The post recession dynamics bring a new consumer! One that is not caught-up in conspicuous consumption, excess credit and collateral wealth. The past two years have changed behaviours, attitudes and personal goals. The new consumer is value conscious, more savings oriented and a person that shops and compares price and value for most purchases including financial services.
We have watched as some of the major banks in Canada and Australia start to adjust their value propositions to fit "segment of life cycle events/actions" to try and synchronize with the new consumer and avoid further commoditization. In some countries, most notably the USA, consumers have developed a "bank distrust" after the public greed and mismanagement plus hugh bailouts at their expense. There will be spill-over effects on other countries such as Canada even though the industry exhibited different dynamics. Also, eco and social issues are now more front and centre with consumers and these variables will be decision making elements as well moving forward.
The status quo approaches of the past by all financial institutions, large and small, will surely lead to an erosion of loyalty and business volumes by consumers who will expand their searches and range of supplier choices. Even though the average Canadian adult has probably a dozen financially related relationships, they will broaden the possibilities, especially with their Internet companion.
The leading edge CEO's will spend more effort on contemporary research, information gathering and customer listening to understand consumer preferences and the personalized solutions expected. They know that the buyers and influencers have changed an that their organizations have to adjust accordingly, from the Directors to the newest recruit.
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The recession of the past two years clearly pointed to weaknesses at the Board level of many financial institutions- not just those that publicly got into trouble! Unfortunately, we continue to see relative inaction in addressing the core issues of Board competencies, strategic insight, planning, operations, director assessments as well as tenure. Surely the recession and the new business dynamics in the post period necessitates an objective review and re-invention of Board dynamics? Unfortunately in some small and medium sized institutions where change is very important we find the most inertia.
The Board has to demonstrate a greater appreciation of risk management, roles and responsibilities plus the disciplines required to protect and grow their organization in a sustainable and secure way. The makeup of the members should represent the diversity of the market the institution serves as well as its business and social responsibilities. The members themselves need to reflect an integrated set of mandatory skills and knowledge which can deal with the present, and focus on the future.
Tenure and turnover guidelines are often neglected due to tradition, relationships or egos, which if continued can place governance at risk. If there are difficulties having people realize today's challenges and the need for change, it is time for self and peer evaluations as well as strategic retreats with professional facilitators who are "in the know" and have an objective value proposition.
CEO's have a responsibility to lead this elimination the governance inertia. Professional assistance will be required by many.
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This week Canada's Finance Minister indicated his intention to restrict online insurance sales by Canada's banks. This appears to be another ridiculous attempt to weaken competition in our financial services market. Even though the current regulations preclude "bank branch insurance sales" (which I believe is archaic), obviously, some politicians do not understand the Web and its many iterations of virtual evolution.
Go to google, bing, or any other search engine and research various general and life insurance options available to Canadian consumers. Thousands of hits! You can actually do comparative shopping on features and rates. The types of Internet competitors are endless. So, what is this nonsense of trying to curtail the banks in this competitive world? The consumer controls the decision making process as to their delivery channels and preferred suppliers from a wide range of choices of familiar and emerging sources.
Look around the world in the financial service industry where all necessary services are offered by companies inside and outside the industry, such as major retailers and manufacturers. Yes, you also find insurance companies offering bank products! In fact, all products are in a virtual universe of competition. It's a shopping experience without borders.
If there are insurance players that find it difficult to compete in today's multiple distribution channels, isn't it time that they re-invented themselves rather than hiding behind political protectionism? We are a country of free enterprise where competitiveness is the key to survival locally, regionally, nationally and internationally. Competition will weed out inefficiencies and uneconomical or non preferred offerings. The marketplace is a better referee than restrictive regulations.
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