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Martin Bamford: Consumers lose out due to misplaced trust in banks

My trips to the bank are, thankfully, few and far between. Earlier this week I made one of those rare visits to pay in a cheque. With only a couple of people in front of me in the queue, I decided to wait for a cashier rather than fill out the paying-in slip and drop in an envelope instead.

Eavesdropping on the conversations of other banking customers is often enlightening. In the past I have witnessed questionable Isa advice and attempts to put customers in front of the ‘financial planning manager’ to move new cash deposits into investment products.

This week it was an elderly lady worried that the local branch had been sold off and would be closing down (“no, and neither are the other seven branches you asked about”), and then another elderly lady asking the bank to stop sending her so many emails (“they weren’t from us, they probably came from Nigeria, just delete them”).

It seems that, despite rigging rates and facilitating money laundering for drug barons, our High Street banks are beyond reproach. They never seem to get things right, but they never receive the killer blow to their reputations that see customers leaving in droves either.

Even their contribution to the global financial crisis, pushing the UK economy into recession and creating financial hardship for millions, does not appear to have been enough to convince the average customer to seek an alternative.

Maybe there are no truly viable alternatives. We have seen an innovative banking service crop up in the form of Metro Bank, which has grand plans for the future but limited coverage at the moment. Online banking will also only appeal to so many customers; the old lady asking at my bank about branch closures probably isn’t going to bank online, and the one who thought the phishing emails were coming from the bank itself probably shouldn’t ever bank online.

When the Co-op acquisition of over 600 Lloyds branches takes place, there could be a little more competition in the market. Or perhaps nothing much will actually change; the same staff will be dealing with the same customers, who will have the same mortgage deals.

Assuming that nothing will really change in the seedy world of banking – customers will remain loyal to their local branch and bank bosses will keep squeezing massive profits out of them – is it time for us IFAs to promote our roles as the saviours of banking customers more actively?

I have, until now, resisted the temptation to escalate my in-branch behaviour from unavoidable eavesdropping to an actual intervention to protect a vulnerable customer. As tempting as it often is to jump in to prevent another structured product from being mis-sold, I suspect few would thank me for this minor act of heroism.

As the part of the retail financial services sector responsible for the bulk of reputation damage and negative headlines, we need to sever the link between banks and financial advice. There is a clear distinction between the sales activities of the banks and the advisory or planning services delivered by IFAs.

Helping bank customers realise this distinction when they remain stubbornly loyal to their local branch is the real challenge we all face.

Martin Bamford is managing director of Informed Choice


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There are 7 comments at the moment, we would love to hear your opinion too.

  1. man on the moon 27th July 2012 at 9:11 am

    Timely article Martin, had the same conversation this week with a good friend.

    Ulster Bank had a lost month for customers which is being moderately replicated with Natwest. Chaos for many. The Staff are under enormous pressure to get sales and leads. Pressure of a Disciplinary nature – where are the FSA in this mire? Fred the Shred brought in the Performance Improvement Program for staff, filed under the Disciplinary section of the HR handbook.

    Libor machinations which most of us truly don’t understand. Money laundering micro deposits whilst large transactions globally are ignored.

    Plus mismanagement globally that have put the Taxpayer in hock ad infinitum.
    The list goes on.

    But the elderly lady may still like to get her Book stamped at the Branch and trusts the Bank Pillars.

    We do need to do more to divorce ourselves from the Banking side of Finance to highlight our Benefits to consumers.

    I once had the displeasure to deal with a Marketing Exec from a toxic soft drink company who told me that WE had messed things up. I asked who WE WERE?

    The response the Banks, my reply was direct to establish all and any distinctions.

    Oddly enough we need Banks and we shall in the main continue to use them.

  2. Dear Martin

    In essence this is nothing new.

    Years ago when Coutts was taken over by Nat West people still thought it was a Private Bank and Nat West did nothing to disabuse them
    Gullible people were taken in by a fancy chequebook and a plummy voice and didn’t notice they were getting a very poor rate of interest relative to what was available AND they were paying for the privilege. I have had no small number of clients who have closed their Coutts accounts.

    I would extend your remarks to encompass Insurance Companies as well. In my experience the general public (or at least my clients and acquaintances) hold them in equal low regard.

    However as far as banks are concerned we may
    hopefully live to see a partial unwinding of the results of Big Bang and that the high street bank will be isolated from the investment banking sector.
    At root high street banks are a utility and as you very rightly point out we can only hope that the likes of Metro grow to give the established players a real incentive to change their ways.

    One of the advantages of being a wrinkly is that I can remember when the Bank Manager (an extinct breed) was an esteemed member of society. A member of the Rotary and Golf Club, known and respected in his local community, with the authority to act on his own initiative. I even recall that back then if you needed life assurance or a pension, the manager used to refer you to a broker! Were those the days? (Before my time in financial services).

  3. A great article and I would totally agree with its idea that IFA’s needs to offer a real alternative as the marketplace is in desperate need of such an alternative.

    RDR offers advisers a real chance to provide a different service to the normal adviser product led sales routine that has blighted financial advice for so long. With the apron strings being cut maybe it’s about time the IFA’s start to really think outside the box and how we can provide high-quality financial advice that benefits the consumer but does not necessarily always lead to a neat products sale.

    What made that conversation with the old ladies in the banks so insidious is that there is a pre-sale conversation trying to persuade somebody to switch money from deposit-based to some product without actually understanding the client’s own situation.

    I know many people who read articles on this website feel that the FSA has got an awful lot wrong in RDR but that break from commission to fee charging is so important and is also going to have providers quaking in their boots as they will only be able to differentiate their products on service and performance and not by enhancing commission rates as in the past.

  4. Interesting that bank staff are being put under disciplinary for sales issues. Back in the early 90’s I had the same issue – was fortunately made redundant before it went all that far.

    Still, I had the very satisfactory expereince of bumping into my old regioanl manager a few years ago, and responding to his question of “have you had much contact from our old head office over customer complaints” was able to reply “none – you may remember sticking me on discplinary because I wouldn’t sell rubbish products……” . Don’t you love it when a plan comes together…….!

  5. man on the moon 27th July 2012 at 1:33 pm


    I was an IFA for a Bank who moved to dramatically reduce that channel in favour of their own in house insurance company. Shiny and new with products that were simple, straightforward and in comparison not as good as those we advised on before.

    Trust Banks at our peril, people.

  6. How do you find the time to state the bleedin’ obvious so often?

  7. YAWN !!!!

    Anyone would think this is something new – what goes round comes round.

    As far as ‘providers quaking in their boots’ I know (I REALLY DO KNOW) there are contingency plans in place with a number of providers when the old balance sheet collapses as a result of RDR – stand by for commission mark 2 when they run to the DTI bleating about restriction of trade etc etc (same as in the late 80’s ROLAC)

    Give it a few years – and we always end up back where we started – all the new model wealth managers just dont know it yet and still looking through rose coloured glasses – exams on the wall and no bloody clients runnning into their offices arms aloft crying charge me a fee pleeeze I want to buy what you are selling !!!!

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