In This Game, Someone Has to Take the Blame

After twenty years of institutional broking in the UK, I arrived in retail stockbroking in Australia in 1998. One of my first experiences of looking after the Mums and Dads (and everyone else that didn’t have kids) was a “hit and run” client – meaning they only wanted to sell once and bugger off – who wanted to sell her deceased husband’s portfolio.

Deceased estates are a bit of a minefield in our game, because you have to be sure the bugger is dead before you go and sell everything and give the proceeds to someone not on the share certificate. Brokers just love admin. Some brokers have been known to feign a heart attack when faced with sorting out probate for a deceased client.

The portfolio, in this case, had some simply astonishing holdings and was worth, well, a fortune. Included in the list were some BHP holdings bought in pounds, shillings, and pence.

But our lucky widow was not happy. Something was eating her away, and she was not shy of telling anyone who would listen.

During the War, her father had unfortunately passed on. Part of his estate was a share portfolio that was left to her, her mother, and her sister. After the War, her mother had “fallen in with another,” and he had persuaded her mum to cash the portfolio in. Being too naïve to assert herself, the whole portfolio was sold, and the proceeds scattered.

Many years later, her mother had died, and during the administration of her mother’s affairs, her father’s will resurfaced. Listed in there was the stock portfolio he had bequeathed to his girls. It included a list of the individual holdings and, piqued at the memory of her mother’s poor pick of portfolio-assassinating partner, and having inherited her father’s respect for money and the share market, our widow had set about tracing the current value of the long-ago sold portfolio.

Her investigation of corporate actions, name changes, splits, bonuses, and dividends since her mother had been persuaded by an unfortunate lover to sell was worthy of Holmes. The net result was an Excel spreadsheet that recalculated, every day, the value of a collection of now-sold regrets. It was worth $11.4m in 1998, having been sold in 1940-something.

Goodness only knows what it would be worth today, although a guess, based on the 240% rise in the All Ordinaries index since 1998, would suggest somewhere around $27.3m before compounding dividends. That calculation, even in 1998, had prompted two things: (1) her perpetuating unhappiness, and (2) a passionate dislike for the broker who had executed the trades on the request of her mother – Ian Potter & Co., which became Potter Warburg and is now UBS. She doesn’t have a good word to say for them.

Financial people are used to taking the blame. Blame comes with the territory. It’s why any agent gets paid commission. Commission is a compensation for taking the blame and being blamed for anything that ever goes wrong in anyone’s life, post any related or unrelated asset exchange the agent or broker was unfortunate enough to have facilitated.

Stockbrokers, financial planners, second-hand car salesmen, and estate agents all know the score. But in the blame department, the car salesman and the estate agent have a big advantage over the broker and financial planner.

When a car salesman sells you a car, you both know it’s going to go down in value. He’s not responsible for that.

When an estate agent sells you a house, you have bought somewhere to live. That was the main purpose. He’s not responsible for what happens after that.

But when a broker or financial planner makes a trade, that share price hangs in the newspapers in plain view for the rest of everyone’s natural life and, at some point, if the company involved has even half a grain of integrity and longevity, its share price is 99% guaranteed to make the decision to sell look stupid. Forget the fact that the money was put into something else that went up as well, or consumed in a fantastic splurge on a holiday, hotel, or lover – that’s not the point. The contract note saying “X broker, sold XYZ, at X” remains for all time.

The golden rule of the stock market is that clients take the credit for any winners, and brokers take the credit for any losers, for all time – and in that knowledge, you begin to understand our lot. We are being paid to take the blame.

But cry not for us. We know it, and we are happy to provide the service. Taking responsibility for our clients is our job. And if that means taking the blame so clients don’t have to, then so be it. We have saved countless marriages.

You’re welcome.

Notably, Ian Potter & Co. and its derivatives have now been providing their blame-taking service to our unlucky widow for eighty-five years. A heavy burden to carry for two shillings of brokerage. But I’m sure the heated leather seats of the UBS Chairman’s BMW 7 Series will warm the inequity away.