The recession mindset

Wednesday, 22nd October 2008 14:11 - by Resident IFA

Gordon Brown has today said a recession is likely. It is fair to say that Columbo is one of the few people secure in their job based on that insightful pronouncement. The figures to prove the UK is in an economic recession will be published on Friday. A recession occurs when Gross Domestic Product (GDP – the value of all goods and services produced in a year) declines in at least two consecutive quarters. With this in mind, I attended a meeting yesterday of Independent Financial Advisers (IFAs) run by a Compliance service provider. I sat in on presentations made by representatives from Prudential, Friends Provident, MetLife, and AEGON Scottish Equitable. All shared the common theme of pandering to the ‘recession mindset’ (Copyright: Me, 2008). One championed the benefits of changing to an ongoing business model reflecting lower ongoing commissions, one the ‘added value’ service of Trust use in financial planning that “Tesco doesn’t provide”, another their financial strength compared to the opposition and their Pension product providing guarantees of capital and income, and finally the plight of small businesses running Final Salary Occupational Pension schemes for their employees and how they may now want an ‘exit strategy’ from the punitive costs and deficits they face...oh, and again what a financially secure company they are. Don’t get me wrong, these are all positive actions borne out of troubled times. My question on the back of this, though, is to what extent do the media affect our collective mindset in troubled financial and economic times? The media is all-pervading in this day and age, including the added ‘bonus’ of the internet for immediate, global information dissemination. There is no doubting the aforementioned GDP figures don’t lie and that we are technically in recession, but do we have to have it drummed into us day and night, with no respite? I am sure the problem is exacerbated by the continual pounding of the media, at least to the detrimental effect on our states of mind and moods, although it undoubtedly sells papers...what a nation of schadenfroiders we are! A colleague and I, listening to a radio station last week, were marvelling at the descriptive words the media use for the stockmarkets. We had such gems as ‘plunging’, ‘crashing’, and ‘soaring’...all on market moves of less than 5%. Whether up or down, they have an attention-grabbing way of relaying the day’s events. It keeps it all interesting, I suppose. Would I do the same if I had a paper to sell or listeners to attract? Probably. Do you have any views on the media or the psychology of recession? Please let me know. Until next time...