Customer Services in Financial Organisations (Market Assessment)
Executive Summary
Banks are the largest financial-services sector in the UK, with building societies providing a small secondary role. The life insurance sector is important, although in 2003 this sector, which is shrinking, is in crisis. General insurance exists because it is necessary, rather than as an opportunity to make profit.
Financial advice is provided by financial advisers, whose working environment is about to change. The main channels by which financial institutions deliver customer services are through branches, call centres, automated teller machines (ATMs), credit- or debit-card systems and online delivery.
While the major banks have consolidated and become bancassurers (owning insurance companies as well) the insurers have become banks. This form of diversification means that insurance company capital can be used more efficiently, but with so much cross-ownership a stock market crash affects any bank that has an insurance subsidiary.
The nature of customer service differs between the different sectors. Customers find banks efficient and friendly, because they like to meet people in the branches. They like building societies even more, although they possibly do not realise that building societies have atrophied in numbers.
Customers are less keen on insurance companies, which have few branches and sales representatives. For them, the independent financial adviser (IFA) channel is the source of customer service. IFAs are accepted by customers, but not enthusiastically. IFAs are perceived to be motivated by fees rather than by the best outcome for the client. Customers are even less happy about the new distribution channels and much prefer to talk to someone in person.
Financial services are increasingly controlled by the Financial Services Authority (FSA), which was set up to cover the entire industry, with some exceptions. The FSA has a remit to take the customer's point of view, and its insistence on greater transparency, particularly over fees, is likely to enhance competition within the industry. The mis-selling of financial investment products hastened this development, because it became clear that financial-services representatives could easily persuade customers to buy inappropriate investments.
The fall of the stock market has introduced extra volatility to the industry, raising strong queries over the future of with-profits policies in a world where stock prices appear to govern almost all financial instruments.
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