about terms and conditions. In pretty much all cases, people admitted to not reading the small print or even all of the terms and conditions. I'm afraid this was the kind of basic error made by the security guard in Freefall. Yes, he was under pressure from the broker to sign up to the mortgage, but a house is generally the biggest investment you will make in your life. You will probably spend some 25 years paying for it. So surely it's important to actually read the document?

Had he done so, he would have realised the mortgage was unaffordable. I have said it before: we are all looking for a scapegoat to blame the crisis on. Freefall chose the high-pressure mortgage salesman. Stupidity of the consumer never seems to be mentioned.

The comments from last week diaries were extremely interesting. We do read them so please continue to send through your messages, it is your opinion that counts not whether you agree with myself or the other diarists.

I wanted to respond to "Ross from Stoke". The comments can be read in full here .

Ross compares a newly qualified teacher with those of head of a bank. That's not fair. I know everyone likes to comment about bank chiefs, but a fairer comparison would be with those who work behind the counter, in the operation or in the call centres. They don't get huge bonuses and will earn less than the average teacher!


8 July: Private sector pain

Today, I read a story that really annoyed me. It was off the back of Alistair Darling's comments about bankers, yes, it is still the bankers' fault, and it referred to public sector workers. The general gist was that there may have to be a pay freeze in the sector, which would save billions, rather than look at cutting vital services.

This is something many in private firms have already endured. In the very next article, the militant public sector may suddenly strike if pay is frozen. Now the recession has not been good for anyone; people have lost homes, businesses and probably most importantly for some, their self-respect. Yet those in the public sector have, in the main, come out the other side relatively unscathed. Yes, I am sure there are those that have lost their jobs but on the whole, there has not been a widespread cull that has hit the private sector as firms cut costs.


Why should a newly qualified school teacher on £20k share the pain with the head of an effectively nationalised and failed bank on a potential £8m?

Ross, Stoke


Indeed, a relative who works for local government recently described her job as "recession proof". She received a pay rise a few months ago (backdated to April) after it had finally been agreed. OK, it was just the cost of living but it was still nearly 3% more than I received, and the pension is better. A friend who also works for the local government, says her team is overstaffed. However, if they did not fill the position, they would potentially lose funding for that post. So, rather than lose the funding, they fill the post. Let's not worry about the person employed with nothing to do! Try telling that to the former bank cashier looking through the jobs paper after they have lost their job.

I was not around when any of the World Wars took place, to which I believe I am fortunate, but one thing you cannot take away from that era is the camaraderie that existed.  I feel very unfortunate to live in a time, often a troubled time, when this sense of 'in it together' has completely gone. We do, completely, live for oneself.

It is also a blame culture. It doesn't matter what has happen, as long as you can blame it on someone else. That's why we walk down the high street and are attacked by vultures that shout "had any injuries at work?", "had any car accidents?" or "had any accidents in the last five years?" Clearly, they don't understand the definition of an accident! That is why anyone outside of financial services feels they have a right to be angry, a right to vent their spleen because it was someone else's fault. Let's forget that while the banks might have been guilty with cheap credit, they did not exactly force consumers at gun point to take out mortgages, loans or overdrafts!

The world lost a music legend last week, in his words, "if you want to make a world a better place, take a look at yourself and make that change"*. A lesson for us all perhaps.

*Man in the Mirror, Bad, Michael Jackson

Looking ahead

Canary Wharf September 2008

It's the first time I have experienced such difficulties in my chosen profession. At times sleepless nights were common

It has been a turbulent time for anyone that has worked in financial services over the last year.

It's the first time I have experienced such difficulties in my chosen profession. At times sleepless nights were common. Six months ago it look liked I was heading down a dark tunnel - one with very little or no light at the end. I began to envy those that had pursued recession-proof jobs in medicine, teaching or police work.

I enjoy my job. My profession has afforded me a nice house, cars and holidays to exotic locations. I have met many people that have now become friends. But in the last six months I worried that I might not see out the recession with a roof still over my head.

A handful of colleagues left my office recently, all moving off to new careers. Some of their own choosing, others without a choice.

Losing your job can be a harrowing experience and with the economy in its current predicament, there is not always a ready supply of new jobs or careers. I recently met a former business contact who had been made redundant eight months ago. She had been fairly senior within her organisation but they had outsourced her function to cut costs. She ended up temping in a university admissions office to see her through. She has only now finally got herself back into the industry, although a level or two down from her previous position. She's strong-willed so she'll rise again. But it does knock your confidence when this happens.

I am not about to say my whole outlook on life has altered, but I have made small changes to my personal and professional life. I'm not quite keeping a diary of my spending but I have been a lot more prudent with my cash. Setanta was something I dropped quickly, as I watched it perhaps once a week. OK, £14 a month will not really pay my mortgage, but it was 'wasted' cash.

I'm also looking into getting more qualifications. A friend recently completed an NVQ in Business Administration. I have several professional qualifications, but a recruitment consultant friend pointed out he would prefer to pick someone with an NVQ as he actually knew what that was.  There is a fine line between being an expert in your field and employable outside of your chosen profession.

I don't think I have made the wrong decision being in financial services but maybe one day, I will leave it all behind.

'You're not an MP are you?'
This week the story about MPs' expenses has detracted any publicity from financial services. In my opinion, it is an absolute disgrace that many of those who criticised the banking industry and financial services in general have been found with their own snouts in the trough so to speak. What is far more worrying is that these people are employed by the public, and I think this is a far greater concern than those paid by private corporations.

Westminster
Mark says some of the expenses claims have been shocking
Expenses are part and parcel of business and I don't expect MPs to claim nothing, but the claims have been shocking.


The recession has hit trust in all areas of business, whether it is financial services or high street stores but Parliament is slightly different. In a restaurant in London recently, I was dining out with a business associate. Although talk strayed onto topics, such as MPs' expenses, this was a business meeting and over the two hours we discussed various elements of our business.

It was a claim that will go down in my expenses. I made the error, on the train home, of reviewing my receipts ensuring that I had it right for my expense claim. The two ladies on the same table seat as me looked at my suspiciously and then joked: 'You're not an MP are you?'

'Unfortunately not,' I replied, 'I could do with my moat cleaning!'

We got into discussions on expenses and after making her aware that I worked in financial services, she did ask whether anyone needed expenses 'on those salaries'.

I am not hugely religious but I think our materialistic society has contributed to our problems
Defending myself was always going to be difficult, she has a blinkered view based on items in the press and her mind was well and truly made up. However, I did try to convey that I don't earn a seven figure salary and, as someone that is based regionally, London is often very expensive. Unfortunately, as she believes all banks (I told her I did not work for a bank) are making a loss (they are not) and that financial services employees all earn ridiculous sums (they do not), expenses is just another example of what is wrong with the country and the industry. I did therefore, find it rather amusing that when she took a cup of tea and a slice of cake from the catering trolley she immediately asked for her receipt! Clearly, her expense claim was going to have £3 on it but because she is not in financial services, all is well!!


I am not hugely religious but I think our materialistic society has contributed to our problems, which is a a problem with modern society in general. Perhaps if we had a sense of community and weren't so worried about keeping up with the Jones', we might get on better.


'Green shoots' of recovery?
I had the pleasure of sitting next to a gentleman from Scottish Natural Heritage on the train home on Tuesday. He was typing up his notes for a conference called 'Conservation of Rivers: 20 Years On', or something along those lines. 

Outside of former Woolworths store in Corby
Firms like Zavvi and Woolworths were not 'victims' of the credit crunch - they were poorly-managed businesses on borrowed time

It seemed that in 20 years, methods for improving rivers have advanced, and a lot more can be done for their conservation. Events of the 1980s had focused minds and this had assisted them with their planning now. I am not sure exactly what happened, but it clearly had a profoundly positive effect two decades later.

I honestly believe there will be real benefits and lessons learned from the current recession and banking crisis. Although those out of a job, losing their homes or having to close their business might not feel the same.

The green shoots of recovery are, ever so slightly, rearing their heads. 

It is like when fires devastate woodland, apparently, the ground becomes very fertile and new flowers, trees and plants will grow. 

Like a phoenix from the flames, the economy will, eventually, and in my humble opinion, become stronger. I reiterate a point I made in a previous diary entry, firms like Zavvi and Woolworths were not 'victims' of the credit crunch - they were poorly-managed businesses on borrowed time and the credit crunch was the straw that broke the camel's back.  Now that the small signs of recovery are showing through, those that have been able to weather the storm will be able to grow.

'Income will take a hit'

We, as a firm, have not been too badly hit by the recession.  Staff have left, some taking early retirement, others, mainly contractors, not having contracts renewed, and a few leaving of their own accord by finding a new job. 

As with any stockbroker, our fees are based on client valuations and with the FTSE down more than 2,000 points from a year or so ago, our income will take a hit.  However, it is credit to the senior management of the business that we will be in a really good position to take advantage of any upturn. 

If we are still profitable, why not reward your most important asset, your staff?

You can get rid of staff but that can leave you short and client service will suffer. Telling clients their portfolio is worth less and then giving them customer service problems would be a bitter pill to swallow.  

My colleagues might have been demoralised by the general state of the economy but I really feel that people are seeing a light at the end of the tunnel. 

This week, talk turned to any potential annual bonus. Those on the outside might see this as the root of all problems but if we are still profitable, why not reward your most important asset, your staff? I would like to see more shares handed out as part of the bonus scheme. Cash is nice and you cannot spend shares, but it does encourage long-term goals and commitment. 

I personally think we will pay a modest bonus, it might even be a token gesture, but staff have worked hard and despite the problems in the wider economy, we have done well. 


Budget reaction

Sitting in a cafe in London recently, utilising the free wi-fi and enjoying a latte, I experienced what is probably the most surreal experience of my life.

Sir Fred Goodwin
Is Sir Fred Goodwin to blame?
Next to me, two City professionals, reading in between discussions, the City Diaries! My City Diary! Of particular interest was my comment 'we all contributed to this disaster'. As I began listening, now abandoning any work I was trying to do and now solely focussing on swan-necking and listening to their conversation, it disappointed me that they did not like my comments.


According to them: "It was that Fred the Shred or whatever they call him and all the rest of those bankers."

Reassuring nodding came from her colleague who then added: "My bank charged me £35 because I was overdrawn by £80. I mean, it was only £80." Colleague Number One, as I will call her, then added: "Yes, my credit card was maxed out, I have bought some shoes and a new dress for this cocktail party, and I forgot to make the minimum payment. It was shocking the amount they charged me." Colleague Number Two looked on in disgust before going to collect two further coffees.

Attitude change

It took all my powers of restraint not to mention that these two, in many ways, were those I was referring to.

A colleague seemed disappointed recently that they were turned down for a loan. It was hardly surprising, with a bank account constantly overdrawn and a high credit card debt, why would someone lend? Her response "well they used to".

Attitudes most definitely need to change. It was therefore, with a curious eye that I switched on the Budget in hope that the government would realise that these attitudes would have to be changed and not just in the short term.

G20 march in London
I expect more gimmicks, such as the VAT reduction, to come out from Number 11 depending on how the economy responds

It was therefore, slightly disappointing that the Budget contained just the usual tax increases of cigarette, alcohol and fuel. The slight mitigating factor was the increase in the ISA allowance to £10,200, although this was made unnecessarily complex by allowing over 50s to use that allowance this year with the rest of following later.

ISA are big business for stockbrokers and it is a welcome boost that the allowance has increased.

However, I think more could have been done for savers. Obviously, the government wants people to spend to help the economy through this difficult period but ultimately, you need savers.

You also need to encourage saving throughout the economy and not just for high-rate tax payers. Perhaps there was an opportunity to give basic rate tax payers a break on the tax on savings and to help them build their nest eggs which are currently depleted and yielding low rates of interest.

I have not been blown away by the Budget and I think the most interesting part of it was the level of debt and the economy contractions. I expect more gimmicks, such as the VAT reduction, to come out from Number 11 depending on how the economy responds. Some firms would have been looking to the budget to give them some relief but I don't think there was a lot.

For some, the tough decisions now have to be made.


We now talk in trillions, not millions!

Dunfermline building society branch
The UK Government ruled out a bailout for the building society
It is strange that £26m no longer registers in the business quarters but that is exactly how I felt when I heard that Dunfermline Building Society collapsed after generating losses of £26m. Twenty six million? Hardly worth a mention. If you have not lost billions, don't bother! We now talk in trillions now, not millions! Of course, I jest, and the loss of another financial institution is a worry, especially one that has survived since its inception in 1869. Last week a little bit of confidence was creeping back but this type of situation shows that the next collapse is just around the corner.

Quantitative easing. Fiscal stimulus. Money market expansion. Buzz words in the current economic crisis. Now while someone more learned than myself might choose to explain the meanings of these words to the man on the street, it basically means getting people spending again. This is why our government has chosen to reduce interest rates to a mere 0.5%. Bad news for savers, good news for those on tracker or variable rate mortgages that stand to save. I myself, now pay 1.85% for my mortgage, saving me 30% on what I was paying a year ago. Those on interest only mortgages have saved even more. However, has it actually worked? Are people spending the extra disposal income they now have?

Before I give my opinion on this question in the context of the wider economy, I thought I would give you my own personal perspective.

I am saving hundreds of pounds on mortgage repayments each month but to be honest, I am not really spending this money. It is all going to reduce my debt. I have a modest amount on a credit card but had two cars on finance deals. The one with only a few months until it finished has been paid off while I have also began paying off more on my credit cards, that debt will be cleared very soon.

Twenty pound notes being handed over
Holiday plans are being shelved while expenditure on items such as football season tickets, deemed 'essentia' by the men only a year ago, are under scrutiny.
I intend to make small overpayments on my mortgage. Not huge amounts but a little something, probably the difference between the base rates being 1% and 0.5% will go in as an overpayment. I am spending less and the money that is left at the end of the month is going away for a rainy day. Holiday plans are shelved this year although I am planning something for next year. Finally, some shares are cheap and I am looking at picking up some of these in the near future. Although savings rates are terrible, I still putting something away as you never know if the dreaded 'r' word, redundancy, will come your way.

In a straw poll of those around me in the office, my scenario is very similar to others. Most are looking to reduce any debt, make overpayments and not make any big ticket purchases. No one is willing to take on large orders for fear of losing their jobs.

Holiday plans are being shelved while expenditure on items such as football season tickets, deemed 'essential' by the men only a year ago, are under scrutiny.

Those not on the property ladder however, have seen no benefit. A colleague, a first time buyer with a 15% deposit, is being quoted a fixed rate mortgage of nearly 6%. This is only fifty basis points lower than what I was offered some 12 months ago (I went with a tracker) and base rates have tumbled. Properties might be cheap but the mortgages are certainly not!

In short, confidence has to return to the economy. Unless jobs start looking safer, people will not choose to spend.


Sir Fred Goodwin has dominated the business pages

Sir Fred Goodwin has dominated the business pages as well as the front pages as his near £700K a year pension was revealed. This has caused outcry from business leaders, politicians and the public. Sir Fred, you may remember, was christened a cheetah by myself in this column and we continue to see parallels between the two. Sir Fred secured a fat pension pot, just like a cheetah often secures a decent sized kill. But in the plains of Africa, the cheetah will lose between 10-13 per cent of kills to other animals, such as lions. Sir Fred, not in the plains of Africa but in what continues to look like a hostile environment, is trying to fend off the government from his pension. It remains to be seen what will happen, but Sir David Attenborough would do the voice over!

Harriet Harman might regret such a bold statement

The government's recent comments have been very interesting. In the press, we were treated to the comments of Harriet Harman. She said [the pension contract] "might be enforceable in a court of law but it's not enforceable in the court of public opinion and that's where the government steps in". One thinks she might regret such a bold statement. For a starter, this blogger is unaware of a "court of public opinion". Furthermore, I was not sure a government was there simply to provide guardianship of this fictional public opinion court. The Liberal Democrats entered the discussion and bandied about a figure of £27,000 a year as acceptable, based on what one wonders. The Conservatives, cleverly, have simply blamed the government for agreeing to it in the first place and for once, I have to agree with them. I also wonder, should the economy continue to flounder with Labour at the helm, if the 'court of public opinion' would vote against the pensions of the current ministers?

Perhaps Harriet is looking for a prime television slot like other MPs who have graced the likes of Big Brother and Ant and Dec's Saturday Night Takeaway? I can see it now, BBC Television Execs get your pen and paper ready, and tonight, on BBC1, "Court of Public Opinion" with your host, Harriet Harman MP. Harriet would introduce that week's hot topics and viewers, as we like to do this in this country, would vote by text and the government would then draft a law based on the outcome. Votes after the end of the show will not count but might still be charged! We could have Premier League footballers' wages or criminal sentences as the first topic. It sounds ridiculous, but so does our government at this present time!

I only hope, that in the future, we learn from our mistakes. As I have said, this correction in the economy will hopefully foster change for the good. On one final point, interesting that a certain former prime minister, now making millions across the globe, is not attracting much attention as he continues to pick up £64k a year as a pension. In this climate, should he give it back? Don't answer the question, vote on "Court of Public Opinion", this Saturday, 7pm, BBC1!


The government cannot be expected to save all firms

I was delighted to hear the views of Sir Richard Branson on the current economic downturn last week as he shares one of my fundamental views, that failing companies should not be saved. This week, LDV has announced the trouble it is in and sought help from the government. If press reports are to be believed, LDV has asked for somewhere in the region of £30m as a bridging loan to allow its current management to restructure the company and ultimately, buy it out. The company employs some 900 people and many more indirectly via its supply chain. It was met by a stern warning from Prime Minister Gordon Brown: "The British taxpayer cannot be expected to pay for the company's losses".

While I feel for those that work in the industry, I wholeheartedly agreed with the comments of Gordon Brown and those of Richard Branson, the government cannot be expected to save all firms. I had a very interesting debate on a train a few weeks ago with three fellow passengers, none of whom I had met before. I was reading the BBC Business section on my laptop which, at the time, was reporting that the final Zavvi shops were closing. The lady sitting to my left remarked that it was terrible what was happening to the staff. Her friend, sitting opposite, nodded her head in broad agreement while a further gentleman, sitting opposite me, agreed and added that the government had a lot to answer for, especially with the likes of Woolworths, Zavvi and other high street names going to the wall. Never a shrinking violet, I had to pipe up and join into the conversation, it would have been rude not to given that the debate started because of the subject matter I was reading!

My view was quite simply this: the Woolworths business plan was terrible and it had no clear market. Other than "pick 'n' mix", it had no real dominance in any sector and market share had been eroded by more dynamic firms, not least the supermarkets and online retailers. Zavvi, which ultimately went under because of the demise of Woolworths, was a classic tale of all the eggs in one basket. It did not go under because of the credit crunch, it went down because its firms had no disaster recovery plan should its supplier go under or circumstances change. Clothes retailer USC had, for a long time, sold branded goods at inflated prices. When their clients could no longer afford these prices, there was no clear steer from the group as to how it would change and again, it became a victim of bad management. LDV was not discussed but is much the same. It has made losses for a number of years and is failing because of that legacy rather than the recession. It is classic survival of the fittest. Those firms that emerge from this crisis will be much stronger. If LDV were to be bailed out, it would be a successful failure which in English is oxymoronic but in business, is plain stupid.


Firms have to be allowed to fail, it is the circle of life

If the government was to support all firms, we would have a legacy of failed business plans propped up by the tax payer. I know comparison will be formed with the banking sector but banking is very much a different beast. Firms have to be allowed to fail, it is very much the circle of life. Richard Branson will be affected by the recession, but he is bold enough to speak out because he is confident in his business models.


The opinion was that bonuses should not be paid for failure

The business headlines have once again been dominated by bonuses, in particular, those paid by the now part-nationalised banking firms that were once the darlings of the city. As usual, the opposition politicians have been quick to jump onto the subject with David Cameron saying anything over £2,000 should be scrapped, and Vince Cable described the RBS news as "unacceptable". Of more interest to me than the political leaders' views was that of the BBC News website readers that flooded the Have Your Say boards on the subject.

The overwhelming opinion seemed to be that bonuses should not be paid out for failure and I think this is key. Financial services firms often have large structures that include many divisions and it is possible for a division to be successful, even profitable, while the listed entity actually makes a loss. Take, for example, the customer service division of any of these banks. These are the men and women on the front line, taking the flack for bad decisions of management that they have quite possibly never even met. These are the people that will deal with the irate public, often being verbally abused, for salaries in the region of £15,000 a year, generally under the threshold of £17,000 which Lloyds said a lot of their £120m bonuses were aimed at. Now this division will be performance managed on subjects such as speed at which the enquiry was dealt with, number of calls answered and how long calls were outstanding. They cannot make a profit but they can still perform. If they have been successful, why not pay them a 10% bonus (or whatever the prevailing rate is). I think the "Great British Public" have also realised that and it was heartening to see so many people supporting bonuses for these workers.

I know some people will be thinking the customer service executive was a bad choice as an example because, as a nation, we constantly complain about call centres and the endless, press one for this, press two for that. It did make me wonder if Downing Street worked in the same way when the bosses of the various banks called for funding. Your call is important to us, please hold while we transfer you to the appropriate department, alternatively, press one for tax payers cash, press two for more tax payers cash, press three for nationalisation and press four to resign. Alternatively, please hold and we will be with you shortly.


Bonuses have become a dirty word

There has been a lot of emphasis placed on bonuses in the last few days. Indeed, sitting next to a woman in her mid 40's on a train recently, she commented that if firms had not paid bonuses, we would not be in the trouble we are now. That was her assessment, not that bonus levels were too high, not that they rewarded short-term decisions, just that bonuses were wrong. I enquired as to what she based her conclusion on and to be honest, there was no substance to the argument. It was simply along the lines of "those bankers got bonuses and look what happened". So bonuses have become a dirty word and anyone in an industry where bonuses are paid suddenly gets a suspicious look.

Catching up with some old school friends recently, the subject of bonuses came up. I tried to stay out of the conversation. A friend was paid a substantial bonus in 2007, it had been a good year for her in recruitment. I was pleased, it was, after all, a reward for success. She asked if I got bonuses and I replied in the affirmative. Two other friends, delighted at her success, suddenly looked at me with what can only be described as a scornful look. I suddenly found myself on a five minute rant trying to justify the bonus I worked very hard for. One of the guys commented "this is the problem, rewards for failure". A general nodding occured. I try to reason that my firm had done well, it had certainly not been a failure, my division had done well and I personally had done very well yet this, seemingly, failed to justify the bonus I received. In percentage terms, my recruitment consultant friend had earned more than me and although I pointed this out, again, it was not enough. When asked now, I gloss over the situation.

My bonus is non-contractual. If my division, firm and I failed to perform, a bonus would not to be paid. Equally, it is not based on a single transaction but sound, long-term success and I am proud that I have been able to earn a bonus in each year I have been employed. I can however, see the reasons why people have come to regard financial services bonuses as bad. Sir Fred Goodwin earned an incredible £2.9m in 2007 as a bonus, this was on top of his £1.3m salary. Sir Fred commented that he "could not be more sorry". I too am sorry, sorry for the 2,300 workers at RBS likely to lose their jobs while Sir Fred sits on more money than most of us can ever dream of. Bonuses can be a strong incentive for achievement and success but there is no doubt that a change has to be made. Maybe the UK's current predicament will foster an important change.There has been a lot of emphasis placed on bonuses in the last few days. Indeed, sitting next to a woman in her mid 40's on a train recently, she commented that if firms had not paid bonuses, we would not be in the trouble we are now. That was her assessment, not that bonus levels were too high, not that they rewarded short-term decisions, just that bonuses were wrong. I enquired as to what she based her conclusion on and to be honest, there was no substance to the argument. It was simply along the lines of "those bankers got bonuses and look what happened". So bonuses have become a dirty word and anyone in an industry where bonuses are paid suddenly gets a suspicious look.

Catching up with some old school friends recently, the subject of bonuses came up. I tried to stay out of the conversation. A friend was paid a substantial bonus in 2007, it had been a good year for her in recruitment. I was pleased, it was, after all, a reward for success. She asked if I got bonuses and I replied in the affirmative. Two other friends, delighted at her success, suddenly looked at me with what can only be described as a scornful look. I suddenly found myself on a five minute rant trying to justify the bonus I worked very hard for. One of the guys commented "this is the problem, rewards for failure". A general nodding occured. I try to reason that my firm had done well, it had certainly not been a failure, my division had done well and I personally had done very well yet this, seemingly, failed to justify the bonus I received. In percentage terms, my recruitment consultant friend had earned more than me and although I pointed this out, again, it was not enough. When asked now, I gloss over the situation.

My bonus is non-contractual. If my division, firm and I failed to perform, a bonus would not to be paid. Equally, it is not based on a single transaction but sound, long-term success and I am proud that I have been able to earn a bonus in each year I have been employed. I can however, see the reasons why people have come to regard financial services bonuses as bad. Sir Fred Goodwin earned an incredible £2.9m in 2007 as a bonus, this was on top of his £1.3m salary. Sir Fred commented that he "could not be more sorry". I too am sorry, sorry for the 2,300 workers at RBS likely to lose their jobs while Sir Fred sits on more money than most of us can ever dream of. Bonuses can be a strong incentive for achievement and success but there is no doubt that a change has to be made. Maybe the UK's current predicament will foster an important change.


I have become too specialised

The Have Your Say comments on the latest blog entries were very interesting, especially Mark from Bracknell who commented on the back office or operations staff. It is true that should a stockbroker lose his job, he will generally find another firm willing to take him (or her) as in most instances the clients strike up a personal relationship with their broker and will move firm as he or she does. Those in the operations department are not so lucky as the clients have no affinity to them. More importantly, those in the back office, while extremely important to the smooth running of the firm, are the ordinary people who would really struggle should they lose their job.

In the last few weeks Nissan and Newcastle Building Society announced redundancies in Newcastle, not a million miles away from me. Both had me thinking. Newcastle Building Society is clearly a finance firm and perhaps, a firm me or my colleagues, should we ever lose our job, would look to for employment.

Unfortunately, that is no longer going to be an option. I have relatives that work at the plant and I genuinely worry that should they ever lose their jobs, their skills would not be portable. There are no other car makers in the North East and any other car makers in the UK are certainly not hiring. I have various industry qualifications on my CV, generally provided by the Securities and Investment Institute (SII). This has gained me Associate of the Securities Institute status, something I am proud of and in my industry, is generally well thought of.

It suddenly dawned on me that while qualified in my current field, I have perhaps become too specialised. I enquired about a local NHS job recently, I discussed my professional qualifications. It was apparent that the person on the other end of the phone had absolutely no idea what I was talking about. All she could offer was that it was clear I was happy to learn and that was a good thing. This year, I will be taking two further exams, the fourth year I have completed industry exams. However, should I ever have to leave the industry, they may well not be worth the paper they are written on.


Only the strongest survive

I spend a lot of time watching nature programmes and it is amazing to see the natural world and the selection process that goes on. Only the strongest survive and this keeps a perfect balance. Save human intervention, our planet is delicately set up to survive, however, with excess human consumption and our destructive nature as we try to satisfy our greed, rather than needs, it begins to crumble. It would seem our banking system is not too dissimilar.

The recent announcement on the Royal Bank of Scotland's record losses has sent shockwaves through the economy and, just as perhaps a little confidence was creeping back into the financial sector, we find ourselves getting bombarded with headlines on jobs losses, bail-outs and a worsening economy. Fred Goodwin, a Knight of the Realm no less, is the media's new scapegoat and the man responsible for these remarkable losses. Derided for his bad decisions, he now leaves potentially tens of thousands looking over their shoulder and worrying about job losses. He reminds me, you might think bizarrely, of a cheetah featured in a recent programme I watched. Young, ambitious and attempting to show off his hunting abilities, he picked on a rather large animal with horns but clearly in some distress. Replace the cheetah chasing the buffalo with Sir Fred's pursuit of ABN. Similar to the cheetah, many felt he had bitten off more than he could chew but he pursued it anyway. Back to the cheetah and, after initially seeming to get a hold of the buffalo, a slight swing of the head and the cheetah was caught off guard, a horn pierces the thigh.

Although not a fatal wound, the cheetah was now immobile, unable to run at great speeds and, ultimately, unable to feed. The cheetah died. As the shockwaves reverberate around the finance sector and media from the RBS losses, the pursuit of ABN seems to have had a similar affect on Sir Fred's reputation. The hyenas circled around the ailing cheetah but the television team faded out on the inevitable consequence. Unfortunately, there will be no fade on the impact RBS will have on us all. Job losses are already being predicted and for those of us in the sector, we wonder when our turn might come.


It has been a brutal year

The festive period is generally a time of happiness however, most people are also in a reflective mood as they say goodbye to the previous year and hello to the New Year. Each year I support Link Romania's Shoebox Appeal and on Christmas Day find myself thinking about those with less than myself. This year was slightly different as while I was thinking of the families opening my shoebox, I was also thinking of my fallen comrades. It has been a brutal year to work in financial services and for me personally, it is the first time I have been through this type of experience.

I look for some positive news but there is none

As I write this latest blog I look for some positive news in the economy, there is none. Houses prices are set to fall by a further 10% in the coming year and mortgage lending will sink further. With the contraction of the economy speeding up, those looking for a bit of festive cheer may have to search harder than they intended. 2009 looks set to be a difficult one.

My grandfather used to have this first foot routine he and I would perform each New Year. It basically involved walking from the back door at 11.58pm, with a bag that contained whiskey and coal among other things, on New Year's Eve and knocking on the front door as Big Ben chimed on the TV. We were greeted by my grandmother and mother and we would welcome in the New Year. It supposedly brought luck but I did not do it to see in 2008. But this year, whether I believe it or not, we need all the luck we can get!


There is a financial services industry outside London
When looking at the current crisis in the financial services industry, it is easy to think solely of London and that shining light of the UK's financial services industry 'The City'.

In the City they earn massive salaries, drive the fastest and most expensive cars, have the biggest and best houses, and probably a country retreat as well. This is probably why there has not been too much sympathy for those losing their jobs in this industry. Well that is not always the case!

There is a financial services industry outside London where ordinary people live ordinary lives and earn ordinary salaries. I am one of those people. Inevitably, the firms we work for have their headquarters in London and you often worry that being so far away means it is more likely that people sitting in those London offices will turf you out without even having met you.

In the past two weeks, we have had our annual Christmas party. It is never lavish but is always enjoyed by all of the staff. This year, the black cloud that has covered the whole industry loomed large and there was a subdued atmosphere.

It is hard to party when you may not have a job in the new year or when your colleagues have already been relieved of their duties.

We are not all bankers and it is not all our fault. I sit, writing this, worried that come December 2009 I might not have a job, and might not be able to afford my mortgage. Would I be able to keep a roof over my head? If I am out of work, can I get another job?

In the City jobs are going but there are still some jobs out there - outside London there are not such rich pickings. I contacted a recruitment consultant the other day who was listed as 'banking and financial services'. I got an e-mail back saying she no longer deals with that sector as there is no work, and now looks after education. If only it was that easy for me to switch industries!




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