Abstract:

In this paper, I shall examine the full spectrum of distribution channels for financial services. These changed comparatively little for at least 150 years, being based around branch banking and insurance brokers. Technology, combined with pressure on overhead costs, have conspired to make financial institutions re-examine their distribution philosophies and practices, helped in no small way by changes in legislation and regulation. Some of these changes have been more successful than others; automated telling machines are now an accepted feature of High Street retail banking, but ’one-stop’ shopping for financial services has failed to take off, and the move of institutions into estate agency, at least in Britain, has been a disaster. I shall draw on several pieces of research undertaken in the past 12 to 18 months to demonstrate the need for better targeting of distribution channels in terms of market segments. Recent research among European financial institutions shows that the trend towards fewer branches and greater automation will continue, but large segments of the market, notably women, the older age groups and less well-off or educated people have deep reservations about these changes. The institutions themselves admit that it is becoming more difficult to discriminate among financial products, and point to corporate identity as a major instrument in creating product differentiation. The world of insurance, too, is seeing considerable changes in its distribution network, with the traditional broker hard pushed to survive. Legislators make great play of the importance of independent advice, and laws forcing intermediaries to polarise between tied agents, offering the products of a single supplier, and independent advisers, have existed in Britain for the past live years. Even if these laws have achieved their purpose, which is a moot point, do the British public want the results? Research evidence suggests that they do not: that independence is at best little understood, and probably plays little part in their decision of what to buy, and where to buy it.