If
you live or work near a city or town centre, you probably have to think twice
about where your bank’s local branch is. In 2024, the high street bank and
building society branch network is dying, with numbers
declining from over 10,000 in 2010 to fewer
than 5,000 in 2023. But why?

The
rise in exclusively online challengers like Revolut and Monzo, as well as the
ageing population becoming more comfortable with remote and digital channels,
means we don’t need that cash counter any more. We don’t even need an ATM to
take out paper money, which is unsurprising given that in the city of London,
you’ll struggle to find food retailers prepared to take cash.

Part
of the idea for writing this piece was inspired by my visit to a remaining
branch near our office to discover they won’t even discuss savings. To my
surprise, they’re purely there to discuss mortgages – and very little else. Oh,
and they have a coffee shop in there, too, which brings in some revenue on a
daily basis. Fancy that – the bank would rather sell coffee than talk about
anything other than mortgages.

But
this isn’t a complaint. I applaud the initiative to make the expensive space
they rent work for them in some form – because it’s probably the reason that
the other branches in the area have closed. Sometimes, I think the most
confusing question you can ask anyone in the city is where is the nearest
Barclays, or HSBC, or Lloyds? Try it and watch their faces.

The
high street branch is dying – but it’s not dead yet!

Before
recruitment, I was the sort of person who didn’t know what they wanted as a
career. An easy route for types like me back in the day was working for a bank.
I did a lot in my time, working across several big names, and it’s rare that I
go to a client meeting today without walking past a branch where I once worked.

It
was a time I remember fondly because of the great teams I worked with, not to
mention the social aspect as the doors had to be locked by 5:30 p.m. I
also remember how we were measured and rewarded for success. There were several
pots: Banking, Savings, Unsecured Lending, Mortgage Lending, General Insurance
(including PPI) and Financial Adviser referrals.

It
doesn’t take an economics degree to know that the biggest margin came from
insurance, mortgages, Unsecured Lending and of course getting customers to
invest via the financial advisers. Contrastingly, if you manage to find a high
street branch today (not including the aforementioned glorified coffee shop),
you’ll have a very stripped back menu. Lower margins + lower footfall = doors
closed.

A
light at the end of the tunnel?

Perhaps
the new
simplified advice regime will change things. The FCA
aims to create a retail investment market that consumers can trust and that is
sustainable for businesses.

Consumers
face complex financial decisions and assistance isn’t available to many,
certainly not like it was a few years ago. The regulator’s Financial
Lives 2022 survey suggests just 27% of
non-retired adults have given much thought to how they will manage financially
in retirement, while 33% haven’t thought about it at all.

The
simplified advice regime and Boundary Review could well be a lifeline to the
high street banks and building societies, as well as a great route into the
advice market for the new generation of planners. The number of authorised
firms is shrinking when you consider the amount of acquisition and
consolidation that has been happening over the last two years.

The
firms still practising also have the impact of consumer duty to consider. My
colleagues and I at Hanover have been speaking to lots of advice businesses and
the tide is turning from a few years back. Not long ago, new advisers had to be
able to bring in some form of existing client bank to be sustainable. Now it’s
looking like an environment where firms have too many clients to look after and
a fiduciary responsibility to see them more frequently.

So
where will these clients go? If they move quickly, this presents an opportunity
for a high street financial planner to help people who aren’t getting the
frequency of service they deserve.

Addressing
the gaps left by the Retail Distribution Review

The
regulator has confessed that the Retail Distribution Review could have been
handled better. Things were cleaner and a lot of complexity was removed – but
at the expense of a huge slice of the population who probably needed financial
guidance more than the UHNW clients most IFAs aspire to have in their
portfolio.

In
fact, with a trend of advisers
turning away low-asset clients, the number of consumers paying
for financial advice has fallen to just 9% this year, evidence that the advice
gap continues to widen.

The
purpose of the
Boundary Review is to provide consumer support
in three areas:

• Further
  clarifying when firms can give consumers support without giving
  regulated financial advice
• An innovative approach
  allowing firms to provide support tailored to groups of people in similar
  circumstances
• A new form of simplified advice
  that makes it easier for firms to provide affordable personal
  recommendations to clients with more straightforward needs and smaller sums
  to invest

It
would be great if there was a national network of convenient locations which
could readily support an existing client base with these ideals.

Opportunities
ahead

Nationwide
have famously made a point of keeping branches open with a humorous TV ad
campaign and in February this year, their financial
planning service moved to Aegon Financial
Planning – an amazing opportunity for the latter to leverage a branch network
for a greater reach.

If
you’re a high street bank with a licence to sell regulated investments, surely
it’s an option to consider making use of the few branches left in our town
centres with some simplified advice for people who genuinely need it.

And
while they’re in, see if they want to switch bank accounts and get a personal
loan to help their teenage son get a ULEZ compliant car. Everybody wins.

If
anyone wants to talk about the old days of branch life, I’ll be at the
Wetherspoons over the road at 5.31. Or, for more advice, you can contact
me directly.