SO WHAT BANK WOULD YOU LIKE?
Just what type of banking system do we want? It´s not often we get the chance to choose, but the actions and opinions of the EU authorities on our banks may well have thrown this whole question open.So do we want big banks? Big does not necessarily mean strong as it used to before the banking earthquake. Do we want small banks? Small may not have the necessary cost efficiencies to survive, and also small may not be strong enough.
No, what we need are properly functional and functioning banks. We need banks which can be both scalable and provide deeper facilities, but also enough of them to provide a competitive and more efficient market.
The agreement to separate out Northern Rock´s good quality bank from its ´manure bank´ is to be welcomed as only then will the management be properly freed to start growing the business more effectively when released from the shackles of the inherited horrors. However, just relieving the beleaguered Rock from its position is only part of the solution and, if not followed up, could be part of the problem. What we can´t then have is a clean Rock offering market winning facilities when the competition is also hobbled. Action needs thus to be taken, and in short order, on the other banks and most especially Lloyds and RBS.Just think what we could create. Edinburgh could get the once venerable Bank of Scotland back, Yorkshire could retrieve its once leading mortgage provider and regional icon, the Halifax, and even the TSB in Scotland could see the light of day again. The reality though is likely to be less bold with, I suspect, a sell-off of a few brands like Insight and branches of Cheltenham and Gloucester – not very imaginative and not enough.
How about RBS? Maybe the primary brand for England will be Nat West and the Royal name kept for North of the border and also for the still significant international investment banking business. How about bringing back Williams and Glynns, which I recall had an excellent reputation as a retail and commercial bank for maybe a premier brand? And of course, there is also the Coutts brand which, despite the devaluing of the exclusivity of the brand by its unimaginative corporate owner over the past few years, could still be saved and revived. Perhaps the staff and management should start a campaign to ´Free Coutts?´ There will also be the niche Edinburgh based bank of Adam & Co which could be separated, but for my own personal and totally selfish (and probably no more than emotional) wish, I would like to bring back the Drummonds bank brand, if only to remind me of the days of the branch just by Admiralty Arch.
In fact we could have an array of great brands if we wanted, all of which could provide healthy competition if properly capitalised and managed. Of course there is the problem – who would want to buy them and who can give them enough capital and marketing drive to revive these great brands? Well of course we do know of at least two companies lurking in the foyer. Just maybe the likes of Virgin and Tesco might want to pick up such names and add them to the top end of their prospective financial ranges?
On the other hand there are other entrants as well which could also have an impact. The Chinese have already entered the UK mortgage market and a further extension of this is quite probable and, given the lack of capacity in that market, any such addition must be a benefit not just to mortgage applicants but to homeowners if transaction volumes start to increase again. Additionally there are some smaller very exciting technological innovations beginning to make their presence felt such as Zopa, which cuts out the middleman and matches lenders directly with borrowers. The line to draw from this is that commercial banking is changing – and after what has happened over the past year, then it has to be only for the better.
However, just being a retail bank today is no guarantee that you will make a decent profit. Only last week we saw the rather small fish of Standard Life Bank being snatched up by the Barclays eagle. Starting from scratch, the bank has been going for some eleven years and has cost the company apparently some £85m. Sadly the removal of another banking participant will further reduce competition and especially one which had started with a reputation for market leading initiatives and had forced some of the larger banking mastodons to react.
Inside this issue:
Not being prepared to pay for advice - Robert offers some sage reflection
So what bank would you like? - Justin Stewart offers an interesting viewpoint
Wealth Creation Specialist - November 2009 Newsletter
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There is no such thing as a free ride, so the saying goes. Why is it that when it comes to financial planning so many fondly imagine a professional with years of hard earned experience is going to spend his or her time either giving this advice away or speculating on a possible sale to earn a commission. Financial Journalists are partly to blame for raising the expectation that good advisers will give away free advice. Strangely few of them write columns for free…
The question to be asked is why would anyone with experience and qualifications, that cost them money to earn, give away the only thing they have to sell? You should be suspicious of those who offer something for free. Is their advice worthless? Do they have a hidden ‘sales’ agenda? Do they cross-subsidize those clients who take the free advice with those who pay through commission? If so, steer well clear. You don’t want to be paying for someone else’s advice!
There is nothing wrong with your Adviser earning a commission, provided you both agreed how the advice was to be paid for at outset. Furthermore, it is well worth paying for ongoing advice. This might be available from the investment/product supplier recommended. On our website, ‘Top Tip’ No 2, speaks about using tax allowances. If you do not use these properly, you could end up saving perhaps £500 - £1,000 a year in ongoing advice costs and squandering thousands every year in lost tax allowances.
Remember the old adage – ‘You get what you pay for’!