Putnam’s Haldeman gives mea culpa at Tiburon summit

SAN FRANCISCO — Charles “Ed” Haldeman Jr. has told his peers that he shares blame for the publicity fiasco that nearly sank Putnam Investments.

SAN FRANCISCO — Charles “Ed” Haldeman Jr. has told his peers that he shares blame for the publicity fiasco that nearly sank Putnam Investments.
The Boston-based chief executive of Putnam failed to grasp how his attempts at a quick settlement with the Securities and Exchange Commission would play to the public, he told the crowd at the Tiburon CEO Summit here this month.
“I deserve some of the blame [for Putnam being pilloried by the media], because we were so transparent” during the aftermath of the 2003 scandal, Mr. Haldeman said.
The mistake was misjudging how state regulators would react. Instead of seeing Putnam’s forthcoming approach as guileless penance, the securities cops saw it as a rush to get off the hook. The public, fueled by the Boston media, joined in in that view, Mr. Haldeman said.
But his intent was to keep investors from thinking their cash was at risk.
“I thought it would help to get the SEC to say it’s not a black hole,” Mr. Haldeman said.

Slowing the process
But the public thought the SEC was going too soft on Putnam.
“That made the SEC gun-shy in working this out,” which slowed the process and cast Putnam in an unflattering light, Mr. Haldeman said.
Power Financial Corp. of Montreal, which is acquiring Putnam, wouldn’t have agreed to the deal had the fund company not come up squeaky clean in the due diligence process, he said.
Other CEO-level speakers who took the stage or joined in discussions at the San Francisco Ritz-
Carlton hotel didn’t have to engage in such explanations.
John D. DesPrez III, chief executive of John Hancock Financial Services Inc. of Boston, PowerPointed his way to a case that his company — as the largest U.S. insurer after New York-based American International Group Inc. — is Johnny on the spot for providing safe, predictable income to Americans in coming decades.
That is because there are $500 billion in the private sector and $285 billion in the public sector of underfunded pensions, a poor saving rate and an actuarially unsound Social Security system, he said.
People are going to thirst for the certainty that only life insurance and annuity-like products with assured income can provide in this atmosphere, Mr. DesPrez said.
Hancock is better equipped to take on the risk of selling annuities to a population whose life expectancy keeps increasing, because it has an implicit hedging strategy, he said.
“We have a massive hedge — life insurance.” Mr. DesPrez said.
Yet in response to a question from the crowd, he admitted that even Hancock has limits.
“At some point, there will be too much risk for us to absorb,” Mr. DesPrez said.
One solution could be for the federal government to create the equivalent of the Federal Deposit Insurance Corp. for companies that sell guaranteed income, he said. The FDIC insures bank deposits.
And James S. Riepe, retired vice chairman and senior adviser to T. Rowe Price Group Inc. of Baltimore, cast doubt on Mr. DesPrez’ presumption that traditional mutual funds will give way to newfangled insurance products.
“You hear how we’re moving from the accumulation to the distribution phase. I think it’s overblown,” Mr. Riepe said.
“The idea that the pendulum will go from one side to the other is false,” he said. “The Gen Xers are coming along.”
A loss of intimacy
This high-level repartee among industry heads came amid the efforts of Charles “Chip” Roame, managing principal of Tiburon (Calif.) Strategic Advisors LLC, to take the conference upmarket. The event, held in the San Francisco offices of Los Angeles-based law firm Paul Hastings Janofsky & Walker LLP in recent years, moved this year to the crystal-chandelier-bedecked conference rooms of the Ritz-Carlton.
Attendance grew from 75 participants to more than 100.
One attendee grumbled that the summit had lost as much in intimacy as it gained in horsepower. The executive missed the natural light and intimacy of the law offices — though somewhat cramped — compared with the dark, cavernous basement rooms of the Ritz, he said.
But most attendees applauded the upgrades, and Mr. Roame said that the event retained its essence.
“We went to the Ritz and grew [in size], but we were able to retain our scrappy open atmosphere,” he said.
Certainly this was true of the four feisty people who made up the summit’s consumer panel — three of whom showed contempt for receiving financial advice from any professional.
Asked by an executive for his view on how “long term” should be defined for investment purposes, one panelist brooked no doubt.
“I guess death would be long term,” he said.