The big interview: Sir Mark Weinberg

You’re one of the few people who have been around for 50 years. Do you think the market is much better today than 50 or even 25 years ago?

Incomparably. The difference between the sorts of people that we employed at Abbey Life and that we have in SJP, they’re very, very different.

Each time you start a new company you say, “I’ve got a clean piece of paper, what have I learnt that I wish I had done before?” And the most important thing that I’ve learnt on both occasions is that it all depends on the quality of the sales operation that you’ve got.

Particularly the move from Allied Dunbar to SJP was very much an opportunity to say, “we’ve now got the Rothschild name, that will draw people to us and give us a brand” and we have to protect that brand particularly strongly.

So the standard of advice and integrity you get from someone today I know is incomparably higher than it would have been 30 or 40 years ago.

You were involved a lot in regulating the industry in the past. Would you like to comment on that?

The Government decided that the city and financial operations need to be regulated and at first the emphasis was on the wholesale markets. I was brought in alongside and what followed was called the Securities and Investment Board (SIB) in draft and then there was the Marketing and Investment Board (MIBOC), which was the retail end. And I was made chairman of that and spent about two or three years working on it.

The great issue was to get transparency and to avoid conflicts of interest - how could the public know whether it was getting independent advice or not? And in those days Allied Dunbar, which I represented, had brokers as well as tied people [selling its products] but the tied people at least described themselves as being salesmen.

The brokers called themselves brokers but there were so many side deals going on - they were getting their rent paid etc. So the question was how can you get a really independent source of advice for people who really wanted it? We struggled with that, until one weekend I came up with this one word ‘polarisation’ - which was quite controversial at the time – and meant that an adviser should either be totally independent or declare themselves as not independent.

Do you consider that to be one of the greatest contributions that you’ve made to this industry?

Well, it was very fundamental and I think it’s also interesting to note that it didn’t particularly suit Allied Dunbar because it would not be able to describe itself as giving independent advice; you might think that that would undermine the position of people who didn’t declare themselves to be independent.

The reality is, what’s actually the most important thing in any relationship of this kind is the integrity of the adviser and the degree of trust that the client has for the adviser. You could say that trust could be misplaced and the adviser might take advantage of that, but if so they lose their clients. SJP, from the start, for example, has not had business from IFAs, it only has people who effectively, in their main business, can only place business with SJP.

So is SJP going to be all right after RDR?

Yes because there are two things that matter: the quality of advice and, in the end, the quality of investment management. And right from the start at SJP we had completely untied investment management. It was a simple philosophy and one of the things I feel very strongly about is diversification.

One of the lessons that I’d learnt in my previous companies, particularly at Allied Dunbar, was the limitation of an inhouse investment manager. That’s why when Mike Wilson and I started SJP we said we’re not going to have an investment department at all, we’re going to contract out our investment management, which would give us the advantage of finding the best managers we could for our funds.

The greatest difficulty for any fund manager is marketing, so we’re finding the money for them and they’re delighted to do the business on reasonable terms. And secondly we’re not tied to any individual, we can use 10 different managers and, very importantly, if we lose confidence in a manger we just tell them from next month, hand over the money.

We were the first to introduce it, or introduce it seriously, with one exception to give credit, Skandia. But Skandia did it without taking any real responsibility for the managers - well it’s a platform. But what we say is that it’s our job along with the help of external consultants to select managers, to monitor them and change them if we lose confidence.

So we’ll offer the client five investment managers to choose from, then the client can forget about them. If the managers aren’t doing well it’s our job to recognise it.

Do you think the financial press serves the consumer well?

Two sides to that. I think that the press has an enormous role of responsibility because people don’t understand investments.

But with the headline grabbing stuff, I feel more embarrassed about the things that are discovered - not that PPI misspelling is something I have anything to do with but it is horrific that it does happen.

What about the role of bancassurers pre and post RDR?

Sadly the banks have not been the source of the best advice and this has gone on for a long time.

I’m afraid the problem with financial products is that the public doesn’t understand them and they never will fully. It isn’t like going into a supermarket and seeing what you’d like and tasting it and not buying the same thing again if you don’t like it. In the end it all comes back to integrity of individuals and of management.

One hopes that banks become more trustworthy in that respect.

In these complex times, is there any place do you think for a direct salesforce?

I have got absolutely nothing against the concept of a direct salesforce provided it is run by a company that is high in integrity and realises the responsibility it is taking on. If the salesforce isn’t properly trained, everything else it does will be done badly.

But nobody wakes up in the morning saying they need life assurance or a pension. You need someone to go out and give the message, but quality is everything.

And whichever way you set up a sales situation you need incentivisation of some kind. Incentivisation is frequently in the form of commission, but it is equally there if you’ve got a salary - the most powerful incentive of all is if you’re on a straight salary and you don’t pull your weight, you lose your job.

So it’s not the concept of having incentivisation that matters. What really matters is that the incentivisation isn’t skewed in a way that it encourages people to sell the wrong sort of product. This is something we’ve learnt very much over the past 20 years - if you do your job right then you get a good reputation and you get referred leads and so on.

I think that, in the end, going down the direct salesforce route may not be the most efficient thing to do because you limit what you can sell and you limit the reputation of your people, but if it’s done properly I don’t see any problem in the principle.

How would you want the consumer to become enthused and engaged in protecting and investing for the future?

Interestingly enough about 10 or 12 years ago I was appointed as a chairman by the LSE of a body that was designed to improve knowledge amongst people and improve standards of buying investment products. There were very able people on the board but we found it extremely difficult that there were no simple answers.

I feel that you’ve got to go back to the education system, the high school level, and introduce real understanding of what money is about, almost as a compulsory subject.

The press should also be encouraged to do more educational type things, which I think you increasingly do. The trouble is, getting the people who need it most to read the periodicals.

So how do you get affordable, reliable advice to the mass market?

Now you’ve posed me something that I haven’t thought about very much in my life. Funnily enough it’s a challenge I’d love someone to pose me. When I got that phone call to do this thing for the stock exchange, it was a challenge I couldn’t resist because it was an interesting one.

Unfortunately it proved not to be an easy one. The problem was that the conclusions died. This I suppose is the most important point - you can think of some theoretical ideas but they won’t happen unless you find the structure to build what you want to.

A few years ago I took on the role of chairman of Pension Insurance Corporation, which if you like is actually my fourth insurance company, although it’s not mine - I’m just chairman. It’s just extremely interesting that it’s going beyond the high net worth to the wholesale level to the issue of what’s going to happen to private pension schemes.

And we’ve inherited a very strange model of running private pension schemes because they are run by trustees who have to be independent of the company but the company picks up the bill. So if you’re the trustee of a pension fund and there’s a £50m deficit and you’ve got £300-400m, it’s easy for you as the trustee to say let’s put it in equities, because If they go up it closes the deficit but if they go down the company puts up the money; this is the driver behind why so many companies are closing their pensions schemes.

Is there anything you regret about your personal finance career?

Dear dear, that’s difficult. What happens if I say no? I suppose it’s inherent in my saying that I think the quality of the sales organisation and generally of the last company was significantly better than Abbey Life.

And yet Abbey Life was absolutely fine by industry standards then, but industry standards have moved on. So I suppose I regret that it took me two companies to get to the third company, which I am very proud of.

You were knighted in 1987 for services to regulation. Do you think Sir Fred should have been stripped of his knighthood?

I think that was a bit tough - done without a trial or anything else. I think not to get a knighthood is fine but to strip someone...it seemed vindictive.

The point is, he didn’t do anything criminal and he didn’t do it on purpose. I’m not defending him. But he was part of the system at the time.

Do you think the RDR proposals are a good idea for the consumer?

Oh I’m sure. But like anything of this kind, it does tend to get out of hand. But in a way it had to happen because the absence of transparency couldn’t go on indefinitely and I think hopefully it will go in the right direction.

It’s very interesting the evolution of the FSA from the SIB because originally it was very small and semi voluntary, and the great difficulty we had there was finding people who had any background in either insurance or regulation.

Then when the FSA came along they multiplied hugely, both in terms of what they were trying to do and the staff as well and they had untrained people who didn’t really understand the business.

They’re now maturing and it’s getting a bit more like the American thing, where to spend a few years with the SCC is good for your career and equally it’s good to come from a company into the SCC and then move on and I hope that’s what going to happen with the changes at the FSA.