Redefining Strategic Relationships in Financial Services

The International Institute of Banking and Financial Services Author profiles

Executive summary

Analysis
Financial product manufacture
Financial product distribution
Increasing interactivity between organisations
Customers
Report outline

Chapter 1: Value chains in financial services

Introduction
Complexity of interrelationships in retail financial services
Potential and pressure for change in financial services value chains

Chapter 2: Manufacture of financial services products

Examples of core manufacture
Industry manufacture: production and concentration
Insurance manufacture
Mortgage manufacture
Manufacture resource requirements
Manufacturing functions distributed within a corporate group
External manufacturing interrelationships

Chapter 3: Products offered to the market: branding, open architecture and product adoption

Branding within the manufacturing group
Packaging, wrappers, joint ventures and open architecture
Product adoption by manufacturers
Stakeholder pensions
Proposals under CP121

Chapter 4: Product distribution and provision of advice

The FSA and the regulation of product distribution
Manufacture and tied distribution by same group using a direct sales force
Manufacture and tied distribution by same group using internal authorised distributors or internal appointed representatives
Manufacture and tied distribution by different groups using external appointed representatives
Manufacture and tied distribution by different groups using strategic alliances and joint ventures
Manufacture and IFA distribution by same group using ownership of IFAs
Manufacture and IFA distribution by different groups: collaborations and investment
Major regulatory changes to product distribution and advice
Depolarisation
Extension of the appointed representative regime to mortgage and general insurance business
Wider considerations
Interfacing with the customer
Sales distribution channels
Product interdependencies at the point-of-sale: bundling
Post-sales contact and service: who owns the customer?

Chapter 5: Conclusions

The complexity of interrelationships in financial services provision
Pressures leading to the reshaping of value chains within the industry
The reengineering of financial services value chains
Product manufacture
Product distribution
Replacing ownership with influence
Consumer visibility

Appendix 1: Lloyds TSB
Appendix 2: Barclays PLC

Endnotes

List of figures and tables

Figure 1: Value chain segmentation
Figure 2: Classic value chain with price discovery
Figure 3: ISA sales through fund supermarkets versus all channels
Table 1: Manufacture of retail financial products
Table 2: Top 20 UK long-term insurance groups based on UK net premiums
Table 3: Top 20 UK general insurance groups based on UK net premiums Figure 4: Top composite insurers based on net UK premium income business mix
Table 4: New individual premiums in UK long-term business
Table 5: General insurance net written premiums for UK risks
Table 6: Top 10 players in UK residential mortgage market
Table 7: Examples of brands in the marketplace
Table 8: Examples of product package construction from components
Figure 5: Product adoption by manufacturers under CP121
Table 9: Current status of the distribution tier
Table 10: Examples of internal distribution arms for non-regulated products
Table 11: Examples of combinations used for external distribution
Table 12: Active advisers in the UK
Figure 6: Source of new individual annual premium equivalent premiums
Table 13: Examples of IFA networks
Table 14: Appointed representative status for investment business
Figure 7: Examples of point-of-sale distribution channels
Figure 8: From silos to stratification
Table A1: Lloyds TSB internal manufacture and distribution
Figure A1: Roles within Lloyds TSB Group
Figure A2: Roles within Barclays PLC