Conflicts of Interest

Cazenove alone retained its independence, sensing that clients would be more comfortable without conflicts of interest. Over thirty large London-based groups (about half foreign owned) have the ability to deal extensively in domestic and internal securities.

All the leading jobbers (and most of the smaller ones) were destined to join the dealing arms of large financial conglomerates. Similarly, 19 of the top 20brokers provided the requisite brokerage facilities.

With the prospect of this intense competition primarily for institutional business, the value of the private client list suddenly was being re-considered by many London firms, and as a result they have acquired interests in several provincial broking firms, for example, Charterhouse Japhet in the Liverpool firm Tilney.

One of the most interesting developments has been the formation of Allied Provincial Services. Having turned down individual offers, they decided to pool their resources, which are considerable.

They handle over a billion pounds of private client money. Provincial firms operated on a dual capacity basis long before single capacity was imposed on them when the federation came in 1965.

Several have indicated that they will make markets in local stocks, but on a bargain matching basis: this will not require the injection of large outside capital, and it will avoid uncomfortable problems with conflicts of interest.

One of the most noticeable effects of Big Bang was the change from face-to-face contact on the trading floor to market making on screens with bargains completed by phone. This has given rise to large open areas of floor space suitably endowed with the most modern communications technology.

The larger firms had dealing rooms to accommodate 300-400 dealers. The sums involved were large, but for the most part they were deferred payments – “golden handcuffs” – to tie them to their parent for a few years. Many may find the restraints abrupt; the loss of independence may result in a loss of competitive edge. An executive is not quite the same as a partner.