Sector surfs wave of consumer confidence
ALL three of Scotland’s "big league" financial services players had a very good year, with RBoS, HBOS and Standard Life coming out first, second and third - not just in the sector but in the overall table. The only change here from 2001 was the newly-formed HBOS knocking Standard Life off the number two spot.
Roger McArthur, head of network sales with HBOS, reckons it was especially pleasing that, despite the strenuous internal efforts required by the merger, HBOS was able to deliver a high standard of service to customers, thus helping to generate a "fantastic level of business".
However, McArthur points out that the past year has been characterised by what he called "the conflict between high consumer confidence and a depressed manufacturing sector", creating a two-tier economy.
"People are certainly still confident enough to be buying houses and cars, which is generating a good level of business for the sector, but the manufacturing industry is having a hard time right now. Despite this, people are definitely taking the view that it is all right to buy for today," he says.
He also pointed out that the share of the household income going on the mortgage is well down on what it was 10 years ago, thanks to low interest rates. This has led to consumers being more prepared to take on debt in other areas, which again has lifted the sector.
Standard Life also had a great year. As John Hylands, group finance director, pointed out, the UK business, which represents Standard Life’s core activity, grew by some 75 per cent, while market share increased from 7 to 11 per cent.
"What we saw through the past year, and continuing into this, is that increasingly - as times get more difficult - consumers and their advisors are looking to the bigger brand names for long-term savings products. This trend plays very well for us, and our long-term savings products have all done very well," he says.
Catastrophes such as the failure of Equitable Life disturb the public and make it more difficult for new players with fresh products to make a real impression, he argues. The official launch of stakeholder pensions in 2001 did not make much of an impact on sales at the time, although one year on, stakeholder-related business now accounts for 40 per cent of Standard Life’s pension sales.
"What the introduction of Stakeholder did, as far as our 2001/2002 performance was concerned, was to heighten the general level of awareness of both individuals and companies, of the need to make provision for pensions, which in turn generated increased sales," he says.
One concern for the future, he noted, is that there is a growing "disconnection" between the amount of money the person in the street thinks they are going to require to provide a pension, and the actual amount they will need.
"People think 50 per month will do it, when the reality is that they need to invest a far larger sum than that. This is a big challenge for the government, going forward," he comments.
RBoS’s results, announced at the start of March this year, showed an excellent performance with all aspects of the bank’s operations showing growth, according to the bank’s chairman, Sir George Mathewson. He singled out for mention the way the bank has increased its share of small business start-ups through the year.
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