Rock and a hard place

Just when confidence in financial services was looking like it had turned a corner, along came the run on Northern Rock. No-one knows how long the ramifications of the first run on a British bank for 140 years will continue to rumble, or the extent to which it is a sign of seriously choppy financial waters ahead. But it has served as a stark reminder about both the fragile nature of economic confidence and the way in which the general public responds to financial messages.

In recent years regulators, providers and advisers have together made great strides to restore public confidence in the realm of pensions, healthcare and income protection. This has been both through a number of initiatives that have tackled specific thorny issues and also by development of products that understand Joe Public more clearly.

Apart from the days following the September 11 attacks, as a financial journalist I cannot recall a time when I have been asked by so many members of friends and family about what they should do with their money in the last five years.

Whether or not Northern Rock, or Northern Crock as it has been dubbed by some, coincides with the beginning of a downturn in global finances remains to be seen, but on its own I do not believe this is enough to seriously damage confidence in savings. There have been far worse scandals in the last five years, from split-cap investment trusts to collapsing final salary pension schemes via swingeing exit penalties on with-profits funds – yet most providers and advisers have seen swelling business volumes.

The public perception of economics and finance is an issue at the heart of what advisers operating through the workplace is all about. In the centre of this issue is a special supplement, the Psychology of Saving, that takes a closer look at the way employees actually perceive the messages that providers, advisers and employers give them through their workplace pension schemes.

Any impact the Northern Rock affair has on saving will be short-lived. To paraphrase Bill Clinton, on the campaign trail against Bush Senior back in 1992, it’s the economy, stupid. If the economy stays on track, then there is nothing for the corporate advice community to fear. That, however, seems less certain than it did 12 months ago.

But corporate pensions advisers need to remain strong, even in the midst of wider bearish sentiment.

The Northern Rock debacle underlines how much people like security, but this should not divert the advisory community from extolling the benefits of risk. The public do not just need confidence in financial products. They also need education in the benefits of taking risk with investments over the long term.

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