The shred of comfort that corporate advisers can take from the current situation is that they are in a far better position than most in the financial sector
The disastrous state of the markets is uncertain territory for most of us. Only those octogenarians who remember the Wall Street Crash will have seen anything like this before.
Yes we have had financial collapses before – the oil crisis of 1973, the recession of the early eighties, Black Monday in October 1987, the Asian crisis of 1997 and the Russian crisis a year later, the dot.com bubble and September 11. But through all of these downturns we never saw some of the biggest names of the financial world disappear almost overnight.
The big worry that most of us in the industry face is trying to predict where the gangrene is going to appear next, and the sad fact is nobody knows. But that does not mean professionals cannot advise on what should be done to protect companies from the downturn.
It is times like these when corporate advisers can add real value to their clients’ businesses. It is a time for advisers to go back to the basics of financial advice and assist their clients in assessing the risks that threaten their businesses, and then offer level-headed solutions to insure as best as possible against what the future might bring.
All of us are asking what the financial collapse will mean for our own lives. For the corporate intermediary the future is less bleak than it is for the vast majority of the financial services sector.
Of course there will be a squeeze on business in the future – non-core perks will be trimmed, employers will put in place measures to reduce take-up of expensive benefits and frank conversations will be had about how much is being spent both on benefits packages and on consultancy. The current turmoil may also prove to be yet another nail in the coffin of defined benefit schemes. But all of this should be encouraged by advisers – it is their duty to get their clients in shape to deal with an uncertain economic environment, and that will call for some tough decisions.
In the longer term we may also see a further squeeze on commissions and a hardening of premiums as providers face greater difficulty accessing capital. Many of the financial services products distributed through the workplace are capital-intensive. The money markets are putting pressure on all parts of the economy, and our sector will not be exempt.
But the shred of comfort that corporate advisers can take from the current situation is that they are in a far better position than most in the financial sector. Employers are not going to dump pensions, healthcare and group risk solutions overnight, and unless large-scale unemployment takes a grip, business volumes should stay steady. Advisers will no doubt be recommending employers make cost savings, but they should not lose sight of the value of the benefits they have already put in place.