wealtharticles-the_future_role_of

The Future Role of Banks - Calvin Yeo 30 October 2008

The current situation on the sales of structured financial products in Singapore and also around the world has brought shivers down the spines of many if not all investors. Investors who plough their hard-earn and life-long savings into Lehman's minibonds and other sturctured products are caught unawares of what they have gotten into. The hardest hit are of course the not so affluent who just wants to have their money work harder for them.

As complaints and law suits are mounting each day, financial institutions, namely banks (not to mention any names) are already compensating to people who are quoted as mis-sold on these structured products. As banks and other financial institution are licking their wounds, my question is what then about the future of banks. Or I should put it more specifically, "What then, the future role of banks"?

As we know in today's context, the banking industry has gone out of their primary role in the normal bank facilitation of cash or money services to a more sophisticated wealth management industry. Banks are providing wealth management services on a larger scale than ever before. From privilege customers to premier customers depending on the amount of Assets Under Management, wealth management have taken soaring heights. But a very realistic fact at the moment is, there isn't much wealth to managed out there at the moment, is there? A simple fallacy is that financial institution concentrates too much on sales rather than advisory.

Since the demise of Bear Sterns and Lehman Brothers, the banking industry has gone out of proportion in the services they provide. The greed of the world has gotten over them. Though these are now the things of the past, and what seem like a long time ago, it was only a month ago that all this happened.

In truth, the banking industry has to be restructured once again. In the past banks gave people a safe haven to fall upon in the even of any financial or economic catastrophy. But now, it does not seem that way.

In my 16 years of experience in the financial industry, this is by far the worse the world's financial industry has suffered. People do not know who to trust now. Even the once dependable banks are licking their wounds on the many mis-sold products they have made to the common people. I have seen and heard enough that many sophisticated financial products are sold by unqualified sales people to common people who do not understand the risk involve in these products.

Just two years ago the banks and other financial institutions are recruiting a huge number of sales personnels to try and get a foot-hold on the share of the market. Rightly so because the ageing and greying population are in their prime and would be retiring soon. But now a total rethink is needed to get the confidence and the trust worthiness back into the eyes of the people.

So what strategies do you think they should adopt? In my opinion, the banks and other financial institution should concentrate on just two main strategies at the moment, (1) Service and (2) Advisory.

Service
This is something that is not lacking in the banks, but with many more complaints coming along, service strategies have to be improved and enhanced. Currently, it is only the affected structured products are having a field day in complains, but we must not discount the fact that there are other financial products sold that do not fit the customer's financial profile and to make matters worse, they are losing money in the current financial turmoil.

I believe the majority of such customers have not yet realized what they have got themselves into. Once the reality sinks in and they are seeing losses on their money, what makes everyone so sure that another round of fresh worms won't be dig up again.

So my advice, brace yourself up for another round of complaints. Service strategies have to be centered around the effectiveness of satisfying unhappy customers as well as upholding the institution reputation, if any are left.

Advisory
The strategy I feel is the single most important from here on end is, Financial Advisory. This is where the first mover in the market would get a competitive advantage in, (1) retaining the customer, and (2) acquiring new customers from another institution.

As the relationship between many investors and financial institution are hampered at the moment, it is about time to re-think on how to do a relationship recovery at the moment. And the answer to that is to switch entirely to Financial Advisory. Because financial advisory is the only way to resolve and recover unresolve issues as well as to rebuild the relationship of the customers.

That is the only way out for the banks at the moment. Advisory Services should be the number one objective in retaining customers in the near future and Advisory Services should be the mainstream in determining top line revenue in the long term future.

Calvin is a Certified Financial Planner, CFP. He has 17 years of experience in the financial industry. His experience includes working for a bank, two insurance company, two independent financial adviser firm and a wealth management company. He has been in Bancassurance, Partnership and Alternative Distribution, Financial Advisory, Training, Sales Management and Business Development. Calvin is also a finanical and wealth trainer and coach. You may contact him at, yeo.calvin@yahoo.com. Cell Phone: +65 97496008