In the City
Poaching
Tony Rudd
Poaching in the City used to be rare and frowned upon. People used to be familiar with field sports and although they had a sneaking admiration for poachers would never themselves have become one. It was also the case that people used to be content to stick to their own ground and their own activity. Furthermore, not regar- ding an over-eager professionalism as either a workaday or a social advantage, they weren't particularly interested in expanding into other activities than their own. All that is gone today. To begin with, a keen per- sonal interest in field sports is by no means any longer universal. Secondly, people have become professional eager-beavers. And thirdly, there is a ferocious pressure on costs, such that any preserve of potentially profitable business immediately attracts predators from the outside. Equally the purveyors of one product are only too keen to put another into their salesmen's hands; the more the latter can carry and the more business he can generate, the better.
Take, for instance, the most important development of this kind recently, the move by the clearing banks into the house finance area, hitherto the preserve of the building societies. The clearers have swept into this field like a rush of air into a vacuum, carry- ing all before them. They must wonder why on earth they didn't do it before. Their suc- cess has been remarkable, yet perhaps predictable. The clearers' business is based on getting the deposits of the nation, and this pyramid of credit rests upon the in- dividual accounts of the man in the street. The most important service which can be rendered to such an individual is to tend him the money to buy his house. All else flows from this. Lending money to buy a car or even, much more seriously, to start a business, will most often come as a subse- quent development to that first loan for the house. As the banks are already lending to most of us, they were ideally placed to compete against the building societies for this final and most important piece of business. Little wonder they have made progress. Of course in doing so they have put a nasty kink into the money supply because, a quirk in the way this is counted, advances by building societies aren't in the figure while advances for exactly the same purposes by the banks are. The shift therefore is apparently creating a problem for the authorities in their continuing desire (and need) to control credit which, to the extent that it is a purely statistical slip, should be ignored. Why didn't the clearers move earlier if the , business was so obviously profitable for them; or didn't they realise that it was such good business? The answer really is that they were held back by the old rules and usages. Because housing finance was regarded as the building societies' preserve by the authorities, the risk of a ticking-off by, say, Lord Cobbold was enough to keep them in line. Times have changesd. We are all poachers now.
Another example came to light last week with the news that the salesmen employed by Hambro Life to peddle their products are for the first time to have the opportuni-
ty of selling unit trusts to their clients. Again, it had been thought that this was of limits, that the Department of Trade would never allow insurance salesmen to peddle a product of the securities industry door to door in the classic, 'Fuller Brush' method. But, ever enterprising, Hambro Life asked the Department directly and, to everybody else's amazement, they appear to have got permission. Admittedly it is hedged about with some pretty strange rules: the salesman is apparently not to be allowed to press the sale of unit trusts nor is he allowed actually to make a sale on his first visit but must come back again, and then only in answer to a request from the client. Professor Gower is reported to be unhappy about all this; one thing is for sure, the Professor is in for an increasing load of unhappiness because this must be the thin end of the wedge. The pressure to sell the products of the unit trust industry, especially as so many of them are linked to a greater or less extent with 'qualifying' insurance con- tracts, means that now salesmen have the opportunity of peddling both, they will in- evitably set to with relish. The commissions are just too good to miss. Where will all this end? There was a theory, popular about ten years ago, that eventually 'one-stop shopping' would ar- rive in the financial world and that people would be able to do their banking, buy their insurance, and make their investments all under the same roof and dealing with a single institution. That hasn't quite happen- ed yet. It seemed inevitable at one time that it would, but in the event there was a natural reluctance on the part of the customer to put all his eggs in one basket. He didn't, when it came to it, necessarily want to bank with the same people he in- sured with and, by the same token, people haven't by and large channelled the bulk of their investment business through the banks either. There have been interesting cross- border links forged, but not to the degree that might have been expected at one time• In America, on the other hand, huge changes of direction are now occurring• The large brokerage houses in Wall Street have suddenly become very attractive to the insurance companies and several of the big- gest have already been swallowed up by them. The brokerage houses, particularly the very big ones, had become so attractive because they had invaded territory which hitherto was regarded as sacrosanct to the banks. They were, and still are becoming 'money shops' where the customer can do much more than just make portfolio in- vestments. He can get housing finance, deal in commodities, open what is virtually a checking account and come as near to hay.- ing a 'one-stop' financial shop at his disposal as it is possible to envisage. But it is still not necessarily the case that things will go as far in the UK as they are doing in the US. In America they have a law against branch banking (which the bankers of course are longing to see repealed) but which has also given the big brokers their window of opportunity. In the UK banking is based upon the branch System.
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