Key trends in the financial services market - Essay Example

Key trends in the financial services market The financial services market has been one of the most turbulent, but essential markets over the course of history. There are many factors, both economic and social that have contributed to the changes in the financial services market. It seems with every great financial challenge, whether it be a recession, or a full-blown recession, there have been common trends associated with these events. In addition, there of course those events that are more modern, not necessarily always negative, and these events shape today more than the lessons of the past. One example, that spans a large amount of storied history is the Harpenden Building Society. The Harpenden Building society offers a range of financial services from primarily savings accounts and mortgages to business banking solutions.( Harpenden Building Society. 2010) This paper will examine a number of questions surrounding the performance of the Harpenden building society and some key trends in the banking and financial services market, as well as how the building society differs from traditional banks in the market, opportunities and threats facing the bank, a closer look at the success of the bank and how the society can succeed from a marketing standpoint. There are several key trends in the financial services market. One of the latest trends that is gripping the financial industry like a bruding storm is the level and impact of the global interest rate. ``As interest rates are expected to rise globally, albeit slowly, and current steep yield curves may soon flatten, such risks may materialise in the near future. At the same time, weaknesses in the banking sector still exist, especially for some segments of the European banking sector. While the effects of changes in interest rates and their structure on financial institutions differ, recent changes in asset and funding structures of banks make them generally more vulnerable to a changing interest rate environment. Currency risk exposure has also grown, and regional concentration may pose specific risks. An unravelling of carry trades will have a negative effect on some institutions.`` (OECD.2009) The interest issue is created by a dramatic market crash that only now is society beginning to climb out of, but even as early as 2009, Jacques de Larosière, the former Bank of France governor who is also the former managing director of the IMF, ``estimated the spate of write-offs and write-downs by banks and insurance companies around the world since the crisis began to be worth €1 trillion.``(MoneyPages. 2010) The primary cause for this, is of-course the asset meltdown in terms of valuable that can be seen in the United States as the subprime mortgage crisis. (Qfinance. 2009) There are several reasons that building societies differ from traditional banks within the financial services environment. One of the main differences commonly found is that the institutions while offering some overlapping services, banks tend to offer a wider array of services while building societies tend to be more focused. Banks offer the great variety of services because of pressures to make year to year profits and because they often have large inflexible policies. The other major difference is that building societies are usually owned by the members who operate the institution. Generally speaking banks have an international approach while building societies typically build their business on relationships with their clients and trust. (Harpenden Building Society. 2009) Despite global economic uncertainty, the Harpenden Building Society has had many positive trends and key indicators. For example, Profit before tax of £2.437m shows a significant increase from last year’s figure of £1.240m. (Unknown, 2010) This increasing challenging for institutions to obtain this type of performance given the current global marketplace and should not be discounted. Another example is that, mortgage balances increased by 19.1% to £154.3m and the Harpenden Building Society has advanced £52m to new and existing borrowers. (Unknown, 2010). The model of customer ownership and dedicated, conscientious staff who make sound investment decisions according to common sense and customer needs as opposed to greed is a crucial reason why the Harpenden Building Society continues to experience growth. With customers of banks tired of increasing fees and price grouching, customers look for alternative experiences with the building society model of banking. There are several opportunities and threats that exist in the marketplace that the Harpenden Building Society operate in. The opportunities include expansions into markets currently only held by the banks. It would be easy to pick one or two products and be competitive for your clients in those areas. The strong brand loyalty that the members indicated and the personal relationships with the staff1 will make it easy to convert existing customers to the new products. In addition to new products, it would appear that there is an opportunity for the institution to expand it`s market share in mortgages seeing as they are based in the United Kingdom. The Harpenden Building Society also faces the ever looming threat of larger institutions with more marketing power and the ability to offer temporarily attractive teaser offers to customers.2 These larger banks could, given the rapid growth of the Harpenden Building Society, decide that it is in their interest to expand into the marketplace. (Grady, 2010) With the recent turmoil in global economics the Harpenden Building Society finds that regulatory changes are also hard to meet. This is an additional threat. These changes tend to make the institution as whole more cumbersome. According to the report by the Board of Directors ``As an Industry Sector, the traditional Building Society movement is facing considerable challenges from an increasingly onerous regulatory environment. Whilst regulation per se is a vital facet of the overall picture, there is an increasing danger of some of the smaller Societies being overwhelmed by reporting demands which in reality are only of relevance to their much larger cousins.`` (Harpenden Building Society. 2010) An effective way to succeed in the market for the Harpenden Building Society is primarily to continue to focus on customer relationships and the customer experience once customers walk through the door of their branch. It may also be advantageous to try and expand their hold on the small business banking end of the business. The strong growth in assets is a very positive indicator and perhaps ore of these efforts should be directed towards marketing efforts to continue to attract new clients or sell existing clients new products. If the Harpenden Building Society does not stay extremely vigilant, larger banks will be able take over. The society has strong indicators that the are and could continue to be a very successful business because of their focus on customer service. Works Cited Unknown, \pdfs-public\survey_results.pdf (application/pdf Object) Web. 10/23/2010 . Unknown, | The Money Pages Web. 10/23/2010 . Unknown, 2009_directors_report.pdf (application/pdf Object) Online. 10/23/2010 . Uknown, 45813829.pdf (application/pdf Object), Online. 10/23/2010 . Unknown, Banking and Financial Services Industry | Market Analysis and Trends - QFINANCE Online, 10/23/2010 . Unknown, Harpenden Building Society - About us: History, Online. 10/23/2010 . Perdue, Grady. Advances in accounting, finance, and economics, Online. The Subprime Mortgage Crisis - Understanding the Subprime Mortgage Crisis and How It Affects the US Economy Web. 10/23/2010 . Read More