THE JOBBING SYSTEM OF THE LONDON STOCK EXCHANGE: AN ORAL HISTORY

Interview No. 37: Michael Verey

Interviewer: Bernard Attard

Home: 22 August 1990.

Tape 1, side 1

BA: Could you first tell me, Mr Michael Verey, where and when you were born?

MV: October 12 1912.

BA: And where was that?

MV: In London.

BA: What were the names of your parents?

MV: Henry Edward Verey, called Hal; and Lucy Alice Verey and her name was Lucy.

BA: What was your father's profession?

MV: He was a solicitor.

BA: Did your family have any connections with the City?

MV: No, only my father had a fair number of friends in the City, but not business connections of any sort.  

BA: What area was he practising in? 

MV: He was practising really in the family area.  Some companies, smaller private companies, but he was really family, family trusts and family affairs.

BA: Where were you educated?

MV: At Eton and Trinity.

BA: And did you have any plans for your life while you were at school or as you were coming to the end of your education?

MV: No, not at school. I didn't have any plans, but one had to make plans at Cambridge. I was a younger son and not at all well off and I was out to make some money.

BA: What had you read at Cambridge?

MV: I read first of all two years on languages and one year law.

BA: So how did you proceed when you finished at Cambridge?

MV: Whilst we were all talking in our last year about jobs at Cambridge - I'm speaking of 1934 - I spoke to my father about [it] and made it quite clear that I wanted to go into something where I had the chance of making a million.  And he said, 'In that case I will speak to my old friend Alfred Wagg.'  Alfred Wagg and my father were lifelong friends. They'd gone to a private school on the same day, to Eton on the same day, and to Cambridge on the same.  And as a result of that Alfred Wagg asked us to dinner, a very alarming occasion, and a few days later I got a letter to say that they would take me on at £86 a year.  

BA: Now what kind of business was Helbert Wagg?

MV: Helbert Wagg was, in terms of numbers, that is to say the staff when I joined, was probably about 80 or 90; a small, as far as size was concerned, merchant bank, but was rapidly becoming the most influential.  You see, Rothschilds had really, post War, almost disappeared from the scene and were doing nothing; Barings wouldn't do equities; Hambros were really going for banking; Morgan Grenfell were active; and Lazards, up to a point; but Helbert Wagg very much was to the fore in both takeovers and mergers and investment because we created, because of the determination of one of the partners, Alan Russell, the first corporate finance department in a merchant bank in the City of London.  So we had a huge advantage in that instead of the partners doing the business off the top of their heads we actually had a department with a chartered accountant at the head of it and another chartered accountant under him.  And that gave us a lead which the others all copied in due course, but we were in the lead.  And so when people like IBM were coming to England, and Heinz, they turned to us as the most go-ahead and the best.  

BA: About when did the corporate finance department...?

MV: That was immediately after the War that was started.  I would have said by 1946.  

BA: How would you describe the bank at the time you joined it?

MV: It was an investment bank.  We didn't do loans other than on the most special occasions.  Of course we did loans, but we weren't out to lend money.  It was only if very good friends, be they personal or business, came and asked for money that we were prepared to do any banking.  We were doing investment business increasingly, and issue business.  And when I went [in] the foreign loan business had more or less dried up, but we were starting to do debentures.  We put together the British Sugar Corporation in 1934, which was a combination of beet companies in Norfolk and Suffolk, all of which were owned by the Dutch.  And it was part of hidden government policy, in case of war, to make us more independent of having to get sugar shipped from the Indies.  And so the British Sugar Corporation, beet sugar, was formed and was a public corporation.  And then the last year or two, of course, it was winding down and clearing up everything because the partners, quite rightly, realised there was going to be a war and we must batten down the hatches.  And then we opened up again in 1945/46 and very quickly went for pension fund business.  Again, it was under Alan Russell's propulsion.  He'd been over to America where they were ahead of us; they'd started the pension fund business before the War.  Helbert Wagg was the first group life pension scheme in the United Kingdom, done very reluctantly by the Pru[dential]; but Alfred said to the then Chairman of the Pru that if he wouldn't do it, we'd go to the Pearl.  The Pru didn't realise, hadn't a clue that this was going to the mainstay of their business for the future.  So we went out for the pension fund business, getting rid of private clients, off-loading them wherever we possibly could and only doing private clients closely connected with the firm - that's to say partners and their families and the employees - but trying to get rid of everybody else, all the Dukes and Duchesses and things that we had and going for pension schemes; because they were going to increase every year, whereas one death in the family and a perfectly good estate of two million quid was halved or worse, and then divided up between eight children.  So we thought that was a hopeless business and went for pension schemes, and were fortunate.  We had a very good investment reputation. We were fortunate in getting the BBC which we've had ever since, and of course this was a very prestigious thing to get.  The amount of money will make you laugh - it was £224,000 when it started about 1946, I should think, or '47.  It's now several hundred million.  And we became very powerful in any form of placing because if there was a large placing, we for our spread of interest could take more than any other merchant bank.  

BA: What was your position in the bank at this stage?

MV: I was in the dealing department for a period before the War.  One did everything, one did coupons, messenger; I did everything, bar cleaning the lavatories and running the lift, that there was to do in the business.  And then I was put into the investment department which consisted of two people, and then into the dealing room where we did the actual buying and selling of both foreign exchange and stocks and shares.  And then post-War, investments again, and I then became head of the investment department, if you could call it a department - two men and a boy; now there are dozens and dozens of them.  And then I became a partner.  We combined the investment management and placing of shares together, so that if Cazenove or Baring - not Cazenove but Barings - or one of the other houses had a placing, I was the person who said 'yes' or 'no' and what we would take.  And equally it fell to me in the last resort to say, 'We think Shell is a very good investment and everybody ought to have some Shell.' And then the chaps got on with it.  Then I got also involved because of that situation in the pricing of issues.  So that if we were going to place whatever it might be, a great chunk of something, I was very much involved in the pricing because I was in touch with lots of stockbrokers - not jobbers, occasionally jobbers.  And so it fell to me to do in degree the selection of stocks for investment and the management of the thing - how much in equities; because we were great equity people but nevertheless everybody wanted a bit of gilt edge because they were frightened and they thought...  At a meeting it looked solider to have a bit in gilt edged, but of course on the whole it was wrong.  So I was involved in pricing and placing and investment and was madly busy for thirty years, then I gradually went up the ladder as people fell off it.

BA: Can I cast your mind back a little bit to the pre-War, and ask you how the actual dealing side of Helbert Wagg was organised pre-war?

MV: Well we dealt entirely through brokers and we had a board, the first board in London, with about 20 buttons on it. And button A went straight through to Rowe & Pitman, and one of us, [it] could be me, would say to Jay who was the head dealer of Rowe & Pitman if he happened to answer the telephone, 'What's ICI?' And he would say, and we'd say, 'Buy' or 'sell' or whatever it was.  And then he'd come back and say, 'Done' or 'Not done' or he couldn't do it.  So we dealt entirely through brokers.  Lots of brokers we dealt with but there were about... Rowe & Pitman and Cazenove and Panmure Gordon and a few others got the guts of the business.

BA: What was the advantage in dealing through several brokers rather than one or two?

MV: Well we only would deal one stock through one broker if there was an order.  We wouldn't split an ICI selling order amongst half a dozen brokers. We'd just go to one broker.  Well, it was partly historic that we were friends and also they brought us business.  Panmure Gordon would bring us some debenture issue.  Well then we had to reciprocate.  They'd got two thirds of the brokerage and we got a third return.  And all sorts of firms brought us business: Capel Cure brought us a tremendous lot of business.  They had an arrangement with the NatWest Bank for many, many years, and anything that the NatWest Bank had got they took to Capel Cure - I think there had been a bit of this and that somewhere - and Capel Cure brought it straight round to us.  So naturally if we'd got some fat orders for pension funds or whoever it might be, we gave some orders to Capel Cure.  It was a back-scratching affair, there's no question about it.  But at the end of the day, Cazenove and Rowe & Pitman got more business than anybody else.  Of course we were very badly paid in those days.  For a new issue, you'd probably at the best got a half per cent of whatever it was.  Well then there would be a huge turnover, if it was any good, in the stocks and shares and the broker would make four times what the issuing house made.  It was really a scandal, that we frequently had created the whole business and done it.  And fees were very modest.  The terrific row with Tube Investments - I'm speaking about 1957 or 8 - the biggest City row there's ever been, all we got was £25,000.  It sounded quite a lot of money in those days, but the brokers had turned over - Panmure Gordon and Sebags - had turned over Tube Investment shares, British Aluminium shares, probably three times and, with no risk at all to reputation or anything whatever, they'd probably made three or four times what we'd made.  

BA: Who would be making the decisions about what investments to make with client's money, again during the earlier period?

MV: Well, in the earlier period it was nearly always a partner involved, one of the Helbert Wagg partners, all of whom knew about investments - some were better or cleverer or luckier than others - it was probably a partner and a senior clerk.  And then when it became bigger and really unmanageable in that way, then it became a department and it was someone like myself later on, Bobby Hollond and Ashley Ponsonby who became partners, and later on Gordon Popham who became a partner.  It very seldom got delegated much below a partner.  There were assistant directors later on, but that was much later on.  They had a fair run, but for a long time it was a partner who settled whether a thing should be bought or sold because there was always a feeling of responsibility that it was a partnership within a company and it was [for] partners to be responsible and not to off-load the thing on to however good senior clerks. 

BA: What would they base their decisions on?  Did they get much advice from broking friends?

MV: Well you got a good deal of, it wasn't exactly insider trading, but it was pretty close to it. Kit Hoare who was the head of Hoare & Co., would have dinner with the investment manager of the Pru, and the investment manager of the Pru after dinner probably let a few secrets go that he, the Pru, had been told about this that and the other.  So Kit Hoare went round to his friends the next day and said, 'I think probably ICI or whatever it might be is a jolly good buy at this price.'  A great deal of word of mouthing.  I think the people were fairly scrupulous when they knew facts like: if we knew, because we'd advised it and seen members of the board, that a dividend was going up, from very early stages we would not then buy or sell the shares until that news was out.  But other people were nothing like as scrupulous.  We started that - a "stop list" - very early on; that once it was known as fact... If it was in the balance, you could take your choice, buy or sell or do what you liked, but the moment it was a fact we had a "stop list" which we were very severe about. But a lot of people weren't.  And there was a good deal of directors in clubs with their friends, stockbrokers and, 'we're doing jolly well at so and so' - there was a good deal of that.  So that this all percolated through stockbrokers to Helbert Wagg.  We had our own feelers out because we were in touch with an awful lot of companies, industrial companies.  You see, we'd chucked doing foreign loans by 1930, and went out  for industry and two or three partners were on the move the whole time going to Birmingham, Middlesborough, Glasgow, Edinburgh, to drum up and get business.  And so we got a lot of industrial business - Reynolds Chain, Paper People - and we'd think, 'Well they're jolly good' - Reeds in the old days.  So we rather stuck to favourites, you see, where we knew the business, knew the Chairman and you got a sort of general impression of a thundering good business.  

BA: Do you have any recollections what the expectations of the clients who you were doing investment business for were in that period?

MV: No, they hadn't got a clue.  You see the boards suddenly all woke up to the fact they had to have a pension fund.  They were doing nuts, screws and bolts, or whatever; they hadn't the slightest idea about investments. And if they did have any ideas they were usually very foolish: their wife's mother had an aunt who had a friend who needed some money of course.  So it was usually delegated to the Secretary of the company, who probably also knew nothing about pension funds or yields or returns or what was good, bad or indifferent.  And if the board looked at the results once a year, you were lucky, and if they took ten minutes looking at the results you were luckier still.  You appeared once a year and said what you had done and each year they had to put in more money, and you were then dismissed and a fee agreed and you went on for another year.  We dealt with a large number.  As time went by, of course, the boards became more professional, the pension fund became bigger, and so they would have a sort of grand inquest meeting.  The last time I did the BBC I suppose was twenty years ago, and it would be different now, but at the end of rather a long, full Directors' meeting of the BBC, a £100,000,000, fund we were dismissed with thanks inside of six minutes flat, a cup of tea and be gone, and reappointed for the following year.

BA: What did they want?  Did they want long term growth?

MV: They didn't know what they wanted, quite honestly. I've been out of it now for a fair number of years, but at the time they didn't know what they wanted.  They didn't really begin to apply their minds to the problem.  What they liked to look at, in the very short time that we were given, they liked to see that all the prices had gone up, and they would always pick on anything which had gone down and say, 'Why is this?' - might pick on something that had gone down - and then they would look at the overall return.  Usually we got very few comments, we usually produced a good return, and that was it.  But nowadays, you see, all the investment advisors are forced into this performance business - however you performed against the indices or this that and the other.  And the difficulty is, I think, that if there is short termism it is enforced by the board of the company by asking for performance, saying, 'You'll be judged against these things.'  Well then instantly you get short termism.  But the fault lies, in my view, with the management of the company concerned, not the investment advisors because they will do whatever they are told to do.  And if they're told maximum performance, that's another word for short termism.  If, on the other hand, they are told, 'We take a long view and we don't want you to take short term views and we're not going to judge you against an index. We will judge you over ten years, seven years, something like that, but we are not going to judge you every six months or every year, and we want you to take long views on all the things you do and then we meet again in seven years' time or see how you've done in between'.  But the present thing is largely... It's the companies blame the investment advisors for short termism, but that's what they've asked of their investment advisors.  And they can't see it.  Then they all belly ache and say, 'Oh the City', putting the good, bad and indifferent in the City.  There's never been such a thing as the City.  There are sections of the City: there's the top end of the City which has been badly let down by Morgan Grenfell and one or two others recently, but there is still the top end of the City; then there's a big wodge in the middle and then there is the scum at the bottom.  But there's no such thing as the City anymore, there was.  

BA: When you say 'was'?

MV: Well, I think about... once people started playing ducks and drakes with the panel, that is I suppose about eight years ago, seven or eight years ago. We had to have the panel or equivalent, there's no doubt about that.  And it's worked pretty well.  Then people started to try and bend panel rules.  The fees went up, the fees became enormous and so the prize for winning became terrific. And there was really a huge difference between a winning fee and a losing fee.  As the fees went up so the honey attracted a lot more bees, and some of them were dubious and some of the partners - they got promoted because they were very clever - but they weren't very desireable people and the standards went down.  And the short termism was all on this performance; everybody had to perform at once or yesterday.

BA: So I take it from what you've said, that in the earlier days of Helbert Wagg, you were largely left to yourselves in terms of the decisions you made about an investment.  Did you find that you were turning over portfolios a lot?

MV: No, not at all, no churning.  We stuck to things, many things we'd have without... taking up rights issues, buying a bit more, but had the same thing fifteen years later or twenty years later, no churning.

BA: As a young man in the dealing department, was it a very busy place?

MV: Yes.  Unless we suddenly ran into some slump for some reason.  I mean, the two days before a socialist budget there wasn't much business.  But otherwise, I don't think it was deliberate, but because we were always getting more business, Helbert Wagg was always understaffed.  There were never quite enough people, so we were all crammed together in a small but very nice office.  On the whole we were very well treated, bonuses and holidays.  We led the field on holidays; that in the days when people were lucky to get a fortnight, we all got three weeks' plus a week in the winter.  Everybody knew everybody and the telephones were buzzing all the time, unless there was suddenly for some reason a fright of war or something or other and for a few days there was nothing doing.  

BA: What kind of background did the people working in the dealing room come from?

MV: Oh, absolutely anything.  One had been in the RAF during the War, one had been secondary school boy - Turnham and Gordon they were there for years. George Wood, I suppose was the best known figure in the City of London without a title. Because we didn't have in those days assistant directors or anything like that. You were either a partner or you weren't.  Secondary schools, leaving school on the whole at sixteen. Lionel Fraser our Chairman, you see was a secondary school boy, left school at sixteen, went to night classes to teach himself French.  We were a totally mixed up bunch from the point of view of background and education, from the best public schools down to the least known East End school.  

BA: Now did you have much conception of what was going on at the other end of the dealing chain in the Stock Exchange?

MV: Yes, I think we did.  We knew an awful lot of stockbrokers and one was asked out to lunch a great deal by stockbrokers. So yes, one knew pretty well.   I worked for three months with Rowe & Pitman in their box in the Stock Exchange. 

BA: When was that?

MV: Oh, that would have been just post-War, when Jay and Downer were the two leading dealers for Rowe & Pitman.  I should think that was probably 1946.

BA: What kind of things were you doing?

MV: Well, I was really just dog's body for them.  I couldn't go into the Stock Exchange itself because I wasn't authorised. But in their box all the operations were taking place that they were buying and selling and doing.  And it was quite good fun.  

BA: Was it a different atmosphere to what you'd known?

MV: Well, they were immensely friendly.  Of course they were very well disposed towards Helbert Wagg and they knew I came from Helbert Wagg; so they showed me everything, they knew I was trustworthy, whether it was the Duchess of this or the Pru or whatever it might be.  They were completely open so I knew exactly what they were doing and which of their own partners they liked or didn't like, and who came into the box.  I didn't do much work, but one observed what was going on.

BA: Did you have any conception what was going on in the House?  What the jobbers were doing?

MV: Well, yes.  Jay and Downer would explain that there was a tremendous scurry round the oil jobbers, they couldn't get near them and it was ridiculous and this that and the other. Because at times if there was a particular thing on then it was a crowded, more or less shouting market.  But generally speaking it was calm, very well behaved and regulated, particularly in the gilt edged side.  But every now and again there would be a kerfuffle.  

BA: Now, you've already referred to the importance that was placed on the pension fund business immediately after the War.  Were you doing much institutional work before the War?

MV: Not a lot, because there weren't the institutions to act for.  We did a certain amount for insurance companies before the War.  And of course we developed that post war as well.  Charities, pension funds and insurance we went for.  And we had a director, you see, Bernie Barrington was for many years Chairman of the Legal & General, Alfred was on the Provident & Mutual, I was on the Northern Assurance which subsequently became Commercial Union, Ashley was on the Employers' Liability, Bobby Holland was on the Commercial Union, Charles Villers was on the Sun Life and....

Tape 1, side 2

MV: And you see, a great number of the insurance companies have practically got no ordinary shares.  When I joined the Northern, the portfolio consisted of a great chunk of war loan and a great chunk of conversion three and a halves and a handful of equities.  So that the institutions in the pre-War days were really private people, collar the Duke of Westminster or whatever it might be.  And the investment trusts were the leading - unit trusts hadn't really started - investment trusts were the leading takers and a lot of the houses managed four or five investment trusts and they were of great importance.  Now they're rather insignificant and small related to the pensions funds which have completely overtaken them.  

BA: What inspired your partner, was it Mr Russell?...

MV: Yes.

BA:... to go and get this pension fund business?

MV: It was America, I think really.  He went to America quite a bit and I think he saw very clearly that the Americans were ahead of us and that pensions would become universal in all companies in the United Kingdom, when at that time most companies had not got a pension scheme.  When you went you went.  Gold watch after thirty years service and a fiver and that was it.  

BA: Were other merchant banks looking for this sort of business?

MV: They were very slow and we found the competition...  Of course later when they realised what we'd done, they all started to compete and cut the prices and the annual fees and all the rest of it. But we certainly had an eight to ten year lead.

BA: Did you have any particular approach now to managing these funds?

MV: Well, we were too frightened to put them all in equities right away, so they probably had a bit of gilt edged. We never, I think, went for preference shares at all; it was gilt edged or equities.  I think we were all convinced that in inflation equities did better, that dividends would go up - not necessarily every year - that wages were likely to go up every year, so a pension fund had got to increase it's income every year, and we'd got to look to things that would be likely to increase their income to match the increased pensions. It was fairly simple stuff - it's all come true - but it wasn't gravely calculated.  

BA: Did you find you were able to get the kind of service from the Stock Exchange that you wanted in terms of liquidity and being able to do the size of bargain that you wanted to do?

MV: On the whole, yes.  I think both they and the jobbers were often quite frightened by a large deal and made too great a margin below the ruling price.  We tended, if that sort of business came to us, to cut it to a very fine margin related to what was called the market price.  I think on the whole we found a lot of the brokers... They always wanted to do the business, naturally.  And the price in degree didn't matter to them; what mattered to them was the commission.  So if the price in the market was 50 to 51 bob, of course they would like 48.  It would make it easy for them to do the business and the commission was the same, rather than 49s and 6d and they might not be able to do the business, then they wouldn't get the commission.

BA: Did you ever worry that you weren't getting the best prices?

MV: Only occasionally.  I think we were pretty tough customers for the brokers and I think they all knew that and accepted it.  Antony Hornby said to me that, 'We always knew when we'd got a business for you, we'd got to stretch a bit further than normal, or we wouldn't do the business.'  And the same on pricing, if we were doing a new issue, we were pretty tough on that.  And that was our reputation, you see, so that more people came to us.  If they'd got a big deal, they came to us because they knew they wouldn't get a better price anywhere else.  

BA: Were you still dealing with a great range of brokers?

MV: Yes, biggish range of..., well, we had a huge range of company customers who wanted things done.  And then there were still families involved, most of the big brewing things had families involved and if they wanted advice then the company probably sent them to us.  But of course we didn't do all the business by any manner of means.  A huge amount of it went direct to stockbrokers.  

BA: Who were the main stockbrokers dealing in pension funds?

MV: Oh, Cazenove and Rowe & Pitman were way ahead of everybody else.  Hoare & Co. were very much there, and Sebags, who of course disappeared, Panmure Gordon; but Rowe & Pitman and Cazenove were top of the list.

BA: Which were the other merchant banks that began to get into the business?

MV: Well, Morgan Grenfell; Warburg coming up but of nothing like the same importance as today; Barings - Hambros - because Barings changed their policy and did ordinary shares; Lazards very much Lazards;  Schroders weren't really in the business: they were a bank; until they amalgamated with us they hadn't really got an investment business or a new issue business.  We provided that and they produced the banking side.  There's probably somebody else that I've overlooked. De Stein, you see, that went in with Lazards, they had a very good (Edward De Stein & Company) small new issue business and investment business and investment trust business. Who else now......?  Samuel Montagu, they didn't do much.

BA: Did the way you actually organised the investment part of the business change?

MV: Yes, it did.  It had to become more specialised.  We did a sort of division where one chap and two or three mates looked after charities.  Another one did some pension funds, another one did another group of pension funds, another one did the remaining private clients.  It had to be more organised and compartmentalised than it had been: instead of me buying half a million of this and saying, 'Now boys divide it up', it had to become more organised. 

BA: Do you have a rough idea when that took place?

MV: That would have been late '60s I would have said, middle to late '60s.  

BA:  But right up until then you were still very much actively involved?

MV: Very much hit and miss, back of an envelope.  Had lots of things written on [backs of envelopes].

BA: How did that compare with the way other merchant banks did their investment business...?

MV: It's jolly difficult.  I think they were more formalised than we were.  One never actually saw them working.  All we knew was that they had a lot less business than us and they tended to make rather heavy weather of it. You see, in a way they had this banking tradition of actual banking which is of itself an accountant type operation - loans and interest, and periods and all the rest of it.  So that I think that they started off being more formalised than we ever were who really had a banking business which was of no importance to us at all.  We put all our own money in the money market, virtually always it sat on a day to day basis in case we wanted it to support an issue and so on.  So we weren't bankers and I think their tradition being banking, everything was rather more formal and precise.  And then I suppose it depended on the person, which was as far as it was concerned with myself, was anything but formal. 

BA:  Did you become a bit more sophisticated in your investment decisions?

MV: I think we stuck to the old rules, on the whole, which was what did we know about the management of the company?  Did we know the Chairman?  Was he the biggest so and so of all time?  And if he was, was he really going to make a success of this business because there are some pretty awful so and sos who are quite successful at their businesses; and who was the Finance Director, and was he any good; and had they got a Finance Director, because lots of companies hadn't.  And we were suspicious of back of the envelope chairmen who came brassing in saying how brilliant they were.  So we stuck very much to who was the board, who was the House behind it - was it Rothschilds, or Barings or us, or whoever - who was the House advising them.  And we much preferred to put an awful lot of money into a thing we knew about than to spread it all amongst a lot of things we didn't know about.  Now I suppose that we did all become a bit more sophisticated with these brochures and stuff that came round, but relied a great deal, still, on broker connections with people.

BA: Now did that also apply to the issuing and the placing?

MV: Well, on the issuing it was whether you were lucky enough to get the business.  That was contacts; your reputation. We got a lot just on reputation and on contacts, that they came and said, ' We want to raise a million pounds.'  Well then we would, through our new issue department which was Alan Russell and Gordon Gunson and Rattray, look and see what looked like the most sensible way - whether a rights issue of ordinary shares or raise money on debentures, or preference shares, or whatever it might be - and settle that.  And then when it came to the pricing, 'What price can you do a million pounds worth of 4 per cent debentures,' or whatever.  Then I came into it and said what I thought was possible, and that would be compared with doing a rights issue and so on.  So all of that was very high quality sophisticated stuff.  

BA: Did you depend on brokers' advice?

MV: Not much.  We did some big things for ICI and told the brokers they were wrong and put the prices up against their wishes.  We'd always try out the price on a broker, but we didn't always follow them.  

BA: And how were the placings organised?

MV: Well, the placings really, later on we would say, 'We're going to take this three million pound rights issue, or whatever it is, to be sub underwritten so much below the market.'  We only once did a deep discount thing not underwritten. It's a disaster. It's a long mathematical thing, but it's the worst thing you can do for the shareholders, the deep discount rights issue.
I suppose at the end of the day for many years, I would say, 'Well the most we could possibly do is 52 shillings, one for four at 52 bob, market price 61 sub underwritten.'  We'd  have an argument with the brokers and the brokers usually accepted what we said, and they got their commission on what they placed.  And there was always the threat that we would place the lot and then they'd get no commission.

BA: How would you go about placing them?

MV: Well, a great deal where we managed the funds, we just put them down for 10,000 across the board.  If it was outside our own management we always did, what was called 'doing' the insurance companies in which we had a representative on the board.  So I would ring Thieman at the Legal & General and say, 'We're doing this that and the other.  We've put you down for £100,000.'  And he would ring back quarter of an hour later, 99 out of 100, and say, 'Thanks very much, yes.'  So it was personal from one of the partners in Helbert Wagg to the head of the investment department in the insurance company offering them so much at such and such a price. The brokers got rather cross about that because they said that they ought to do that and these outside..., but we were fairly tough about that.

BA: So you never placed or organised underwriting or sub-underwriting with Stock Exchange firms?

MV: Oh, yes indeed.  The rest of the issue, say it was two million, and we took one million - half - the brokers would have the other half to go to whomever they wanted to, including the jobbers, etc.  And they'd be free to go to any clients of their own.  Oh, yes, we always gave them a part of it.  But they got at times rather cross at the amount we took, which you see reduced their take home.

BA: Now, in all of this, in the investment management, in the placings and new issues, did you at any stage come into contact with the jobbers or with jobbing firms?

MV: Very seldom, is the answer.  Every now and again there would be some question the jobbers were asking, some technical question; they'd seen the prospectus and they wanted to ask a technical question. And the large fat man, Wilkins, he used to come and lunch with us and we were friends.  But the brokers were very, very jealous of their position with the jobbers, and only on the rarest occasions did they like - well they never liked it - us having anything to do with jobbers.  And jobbers were frightened of offending brokers, although from time to time they did talk to us.  But they were quite alarmed at offending [brokers].  You see their bread and butter came from brokers, not from us, and they didn't wish to offend brokers.  And brokers would have been offended if Wilkins had rung us up and said this that and the other.  So our actual dealings with jobbers were very small and few and far between.  Unless you, some member of the firm, happened to have a pal who also happened to be a jobber and they had lunch together - that sort of thing.  But as a firm, the answer was practically nil.

BA: What would be the kind of things that say, a person like Dick Wilkins would ring up about?

MV: Well, he'd probably ring to say that he thought we were making a great mistake, the brokers had decided only to go to two jobbers for this particular issue.  And he thought that there ought to be four in it.  And also we'd cut the market to ribbons and they wouldn't be able to make a decent market.  This was usually a complaint, and that they must have a bigger share of the issue in order to be able to make a market.  This of course was in the hope that, priced at 99 it would start at 101 and they would have on their books £100,000 with two points profit before they started; very understandable.  

BA: Did you have any personal friends who were jobbers?

MV: Yes, I did.  They weren't great friends, but I knew quite a lot of men who were jobbers.

BA: Were these people who were senior partners in firms?

MV: No, they could be anything.  They were mostly my own sort of age group, inevitably, that I'd known for years.  I don't think there was... nobody comes to mind as a particular friend but I knew quite a lot of them.

BA: Where did you come into contact with the jobbers who had been friends of yours?

MV: Well, I think really it was school, or meeting them at lunch.  Quite often if you went to a broker there would be a jobber there and then you had a chat. Socially; there was no particular area that one met them in.

BA: Do names like Durlacher or Powell or Merriman ring a bell?

MV: Yes, and there was a fellow called Tony Headley.  I have great difficulty in remembering anybody's name, or getting it right.  And I never knew so many but one knew a range of jobbers.

BA: Now by the early '70s, I believe, some of the investing institutions and certainly the merchant banks were becoming a bit dissatisfied with the level of commissions that they were paying.  And at the beginning of 1974 they set up this thing called 'Ariel'.  Before I ask you about that, could I ask you again the same question as earlier: how had the investment management side of things in the banks developed by the early '70s?

MV: Well what we were finding was, that the stockbrokers were really getting too big a cut off the joint, and we had a great effort through the Accepting Houses Committee going to the Stock Exchange Committee and saying, 'Look here, something has got to be done about this.'  The commissions on gilt edged were absolutely ridiculous.  Originally, you see, it had been you shared the commission 50/50 with the stockbrokers; then it was altered to a third, by the Stock Exchange, and then to a quarter.  And really stockbrokers for taking no risk of any sort or kind were really being too well rewarded and we were getting crosser and crosser at the Accepting Houses Committee meetings and they refused to budge.  Well then we had various meetings with them and they refused to budge, and I remember one of their most senior chaps say, 'Of course what you want is to share in our profits,' which was perfectly true but they were just doing too well.  We were giving away, I've forgotten now the figures, but huge sums for those days in commissions to stockbrokers, nearly all business we'd created.  

BA: Had you'd been dissatisfied with the amount of commission you were paying for a long time?  Was this a cumulative thing?

MV: Yes, this went on; it was a cumulative thing.  It had been going on for a number of years. I think that it was thought to be rather dirty work, that the half-commission was cut during the War when we were all doing very badly and the Stock Exchange rushed that through.  And then they rushed through a further cut, which made them very unpopular as a body.  We all felt they'd ceased to be the sort of old fashioned gentleman's club.  They'd got to become a proper thing.  So the Accepting Houses, finally getting very cross, started to investigate what turned out to be Ariel.  This of course frightened the Stock Exchange very much, and almost immediately, the produced reduced commissions.  Ariel never really quite got off the ground, but of course was the forerunner of the whole automated system which operates today because Ariel matched buyers and sellers.  And considering the complexity of it, it didn't do at all badly. It did a perfectly good job.  The brokers, of course, were passionate against it and we had fairly armed warfare over the .... I was Chairman of the Accepting Houses Committee when we decided to go in for Ariel, and not all the members of the Accepting Houses Committee were so enthusiastic: some of the smaller firms didn't have a lot of Stock Exchange business, didn't want to offend brokers, and thought they wouldn't bring them business.  

BA: Were there particular banks who were very keen on it, by the same token?

MV: Yes, well I think that Schroder Wagg as it then was, and Morgan Grenfell and Lazards and Barings, were all distinctly keen on Ariel, and Kleinworts. It was the leading merchant banks who were really keen about it - the big seven - and the others Brown Shipley & Co, you know, they followed us.

BA: Was there a sense in which you were made to feel you weren't playing the game?

MV: Yes, I think that this was regarded as dirty work and taking money out of the stockbrokers' mouths.  But there were, of course, a lot of stockbrokers who disapproved of the attitude of their Council.  And there were a lot who really felt that the Council was packed full of baubles.  There's no question Ariel did create a lot of animosity.

BA: How would you describe the Stock Exchange Council in the early '70s, having had some contact with them?

MV: Well, Martin Wilkinson, from memory, was Chairman then.  He was a very nice man and a personal friend; devoted, I think, to defending the Stock Exchange with a ring fence and all the rest of it, absolutely to the nth degree.  The next fellow, from memory, only lived about six months, and I think was only designate, did he become Chairman? I can't remember.

BA: It was Marriott.

MV: Marriott, yes.  Very nice man, and I think he was only there for six months.  We were getting on better with him.   We never expected them to like it, but if they wouldn't play ball... Our claim on the thing was that we produced business.  And then we had the tall, thin fellow who's just retired...

BA: Sir Nicholas Goodison.

MV: Nicholas, whom I never had a cross word with.  We got on very well.  

BA: Did you feel as a group of people they were thinking in terms of the future and were thinking about the changes taking place?

MV: Not until Nicholas came, no.  They were fighting for the past, I think.  I was never present at a Stock Exchange deliberation but I think they were fighting to hold on at all costs, and didn't like what amounted to cutting them out of the business.  But an awful lot of business, of course, was beginning to be done outside the Stock Exchange.  The Pru, all the big boys were in it and doing business outside the Stock Exchange.

BA: Can you elaborate on that a little bit?

MV: Well, the pension funds were becoming much bigger and some of them [were] not managed by houses, but had their own managers.  So a manager of the Coal Board pension fund, who'd got something big to sell, was perfectly capable of ringing up the Pru - he knew what the price in the market was - and agreeing a price with the Pru without a broker or a jobber.  

BA: Now you say that that was beginning to take place.  How much of a market existed outside?

MV: Very difficult to tell. I don't think much.  It was happening but I don't think it amounted to a lot, myself.

BA: What about the merchant banks?

MV: If we didn't place the thing in house, we usually went through the Stock Exchange. But by no means always, particularly when they were being so bloody over-commissioned.  So that if we had a big job to do, we were perfectly capable of doing the whole thing with our friends the insurance companies and our own pension funds, and say Barings and Rothschilds, and not go near the market.

BA: Were the American merchant banks beginning to have some influence?

MV: No. If it was an American issue, and American thing coming from America via an American bank, yes.  But in the ordinary way they didn't exist.  We wouldn't have thought of ringing up Morgan Guarantee or the Chase, or any of those people, wouldn't have occured to us.

BA: Was it very difficult setting up Ariel?

MV: It was complicated technically and it took a very good chap, Charles Clay and... can't think of his name, about a year and a bit to make Ariel a runner.  And it was, as you know, a display system: what was on offer at what price.  And of course the weakness in degree was that the prices were based on the Stock Exchange price.  With no Stock Exchange, Ariel would have been lost.  That was really it's weakness, which we knew all along.  But it did quite a lot of business; it mostly paid its way, then it gradually ....  I don't think the merchant banks put enough umpf behind it.  I think you could describe it as on the whole a Stock Exchange victory because it did not come off and then they started their own thing.

BA: How did you go about getting people to use it?

MV: Well, really through the merchant banks.  You see, we all had some money in it.  All the seventeen accepting houses, through their support of the Accepting House Committee, had all got some money in it.  And what was hoped was that it would pay jolly good dividends and that these people who had backed it would use it.  But I'm afraid my own firm was very slack over using it.  

BA: So what eventually happened?

MV: Well eventually it became the dealer for, I think I'm right in saying, after I'd gone, for Commodities, the commodity clearing house.  And most people sold their shares to that commodity clearing organisation.  And I think most of the accepting houses then got out and it was then used for another purpose.  It stirred the pot and I suppose it did some good because it certainly frightened the Stock Exchange, and I suppose it paved the way for their present dealing system.

BA: Did you lose any face over it?

MV: Oh, I think so, yes.  I'm sure the stockbrokers were crowing and saying, 'Ha, ha, ha, this is no bloody good.  These clever accepting houses, we'll see them off.'  And to a degree it's true.  

Tape 2, side 1

MV: We were altogether way ahead of them in resources and stability, and in standing.  It was only a bit later, you see, that chaps at, in particular Morgans, various of them, became too hot to handle. So that our general position wasn't in fact greatly impaired by having made - I don't say asses of ourselves - but having done something outwardly damaging to the Stock Exchange which wasn't all that damaging.
 
BA: What would you say had caused its demise, that is the demise of Ariel?

MV: I think it was the failure of the merchant banks to use it in the way that they had said that they intended to.

BA: Why do you think that was the case?

MV: I think that the dealers in their dealing rooms simply found it easier - not necessarily cheaper but easier - to deal with brokers than with Ariel.

BA: How did you feel, apart from the issue of commissions, about the service that you were getting from the Stock Exchange?

MV: I think most people grumbled, but I think they would have grumbled anyway.  Because, if they recommended you to buy something and it didn't go up as much, you grumbled at that and if it fell you grumbled.  I think that there was always a grumble against stockbrokers, partly justified, because the stockbrokers wanted to sell something, that's how they lived. So they wanted you to buy it or for you to sell something which they were going to sell; but they wanted you to do something.  And of course, quite often, the best thing to do is to do nothing.

BA: Had this always been the case or was it emerging as an issue during the '70s?

MV: No, no, I think this was always the case.  And of course stockbroking profits were feast or famine. They expected to have two very good years, followed by three very bad ones.  And none of the firms had any capital, tiny capital they had, so they'd got nothing to rest on except the profitability of the firm during the year.  Then there would be, if it was very profitable, there was a huge bonus; not so profitable, no bonus.

BA: As far as the actual trading was concerned, you found you were able to do what you wanted to do on the Stock Exchange?

MV: Not always, no.  If it was very big stuff we'd got to go to the big institutions and talk to Baring and Rothschilds, the Pru and the Pearl and the Legal & General; that was the standard stuff, and maybe the odd pension fund coming up, to get the business done.  The Stock Exchange could not have handled it.

BA: Now what kind of business; would that be an issue?

MV: Either an issue or some very big seller of something.

BA: How often would that happen?

MV: Not often, two or three times a year. Not often.  Usually the amounts were quite handleable.

BA: One thing the jobbers used to get angry about was the breaking of a large order into smaller chunks.  

MV: Oh, yes, they wanted the lot always, and they didn't at all like one going to the Pru and the Pearl, etc - the Stock Exchange didn't like that either, the stockbrokers didn't like it, or the jobbers because they wanted to handle the whole batch, they wanted the whole thing because they got a commission on the lot, very understandable.  What we wanted to do was to do the business.

BA: What about the issue of breaking up the same order into smaller chunks and sending different people into the market?

MV: Well, I think that, myself, was disastrous.  I think it's the one way to send the price down.  We had a friend whose brother went and died on a Saturday.  And if you die on a Saturday you can choose your date for death duties, either the Friday or the Monday.  And he rang me up and said what did I think was the best way of getting a share price down on Monday morning, in share that hadn't got a frightfully good market anyway.  And I said, 'Well, you get hold of one broker to go in with 20,000 shares first thing to sell, and about a quarter of an hour later you send another broker in with 10,000 shares to sell; and half an hour later you send a broker in with 50,000 shares to sell.  And you then employ about six more brokers with about 30-40,000 shares each to sell and I think that ought to wreck the price by the end of the day,' which he did, and it did.  What frightened jobbers always was different brokers coming in with different parcels of the same share, and nothing put the price down faster.  So I regard the idea of sending in half a dozen fellows with parcels, either to buy or sell, as foolish.

BA: Did you feel you could, as a merchant bank, influence the price of a stock?

MV: Not really.  One could say what one liked and quite often you could buy... We did over Stewarts & Lloyds, when Stewarts & Lloyds was de-nationalised and it was a flop; everybody thought it was going to be a great success and the whole future programme depended on Stewarts & Lloyds being a success.  It was 3d premium or something.  So we got together a syndicate that agreed - Rowe & Pitman were the principal brokers - that Arthur Anderson would go into the market and bid 6d premium for all the shares that anybody wanted to sell - take anything, any quantity - which was just above the jobbers opening premium of 3d. And it being Rowe & Pitman and it being known that we'd were the lead bank behind it, this was taken seriously. And we'd got together this syndicate late on the Saturday night, most people had gone home, of 2 or 3 insurance companies, ourselves which was Helbert Wagg in those days, Barings, Morgans, and Lazards I think it was, about five of us.  And at the end of the day, with hardly buying any shares at all they were a shilling premium, and the next day they were 2 bob premium. It was partly bluff and partly the fact that it was a very good share - Stewarts & Lloyds - and brought it off.  This was copied in degree for the BP issue.  It was a case of giving confidence, and having the money behind you.

BA: But this was not something that was done frequently?

MV: Once in five years, if that.

BA: Let me begin to ask you a few concluding questions, again drifting back to the jobbers.  In your experience in the City, did you ever know of cases where fund managers would occasionally speak to the jobbers directly, this is of course not in the spirit of single capacity?

MV: Quite.  I'm sure they did.  Fund managers who became very uppity and all the rest of it were very happy to have lunch with jobbers, and brokers and bankers, and wouldn't have regarded any of the old taboos as applying to them. Oh, rather.  And some of them, of course, had a poor reputation, some of the fund managers, from the financial aspect.

BA: Was this ever a concern to you as a person on the Board of a number of insurance funds?

MV: Well we had to keep an eye on it.  We were a bit concerned with one or two chaps. And of course it wasn't unusual.  There was a general manager of the Midland Bank who was well known when there was a good issue going, a wise broker offered some underwriting to his wife, in the days when underwriting commission was not subject to tax.  So one had always been aware that there was a risk of somebody wanting to feather their own nest in any of the businesses.  We had a fellow who got the sack who bought things in the morning and if they went up he kept them and if they didn't somebody else got them.  There was always bees and honey.

BA: I've been told that the person who managed the pension fund for BP, who I believe you were a director for, enjoyed, well was known occasionally to speak directly with the jobbers because he preferred doing things that way, not for his own personal gain.

MV: No, I'm sure he would.  It's a free world, there's nothing to stop anybody - Butterfield - there's nothing to stop anybody ringing up anybody.  And I'm sure he was a very opinionated tough man and he wouldn't have taken 'no' from anybody. If they'd told him, 'You mustn't do this', he wouldn't have taken any notice.  I'm sure lots of them did.

BA: Did you ever think about single capacity and the separation of capacities?

MV: Not in my time.  It hadn't come to the fore at all in my time.  I'm doubtful about it.  I mean a jobber is a very different animal to a broker and now they're having to be both.

BA: Did you feel there were any strengths in the old method of separating the functions in the Stock Exchange?

MV: Well, I think that the jobbers did fulfil, there's no question about it, for many years a very useful function in ... They were the market and were dealing with a couple of a hundred firms of stock brokers so that when a broker had a selling order, the jobber knew a huge number of brokers who came to him and in due course the business was done, or the jobber took the whole risk just on his book straight away.  It's very difficult to tell.  I suspect there were many occasions when dealing that way got a better price for the seller than the present method.

BA: Finally, again reviewing your long experience of the City, where would you say the jobbing firms as partnerships fitted into the scale of things in the City? Would they have ranked with the merchant banks? Would you have simply classed them along with the brokers as fairly small outfits?  Did they have any clout, that's what I'm getting at?

MV: No, except one or two personally like Dick Wilkins.  But the smaller jobber firms had absolutely no clout at all. They lived on the backs of the bigger jobber firms.  They really had no clout in the City of London at all.  They were a useful part of the machine, but clout, no.

BA: You mentioned again Dick Wilkins and maybe one or two others.

MV: I'm trying to think of their names but there were jolly few of them.

BA: What would that have consisted of? Their contacts with people like you?

MV: I think their personal, extraordinary shrewdness of knowing the people they were dealing with, knowing the stocks they were dealing in, and I think they just were frightfully shrewd and they would have done very well in whatever business they had gone into.  They mostly had started at the bottom of some firm or other and got up just through ability, and they had that particular ability, and usually very little other ability.  

BA: Well, I think we can finish on that note.  Thank you very much.