As usual, everyone missed the point. This was a good news story: bankers may now be forced to stop giving advice. Thank goodness for that.
One of the great misconceptions of our time is that financiers know anything about business. In my experience, financial advisers -- whether high street bankers, management consultants or investment bankers -- generally have minimal understanding of the running of a business. They are the last people to consult about investment.
I know this because I was a banker. And, having been in banking, may I just suggest what should be the first law of business: anyone who has to consult his or her bank manager about whether to invest in something should not be making that investment.
Investment bankers, for example, understand the movement of money, the raising of it and how to negotiate mergers; they are hopeless, however, at evaluating investment risks. If investment bankers, paid millions, dealing in billions, are incapable of dispensing decent advice, what hope has a clerk in a high street bank?
I was an investment banker in corporate finance and mergers and acquisitions, working in New York and London for almost five years. To demonstrate my point, I will mentions three well-known individuals we worked on deals with, whom we believed in, and whom the banks trusted with vast amounts of our shareholders' money. Alan Bond. Robert Maxwell. Asil Nadir. [Accompanying the article in The Sunday Times is a photograph of Asil Nadir, leaning on a large globe before a large landscape painting on the wall behind him. The caption for the photograph reads: "The Great Panjandrum: Asil Nadir duped the financial world with his charm"]
I remember visiting Nadir's offices in Berkeley Square to arrange massive loans. We were dazzled by his palatial offices, decked out in oriental splendour. In the midst of this, like a handsome and sharp-suited magician, stood the Great Panjandrum. We were more bewitched by his Croesian charm than the minutiae of "due diligence".
Even the taxi driver taking us to our meetings told us he would not trust Nadir (nor indeed Bond) further than he could throw him. Of course we financiers dismissed this.
At one dinner party my boss, a vice-president of one of the world's most famous banks, was challenged by a journalist investigating Nadir. Laughing superciliously, the VP replied: "Look, I know Nadir. I've spent time with him. He is as honest and shrewd as any businessman I've known."
Occasionally I bumped into Nadir at a Turkish restaurant we both patronised. He would approach me, arms open, teeth a-shining: "Come eat with me, my banker..." We were like lambs to the slaughter.
The cynics might say we only went along with their herculean ambitions because we were earning huge fees. But it was much simpler: we believed in the corporate charmers because they dazzled us. Clad in our pinstripes, we admired the antics of these pharaohs.
Bankers might look sceptical, smart and sophisticated. But they are dying to be romantics. They believe the tales told be fairyground hucksters. Next time you drop in on your bank manager, remember he yearns to believe your sales patter, to be able to tell his golf club chums how he spotted an embryonic Branson.
The game works both ways: from day one, the corporate banker produces an impressive document that purports to underline the bank's in-depth knowledge of the brewing, publishing or fruit-packing business. Other banks compete to prove the same thing. This is the "beauty contest"; the document is The Book. In fact, The Book is created by a corporate chain gang of sleep-deprived underlings, normally using yellowing newspaper articles; it is rarely read by the senior directors.
The business world is built upon charismatic lying. That is the fun of the show, but it should remain a game played by consenting adults. The real problem comes in the high street, when neither side realises that hucksterism is part and parcel of the financial marketplace. It is unlikely that a high street bank manager is a property expert, as his sales department's pamphlet implies, while customers have little idea that such inexpertise is floating around the financial world. Hence last week's case involving Lloyds.
So I hope I have convinced you by now of the second law of business: beware of experts, be they bankers, consultants, even stockbrokers. The opportunity for profit depends on spotting the differential between the conventional wisdom and real value. Since so-called "expert" investment advisers create the conventional wisdom, they rarely spot the differential. So never bank on a banker.