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Banking on a big shift in power

The banks are crossing the i&#39s and dotting the t&#39s in their silent coup over British financial services.

A merger of the ABI and the British Bankers&#39 Association is now on the cards, a move which is opposed by this newspaper.

Of course, the banks and insurers will say they are simply recognising the situation on the ground. Many insurers are bank-owned or have significant bank distribution.

It is true that the balance of power in distribution may be shifting. Banks expect to take a increasing share of the investment and pension market with the regulatory playing field due to be tilted dramatically in their favour.

But how much will they take? There is a danger that the merger will lead to a trade body ignoring or even misrepresenting the needs of the main distrib-ution channel – intermediaries – and their clients. Those who are great believers in bringing costs down should look carefully at how term insurance providers which concentrate on banking distribution have lost market share among intermediaries because it costs too much.

Banks have neatly avoided any blame for “commission bias” despite distributing significant amounts of the products under scrutiny.

To get things in perspective, the merger makes sense for those involved. But for those now realising just what a mess the 1 per cent “yes men” have left the industry in – thought to have included some banks – a merger may not make sense.

If the message coming out of the insurers&#39 trade body gets distorted following a merger, brokers should be worried but so should fund managers,the regulator and the Government too.


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