November brings relief with the interest rate record fall, but Banks and Life Offices continue to struggle!

Hi again, so what has the first days of November, brought us in terms of news and developments with Financial Services. Its been a really exciting week with a record reduction of base rate by the Monetary Policy Committee & the Bank of England, on Thursday, taking it to the lowest level since 1955. Great for people on tracker mortgages and about to re-fix, assuming the rate is fully passed onto the customers, not sure where it leaves Independent Financial Advisers trying to sell short term Investments with their clients. Furthermore, with Base Rate at 3% from 4.5%, the onus is on the Banks to adjust their rates accordingly, but with the Libor Rate (the rate that Banks lend to each other at) still being set, and Banks still recovering from toxic debts, writedowns, & previous losses, the effect to consumers wasn’t immediate. Gradually, through the week, they’ve started to reduce their mortgage rate, for instance RBS/Natwest announced they were reducing their rates. Hopefully, this will kick start the mortgage market for the first quarter of 2009, good news for the besieged Independent Mortgage Brokers.

JP Morgan have analysed the consequences of the Interest Rate fall to the UK Economy. Two reservations are worth mentioning, what effect will this have on Sterling and its value against other currencies, and will it further slow the growth of GDP, going forward into 2009. In terms of its effects on Financial Services, as mentioned earlier, IFAs will spend a lot of time to retain Investment Business, but hopefully the Mortgage Market will bounce back and Life Offices and Banks may need to get recruitment of Mortgage Advisers off the ground again!

RBS have announced £200 Million in writedowns and bad debts in the 3rd quarter of 2008, but plans to raise £15 Billion in a new Share Offer, with the Government promising to buy up the remainder that the shareholders don’t buy. Also, Lloyds are looking to raise £17 Billion in a similar way. This is a constant issue, with the Banks trying to gain liquidity for 2009, but what does this mean to Financial Services and Recruitment going forward. A lot of the Banks have announced Recruitment embargo’s recently, and are tightening their belts, but I think they need to put their faith in actually attracting the right type of pro-active people to kick start the branch team, and expand their client base. That’s where we come in at Foundation, he he! In talking about the Banks, the attempted takeover by 2 x-Chief Exec’s at HBOS, failed as the Board and Chairman didn’t think it would offer anything for Shareholders, and that going to put their faith in the Lloyds takeover, and become a “Super-Bank”, fighting crime and rescuing customers on the High Street. I think this could mean redundancies for Financial Advisers, Customer Advisers etc, in 2009, it will be interesting to watch it unfold.

In the IFA market, Aegon who owns Positive Solutions, & Origen, has announced £4,000,000 in losses between both subsidiaries, in the first 9 months of 2008. Otto Thoresen, the UK Chief Exec, said depite the losses, and a challenging market for IFA distribution, Aegon is committed to both brands, and can see their profitability going forward into 2009. IFAs, whether they work for a National or Regional Firm, need to talk to a recruiter that they trust, and confidentially put the feelers to see whats out there rather than registering with these Job Boards, as an experienced recruiter can really pin point the right direction for Advisers to go in.Other life offices are struggling at the moment. Skandia UK, for instance have reported a fall of 18% in their Life Sales in the first 9 months of 2008, as apposed to the same period in 2007. Same old story really, some Life Offices panic and make Financial Advisers redundant, but others actually use headhunters to secure, pro-active, go-getters to get business kick-started again! 

Finally, the Scarborough Building Society is planning to merge with the Skipton Building Society. The main cause of this recent victim of the credit crunch, as that back in 2006, they launched a specialist adverse/self-cert arm, actually bought £300 Million of these Mortgages from GMAC-RFC, and noone really knows what happened to this Portfolio, any guesses! When the good times are back, they’ll be a handful of Giant Uber Banks & Building Societies on the prawl for Business!  

In summary, the Interest Rate fall will, I think kick-start the Mortgage Market in 2009, good news for Mortgage Brokers, but Life Offices, Banks, Building Societies are still feeling the effects of toxic debts and falls in their business volumes. They need to augment their sales and business development team with the right type of individuals to push business forward again. Instead of not recruiting, IFAs, Life Offices, Banks need to recruit smart, and attract top-performers, to get through these uncertain times.