Advisers may have role in greater bank competition

Advisers may have role in greater bank competition

Banks could be forced to share more information with financial advisers as part of a new bid to open up the UK’s market to greater competition.

A report by the Competition & Markets Authority found banks do not have to work hard enough to compete for customers.

The investigation found 57 per cent of consumers have been with their personal current account provider for more than 10 years, and 37 per cent for more than 20 years.

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To tackle this inertia, the CMA has proposed a number of remedies, including the requirement of better information sharing with credit reference agencies, banks and financial advisers.

The CMA said this would make it easier for SMEs to shop around for loans and cut out the need for multiple application form filling.

Another remedy is requiring banks to prompt customers to review the service they receive at certain “trigger points” such as a loss of service, closure of their local branch, unarranged overdraft charges or a change in the terms and conditions of their account.

Alasdair Smith, chairman of the retail banking investigation, said: “Despite some encouraging developments, particularly in the shape of challengers that have entered the market in recent years, for too long banks have been able to sit back and take their existing customers for granted.”

On average, the CMA’s research found, current account users could save £70 a year by switching.

It also found overdraft users were even less likely to switch PCAs than other users but heavy overdraft users in particular could save up to £260 a year if they switched.

The CMA’s research found bank customers feared switching accounts would be “complicated, time-consuming and risky”.

Craig Donaldson, chief executive of Metro Bank, said: “Banks like Metro Bank exist to offer customers a genuine alternative to the traditional banks, but in order for us to compete on a level playing field more needs to be done around promoting and delivering a seamless seven-day switching service for both personal and business customers and reviewing of the different capital requirements applied to the large incumbents versus the new challengers.”

An FCA spokesman said: “We welcome the CMA’s efforts to identify and address continued competition concerns in the personal current account market and in small and medium-sized enterprises banking, and we will now consider their proposals and findings in detail.”

Adviser view

Jason Witcombe, a director of London-based Evolve Financial Planning, said: “I think the vast majority of people out there don’t want to change accounts and they know it will be a hassle but that’s not necessarily the banks’ fault.

“The problem with banks is all the other stuff they have sold their customers outside accounts, like PPI.”