In a special series, leading City figures give us their recollections of Black Monday, 30 years on from the great crash of 1987. This is what co-founder of Hargreaves Lansdown, Stephen Lansdown learned.
We were in offices in a building called Embassy House, which was over the road from Habitat. My memory goes back to the Friday because it was the storm.
Double coincidence in that sense, but you had that storm going on and then Wall Street went into a panic on the Friday. I remember a fellow director at the time, Sean Kingston, phoned me up saying what are we going to do? I said we can’t do anything until the Monday anyway.
Monday came and I can’t remember the guy’s name, but he worked at Mercury Asset Management and he said he was doing a presentation on investing in equities at Wall Street and he couldn’t understand why everyone was leaving. He came out with an interesting point that the only reason the market stopped where it did that day was because it closed. It was in free-fall and he’d never seen anything like it before in his life.
I just remember where we were in a scenario sitting around a boardroom table. We didn’t have a discretionary service, we were very strongly focused on advisory. We had clients’ certificates all across the table and we were trying to sell some of these funds and basically the unit trust companies took the phone off the hook and weren’t answering the phones.
The only business that answered the phones was Framlington, but they did no business with intermediaries, so they knew they weren’t going to get any orders, so they were fine, but they made a big player of that.
But the industry went into meltdown because you couldn’t deal in anything and suddenly you realised from that if you want to do something quickly, you’ve got to have discretion. So that’s when HL started to develop a discretionary service. It wasn’t big at that time for a long while, but it grew into what it is now.
It was a frightening experience. I do remember a guy, a client, Mr Pearce, phoned me up and his first comment to me was 'I’m surprised to get hold of you, I thought you’d have jumped off the suspension bridge'. But it cost a penny to go on it and I thought I haven’t got a penny.
But you learn a lot in those situations because again common sense prevailed- markets came off, bounced back a bit, then came off and we had a long bear market until things turned around again.
In the years after that, investment trusts started to take the centre stage because unit trusts lost their market then. They didn’t deal and they let their clients down. They ran and hid and you can’t afford to do that. You don’t run and hide, you stand there if you can’t do anything else, you at least sympathise with your clients.
Investment trusts took centre stage, saying you can sell us, and that’s why we formed Hargreaves Lansdown Stockbrokers because we didn’t want to load 3% [commission] on the front and do it that way. We said if we deal with them, we’ll do it properly in the market.
1987 was one of those periods that you don’t want to go through again, but it actually made the business stronger because you learn from them and you’ve just got to hold your nerve.