Lehmans can’t escape event horizon

The pace and breathtaking enormity of the recent failures brought about by the seemingly insatiable appetite of the credit crunch can be likened to an event horizon.

The most commonly known example of an event horizon is defined by general relativity’s description of black holes – celestial objects so dense that nothing can escape their gravitational fields. So it seems with the credit crunch – apparently no firm can elude its pull.

This seems appropriate following the activation of the European Organisation for Nuclear Research’s Large Hadron Collider recently.

Although the doom-mongers have been busy inventing apocalyptic scenarios, I doubt Lehman Brothers or HBOS was on their minds. Merrill Lynch’s neat sidestep avoided a second collapse, with Bank of America scooping it up for a fraction of its 2007 valuation. It seems the US banks are learning painful lessons.

In the same week as holiday firm XL went into administration, stranding 85,000 Britons abroad, it seems that the ripples of the credit crunch continue to spread with un- predictable regularity, catching even the most experienced of us by surprise. If I had a penny for every time I’ve heard the phrase ‘Well, I didn’t see that coming’, I would be a rich man.

Sneaking in under the radar was the news that the oil price has slipped to $92 a barrel, the lowest it has been for some time. Even more criminal was the fact that the oil companies decided to bury the good news.

Equally unnoticed was the acquisition of Personal Touch Packaging by Savills Private Finance. Now that is a meeting of giants.

It must have taken SPF managing director Mark Harris ages to find someone taller than him to do business with – after all, he’s 6ft 5in. Industry man mountain Rob Jupp fits the bill perfectly.

SPF decided to forge closer links after being impressed with PTP’s service. Given the fact that Harris and Jupp can look each other in the eye – in my case I have to stare at their belly buttons when I talk to them – I predict a long and profitable partnership.

We need a white knight to sort out PPI as it continues to be abused

Which? recently published a report highlighting the fact that almost 13% of consumers who have taken out credit cards also opted for providers’ payment protection insurance because they thought it was compulsory, or worse, that it would improve their chances of getting their applications approved.

The cynic in me says that the latter is likely but I’m still staggered by the public’s breathtaking gullibility. I am also disappointed with the banks that have designed it so that PPI looks like part of the application process. No wonder the product comes in for some stick.

Our industry continues to repeat the errors of the past and it looks like banks are doing the same with PPI. The trend we have seen with potentially toxic products is that firms maximise new business opportunities and don’t get their houses in order until they are forced to. When will they learn? PPI is an important product, especially in today’s economic conditions, yet it continues to be abused.

I learnt a long time ago that at least 50% of consumers are ineligible for PPI due to their occupations. A further 20% are unlikely to get claims approved because they are self-employed, leaving less than 30% of the working population as potential clients.

Yet the negative publicity the product attracts indicates a sales penetration significantly higher than 30%.

We need a white knight for PPI. Many brokers are confused and sceptical about the claims made by companies providing this type of cover, especially following the Financial Services Authority’s recent investigation into the sector.

A best of breed product with transparent charging and accessibility would be a godsend for most brokers, but it seems that the firms pedalling PPI are intent on continuing the confusion to maximise profits for as long as they can get away with it.

Boomerangs keep coming back

Friends Provident recently conducted a survey that showed 30% of 30-somethings have moved back in with their parents.

In typical corporate style they have become known as ‘boomerangs’, unable to cope with the commitment of marriage or cohabitation and frightened by the big bad credit crunch.

These ageing adolescents have decided that mum and dad are the safest bet instead of trying to sort things out for themselves. God forbid they ever face real life challenges.