Tomorrow we see the launch of MetroBank, the first “new” Bank to be launched in the UK for about 150 years. It will be open 7 days a week, will welcome children and pets (Doggy treats in reception??) and will focus totally on service.
I have to declare a personal interest in that Anthony Thompson, the Chairman, is an old friend of mine and I have opened my account already, although I do gather that Anthony has promised at least 500 friends and family account number 00000001! But aside from that I fully support what Metro are trying to achieve. It is not about the rate given or paid, it is about fair value, transparency and service. Google them, it’s a very interesting and imaginative approach.
Let me contrast that with the Meerkat, the Iranian Comedian or even the incredibly annoying but very well fed opera singer. Their model is all about price. These comparison sites wont promote their product unless there is a commercial kick back, although the sites refuse to call this commission, and unless the product is in the top three then the exercise is a fruitless one as the potential customer doesn’t look further than the three cheapest products.
So why do I have furry animal aversion, and just as importantly, why should we all be a Metro rather than a Meerkat?
Simples (sorry...), the way businesses invariably reduce price is by reducing margin, very few have the ability to reduce prices by running their businesses more efficiently, and it normally takes a paradigm shift in some form of regulation or technology to enable them to do so, but even when this happens the benefit is normally reflected as a sector change, rather than a business specific advantage.
So what happens when margins reduce? Normally costs are cut. Where do these costs come from? People!
What happens when People are removed? Service deteriorates!
Currently, these comparison sites focus on throwaway items such as car insurance or credit cards, but they are expanding into the world of less tangible financial services products. I met recently with the Marketing Director of a well known nameless comparison site, and he was clear that he sees Life Protection, Critical Illness, Personal Health Insurance etc as a rich vein of opportunity for them. When I challenged him on how he proposed to deal with exemption criteria (what is covered and more importantly, what isn’t), or how he would differentiate between an amputation below or above the knee (yes its true, some CI policies won’t pay out if an amputation is below the joint), or even how he would deal with qualitative research over claims experience the eyes glazed over. I don’t doubt that he is bright enough to understand, I suspect the reality is he isn’t bothered. Price will always be the winner here...
It’s a sad road to travel. Those of us old enough to remember the pressure for Banks to give interest on low balances in current accounts will also remember that the banks used to offer Saturday morning openings. Some of us even older people will remember when the high street was full of Greengrocers, Butchers and Hardware stores, but price chasing to save a penny on a pound of spuds leads everyone to Tesco.
The local family Lawyer is now an internet conveyance and will writing service, the local Optician is now a huge conglomerate dealing online, the Off License (or “Offy” as my Dad would call it when he sent me out to get him half an ounce of Old Holborn and a packet of Cashews) is now the Majestic Wine Warehouse or the wine section of a featureless supermarket, and don’t get me started on the milkman...
I had better stop as there is a tear in my eye... but seriously, in all of these instances (Majestic arguably the exception...) service has been sacrificed in the pursuit of price competitiveness. No comparison site could ever put a price on the friendly face from Unigate popping in for his Saturday morning cuppa, or the Butcher putting aside some bones for your dog…. But it is equally true to say that without a consumer demand for convenience and price, these businesses would have failed, and they haven’t. So is the case for their defense not made? I hope not.
The challenge for Metro and Advisory businesses like ours is equally clear. How do we balance price with value? How do we all ensure that, in the realization that none of us will ever be the cheapest in anything we do, that the consumer of our services, that’s you by the way, appreciates what, and more importantly, why, they are paying.
In the same way as valuing the benefit of the man from Unigate making sure that the elderly neighbour takes her milk in, the value of an Advisers many years of experience is intangible. What is the current going rate for years of experience and qualifications?
I truly believe Metro will succeed, but as I declared above, I am biased.
I know we will succeed but maybe I am more biased about this than anything else, what I do know for certain is that in the same way as I will enjoy watching Anthony ride the inevitable roller coaster that will be Metro over the next few years, the journey that will build this business into something that our Clients, Advisers, Staff and Investors are proud to be associated with will be the most interesting experience ever.
