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RBS: the taste of things to come

Retail banks are perceived to be in a pole position to take advantage of the new regulatory arrangements, if only by default.

By Hal Austin | Published Jun 20, 2012 | comments

The decision by the partly state-owned Royal Bank of Scotland to cut its advisory arm, is but a sign of things to come.

As we approach the implementation of the retail distribution review, banks, life offices and financial advisers must decide how best to meet the various requirement of the regulatory changes, while at the same time putting their clients/customers first.

However, given the odium with which banks are held by the general public, even if they are held in high esteem by those in Whitehall and Canary Wharf, the reality is that retail banks are perceived to be in a pole position to take advantage of the new regulatory arrangements, if only by default.

High street banks have a massive database of account holders and a pretty good idea of their financial positions.

It is simply incontestable that the obsession with remuneration, which is at the heart of the RDR, will drive the mass affluent – moderately paid people – further in to the arms of the banks for the simple reason that they will be reluctant to pay fees, however this is paid.

But, understandably, they will still be in need of basic investment and saving vehicles, including pensions, Isas, National Savings & Investments products, and whatever collective vehicles come on the market.

Over and above doing their primary research online and self-educating, most of these people unfortunately will inevitably go to manufacturers offering direct sales products – and the dominant players in this market, given the present business models of rivals, will almost certainly be the banks.

The expectation was, that, unlike financial advisers, banks would take advantage of this massive database and their high street presence to maximise their offerings to their customers.

Logic, of course, suggests that these big manufacturers will be more interested in their returns on investments than the actual needs of customers while financial advisers’ only objective would be providing financial advice to their clients for the short, medium and long-term.

From protection to making adequate provisions for their families, financial advisers’ sole focus will be advising their clients about the right and proper ways of meeting their individual and family obligations for every stage in their lives.

Of course, this is not a priority for the banks, and those which think they may face an intense challenge post-January 2013, are rightly going back to the drawing boards and working on new business plans.

RBS may just be the latest to reduce its advisory arm, but HSBC, Lloyds and Barclays have all taken similar steps.

Watch this space.

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Our Columnists

Hal Austin

Hal is editor of Financial Adviser and has been for more than a decade. He has previously worked on a number of local and national publications.

Ashley Wassall

Ashley is editor of FTAdviser and writes on all areas of retail finance. Previously supplements editor at Money Management and editor of a European private equity publication.

John Kenchington

John is editor of Investment Adviser and has written about investments for several years. He has worked at titles including City AM and was recently named in the MHP 30 To Watch list of up-and-coming media names.

Jon Cudby

Jon is editor of Money Management and has 12 years' experience covering retail personal finance. In 2005, Jon was launch editor of FTAdviser and most recently he was head of online content for Incisive Media's financial services titles.

Tony Hazell

Tony is a freelance financial journalist, having been editor of Money Mail at the Daily Mail for a number of years. He has been writing a column in Financial Adviser since 2005.

John Lappin

John is a weekly contributor to Investment Adviser with 15 years’ experience in financial journalism and 10 years writing on the IFA sector. He was formerly editor of an IFA trade magazine.

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