Lets face it, crises are nothing new in the financial services industry. Many fund management houses...
Lets face it, crises are nothing new in the financial services industry. Many fund management houses over recent years have faced problems that have caused uncertainty and anger among their investors. Aberdeen Asset Management is just the latest.
Its problems, created by the mere 3% of its business involved in split capital investment trusts, has grabbed all the headlines associated with the business.
Its problems are different to those at Morgan Grenfell with the scandal surrounding Peter Young and those that Barings faced in the aftermath of Nick Leeson's currency trading losses. They are different again to those of Hendersons after the crash of 1987 and the problems faced by ABN Amro this year when Nigel Thomas and George Luckcraft left for Framlington.
But the acid test of Aberdeen's future as a business, the factor which will determine whether it remains an independent house, is how it deals with its clients now.
Barings did a good job in managing the anxiety of advisers and investors. The lessons learnt there were carried onto ABN Amro by Nick Wells and Dick Turpin.
Putting aside the future of Aberdeen itself, the future of investors' assets in its unit trusts is clear. The assets in the funds are, as in all Oeics and unit trusts, completely separate legal entities to Aberdeen Asset Management.
There is no direct capital risk at all, but there remain risks unit holders face and they must not be ignored. It is up to financial advisers to decide just how serious they are and how to act on them.
In a situation such as this, intermediaries should legitimately be concerned about the stability of the fund management team in charge of the funds.
Aberdeen says a sense of enbattlement has provided a spur to managers and performance on funds has risen. That may be true, but uncertainty, just as it is the bane of the markets, is also rather unpleasant to live with as an employee in a firm.
The fund manager merry-go-round has not slackened. Aberdeen itself has parted with a number of key investment personnel. Advisers are asking will there be more changes?
A takeover, should it occur, and it is a possibility once Aberdeen's split cap liabilities are quantifiable, could provide further upheaval. Takeovers, particularly those which offer shareholders a way out of the business are dangerous times.
It is also at times like this that eyes get taken off the performance ball and man hours are spent on crisis management. It is a risk and it must be considered.
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