Just how much truth is there in the idea there is no such thing as a bad product, just a bad sale? ...
Just how much truth is there in the idea there is no such thing as a bad product, just a bad sale?
It is the line of defence used by providers every time there is disappointment with one of their products and it is one that shifts blame onto the intermediary and the end consumer. It is also the line most commonly used by the regulator when announcing another review.
Falling markets have led to investor disappointment with a range of structured products, with-profits policies and straight funds but the defence of providers is that this is not really their fault: products simply do what products do, they have passed the scrutiny of the regulator and the detail is in the small print for all to see.
No one should dispute that the principle that 'buyer beware' should apply, or that a key role of the intermediary is to shield clients from inappropriate product. But this does not get away from the fact that providers have, on occasion, produced product that is bad and does not work.There is certainly a case to be made that with-profits policies sold by some providers in recent years are not good investments.
The same could be said of some split caps. It is noticeable more investment groups stayed out of that particular bull market than took part in it. The likes of Hendersons, Flemings, M&G and Foreign & Colonial did not look to raise money. Was their absence a sign that they could not organise a launch or that they decided it was not going to help them or their clients in the long-term? If it was the latter, it leaves the standard defence that 'no one at the time could possibly predict what was going to happen' looking rather thin. A drug company can only succeed if the product it creates works. The medical world might then discover the drug has other uses or there are certain circumstances it should not be used but its basic utility is established.
The bottom line for providers is that they have to produce products that work and are not reliant on something close to divine intervention in the stock market to bail them out. This is not to say that workable products can not then be missold or misbought but it does mean the bulk of investors should not be disappointed.
The bear market has revealed the extent to which some products were sold because they could be, not because they were fundamentally sound. The challenge for the investment industry is that when the next big bear market comes, there is no product that does not work.
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