A welcome serving of humble pie

The private banking and asset management world is full of high-profile product promoters. But when things go wrong, are they there to meet their critics and clients? This remains one of the acid tests of investment firms and how they manage their relationships.

Some of the purveyors of poor-performing structured products, hedge funds and quantitative strategies in particular have been keeping a low profile since the crisis.

So it’s refreshing to see Martin Gilbert, CEO of Aberdeen Asset Management, and scapegoat for much criticism of the finance industry during the early, post-millennium years, listing all his failures alongside successes along the long journey since he set up the company in 1983. Mr Gilbert was happy to take questions – some friendly, others more probing and challenging – at the recent annual British-Swiss Chamber of Commerce lunch in London.

Having recently acquired and integrated the active asset management arm of Credit Suisse and achieved an excellent long-term track record, particularly in Asia under Hugh Young, Mr Gilbert looked back to the split cap investment trust debacle of a decade ago with almost touching humility.

He was forced to sell his group’s retail funds arm and a £200m (E225m) settlement was paid out to investors by a group of 18 firms in 2004, although he still insists “there was no evidence of any wrongdoing”.

What he does admit to is a combination of greed, naivety and a failure to listen to critics, which led to significant and regrettable losses of clients’ funds. His lowest point was being compared to a “sophisticated snake-oil salesman” by John McFall, chairman of the UK Treasury Select Committee.

But distributors seem happy to once again pump Aberdeen’s funds – now worth a total of $290bn (E205bn) – through their machinery, especially it seems the private bankers employed by Zurich giant Credit Suisse.

“They used to be sick to the back teeth of being forced to sell Credit Suisse products to their clients,” suggested one UK banker. “Now that the funds are managed by Aberdeen, they can at least pretend towards some independence and sell even more of the stuff.”

How the distributors will sell these funds in the future, re-inventing their business models following the Retail Distribution Review in the UK will be the industry’s next big challenge, believes Mr Gilbert. The day of the shared commission, including a healthy kick-back for the distributor, are about to be curtailed. Fee-based advice will soon be the order of the day. Distributors across Northern Europe are nervously watching the UK example unfold.

Martin Gilbert