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Time and tide wait for no bank

I can just about take the fact that yet again the Germans have managed to show us how to play our national game. However, when they are also giving us a good hiding when it comes to innovation in the personal finance market – an area in which the UK has previously excelled – something must change.

A few weeks ago at the UK Retail Finance Forum organised by Forrester, there was an insightful presentation by Frank Nuy, an executive board member with, the personal finance portal being developed by Deutsche Bank.

He explained how moneyshelf is being established as an impartial source of information and advice for consumers. Listening to his presen-tation, it was clear that moneyshelf is aiming for the moral high ground and that, although Deutsche Bank products will be shown on the service, they will receive no preferential treatment. The primary aim is to secure a position of trust with the consumer.

It was easy to recognise the similarities between moneyshelf&#39s proposition and the IFA market in the UK, even if the delivery channels are different.

I was greatly encouraged to see a major global financial institution recognising that the emergence of new media services is changing the way people will look for financial services and recognising that they need to change, too.

So how do things compare in the UK? It is true that we are seeing an increasing range of online personal finance services from infomediaries, while IFAs are making growing amounts of information available to consumers. However, there is at least one sector where some of the players do not seem to understand the need for such advances. I refer, of course, to the major building societies turned banks.

In recent weeks, we have seen actions by both Halifax and Abbey National that can only have the effect of undermining the ability of consumers to access best advice on financial products.

First, Halifax decided to close its IFA division. This is a bizarre decision for a whole host of reasons. Apparently, it was reached after a strategic review. But did those who conducted this review understand anything about financial services? To expect, as Halifax app-ears to have done, a salesforce of committed IFAs to agree suddenly to drop their independence and only offer investment products from a single provider requires a degree of ignorance about what makes IFAs tick. It is ironic that Halifax had one of the most valuable IFA salesforces in the country as they were highly trained in the use of technology.

What really makes this action unbelievable is the fact that it is well known that several other banks and building societies are looking to aggressively grow their presence in the IFA market. You only have to look at the price paid recently for Chase De Vere to realise that quality IFA businesses are at a premium. Yet the Halifax effectively throws its IFA business away – an interesting way to try to create shareholder value for an organisation whose equities have tumbled from around £8 to little above £5 in less than 12 months.

Many banking institutions see independent financial advice as the ideal extension to the online banking services they are being increasingly successful in persuading their customers to use. But as more and more services make comparative information available to consumers, unless you can remove your products from comparisons, they will be revealed for what they are. If that is something less than market leading, do not expect to succeed.

Even bolder in its attempts to deny consumers the best in advice and products, it seems Abbey National is seeking to force a number of infomediary sites to withdraw the lender&#39s mortgage products from consumer-facing websites.

One website in particular,, is taking a stand against Abbey National&#39s aggression and refusing to comply. It would appear that those in Baker Street have not realised that we have advanced beyond the days when it was necessary to employ Sherlock Holmes-type tactics to track down details of the best mortgage rates.

Recent research suggests as many as 30 per cent of all borrowers now begin their mortgage search by visiting one of the many internet-based mortgage search facilities.

Back in the old days, many borrowers would simply have taken a stroll down the high street and compared offerings from a few lenders. However, more and more borrowers prefer to let their fingers walk over their keyboard to examine their options.

Conveniently, Abbey National claims the sites about which it is complaining are not complying properly with MCCB requirements. If this is the case, why is the MCCB not acting swiftly to protect the public? If there was genuine cause for complaint, I would expect the fledgling quasi-regulator to relish the opportunity to show its teeth.

It would appear, however, that when examined in the cold light of day on its merits rather than its brand strength, Abbey&#39s loans are performing rather less well than the position they hold as second-biggest mortgage lender. According to Moneysupermarket&#39s Simon Nixon, Abbey National is only the 10th most popular lender rated by the number of searches carried out in its site.

E-commerce is a great leveller. Products can be judged on their merits rather than brand strength or the number of high-street branches. Of course, this means that organisations which are stuck with a vast and increasingly obsolete network of costly branches are at a distinct disadvan-tage compared with alternative lenders with lower cost bases.

It is my guess that a realisation of this fact is causing both Halifax and Abbey National not to join the new mortgage trading platform being established by IFonline. This initiative is a direct follow-on from the Council of Mortgage Lenders&#39 proposed electronic trading platform, with one significant difference.

Unlike the CML indus-try platform, which was to be operated as a monopoly, IFonline&#39s proposition is being operated along commercial lines in a manner that is likely to encourage competition and truly drive down costs.

In time, I have no doubt that competition to IFonline will appear. AssureSoft is already moving in a similar direction.

One only has to look at the advances that have been made in the life and pension sector since competition emerged among portal providers to see how this competition drives innovation. As I will examine in more detail next week, there are currently four life and pension portals rolling out new business solutions so advisers can choose the one which best matches their individual needs.

The two mortgage monoliths insist they are developing their own extranet solutions that can facilitate electronic trading. However, this rather conveniently misses the point. Again, there would appear to be a lack of understanding of the way in which independent advisers work. It is vastly preferable for advisers to be able to carry out transactions with many lenders through a single contact route rather than having to log on to separate extranets with different security systems for each lender.

Having worked closely with IFonline since its creation early last year, it is my experience that it is building a platform that will deliver major benefits for both lenders and advisers. This will allow for the electronic creation of applications, obtaining of agreement on principle – from multiple lenders if necessary – and ongoing tracking in ways that can drastically reduce costs.

What all these actions suggest is the thing Halifax and Abbey fear most – a level playing field. Research carried out earlier in the year by NOP indicated that no less than 48 per cent of borrowers are unhappy with their mortgage lender and want to borrow from a different organisation next time.

However much they may dislike it, e-commerce is changing all industries for ever. In the long term, acting like King Canute and telling the waves of progress not to advance is a recipe for their own demise.

Sadly, it would appear the former building societies have forgotten their old customer-driven roots and are adopting some very shabby habits. While their actions may give them a short-term benefit, in the long run they are likely to precipitate a significant decline in the market positions of these two organisations.

In the brave new financial world, it will be those who truly put customers&#39 interests first that will be the biggest winners.


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