The Demise Of The Retail Branch

By James Mcgregor on Aug 16, 2017

It is no secret that over the last 5 years the retail banks have been rapidly decreasing their branch footprint. 

The most recent one to announce was RBS group closing another 158 branches. Here is also a link explaining over 1,000 branches in the UK have closed in the last 2 years.

The main reason for these closures is to cost cut as a majority of people have migrated to the new digital era of online and mobile banking. So the banks have seen their biggest cost cutting exercise is to get rid of non profitable space. Which completely makes sense, but there is a huge problem with the majority of this business model. The technologies for most of these banks are not capable of migrating their customer bank to this operational model. Banks and building societies took too long to invest in the digital world and now they are all panicking to migrate clients as fast as possible. This has caused not only customer frustration but also staff frustration within these environments, which in turn creates a toxic environment.

Where this becomes a huge problem for the general public is the level advice they receive for important things such as mortgages. These banks are expecting the general public know exactly what they want and why they want it, and in my 10 years in finance this is certainly not the case. It seems banks are trying to create execution only processes so clients no longer have to see advisors face to face. I tried calling every bank on Richmond high street to book a meeting with a mortgage advisor, the outcome was shocking. First of all finding the correct number was near impossible and then by the time I actually got through out of 6 banks I tried I couldn't get one meeting. Now in a day and age where access is everything why are the banks making it harder to do business with them in one of their most profitable business areas, mortgages?

Not only this, they are so far behind in collaborating with other companies because of the dated values they hold it is putting their clients at risk. What I mean by this as this particular situation has been a frustration of mine for years. A client goes to the bank to get a mortgage, the client doesn't fit the banks criteria. The bank says no, and the client is then left to wonder in to the world to find his own way. Now in the profession of finance in this situation if your situation is slightly complex, this could take the average person weeks if not months to find the right solution on there own and without using a professional. Why are banks not creating relationships with other local professionals in this situation and referring these bewildered clients that they do not want to do business with in the right direction where they can get help? A simple introduction to another FCA regulated company or advisor would not only allow them to keep the rest of the banking relationship they had with the client, but also if they fit criteria in the future the client would feel more inclined to use the banks services again. As what I see now, once the bank says no, the client will take it personal and move their whole banking relationship away.

With challenger banks such as Atom bank coming in the next 5 years of retail banking will be extremely interesting to see. I believe all branch mortgage advisors will soon be a thing of the past and banks will offer their solutions through Intermediaries. The reason for this is it is a lot cheaper for banks to pay an introducer, which in turn puts all the advisory and compliance risk on the intermediary. By doing this it also creates greater competition throughout the lending market which in turn would create better products for the general public. I am a bit baffled why the FCA hasn't actually enforced this to happen. I believe this should have been done years ago, due to the branch advisors being sole tied to one product range. This is not giving the client the best advice for their particular situation in a lot of instances and has probably cost a lot of people in the world a lot of money.

As usual would love to here your thoughts, especially from any senior management of retail banks. Would be good to hear why banks are still so worried about referring their clients. Also if any mortgage advisors that have been made redundant have read this then please get in contact regarding opportunities.

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