Static interest rates make competition tighter
With interest rates remaining static, the past six months have been a challenge to deposit takers to provide eye-catching products with the potential to squeeze the maximum return out of investments.
This has necessitated careful cost management on the behalf of providers to ensure that products retain their competitiveness in a crowded market. Against this background, while standard deposits and fixed rates have continued to see strong steady growth, it is structured products that have really come to the fore.
Such products are nothing new to Britannia International - we launched our first guaranteed equity bond back in 1993 - but customer appetite for them has grown significantly in recent times, particularly in the intermediary market.
As the result of launching 'new-to-market' products such as the Optimum Growth Bond, Guaranteed Growth Bond and Guaranteed Income and Growth Bond, our introduced business has expanded considerably necessitating the development of separate tranches for key introducers.
We anticipate this trend will continue and predict more innovation in terms of the derivatives behind these products. While Britannia International has already launched products based on house price and gold price indices, it is likely that more varied commodities will be used in future structures as well as potential derivatives such as gilts. The challenge for providers will be to maintain simplicity without resorting to complex structures and linking to too many indices, thereby diluting likely returns for customers.
Latest forecasts for interest rates suggest that May/June is the probable time of a further rise. This is likely to trigger a flurry of activity in the deposit market with repositioning of tracker type products and potential for higher fixed rate offerings.
Meanwhile 1 July 2005 is set for the implementation of the EU Savings Tax Directive and investors in EU countries will currently be receiving a raft of information from their providers on the administrative impact of this piece of legislation.
This event may act as a catalyst for some customers to review their financial arrangements and is likely to see an increase in trust formations, as trusts currently fall outside the scope of the Directive.
As a business, Britannia International's focus remains very much on putting our customers first and making it easy for them to do business with us. Recent months have seen the formation of a dedicated client relationship team which will underpin the service provided to our introducers and their clients. Providing competitive products through cost-effective delivery remains a prime objective and we will be working hard to develop the innovative and professional profile Britannia International has gained to date.
Britannia International is the deposit-taking offshore subsidiary of Britannia Building Society, the second-largest building society in the UK.
Based in the Isle of Man - an AAA-rated offshore jurisdiction by Moody's and Standard & Poor's - Britannia's presence in the market has grown from a simple branch operation established in 1988, through to a UK-incorporated subsidiary and finally in 1994 to the formation of the autonomous Manx-incorporated business known to intermediaries today.
During this time the company has accumulated a wealth of experience along with over £1.8bn in managed deposits. While the business started with only a handful of employees, staff numbers now top 50 and the company offers a wide range of products and services including the recently launched Britannia International for Intermediaries service, client online banking, managed bank facilities and in-house IFA capabilities.
As the subsidiary of a mutual organisation, Britannia International has an inherent commitment to putting its customers first and in recent years the company has launched a number of innovative products, such as the award-winning Deferred Interest Account which allows customers to defer their interest payments and therefore tax liability until a time of their choosing.
However, Britannia International is probably best known to intermediaries for its range of structured products. From the launch of its first Guaranteed Capital Equity Bond in 1993, Britannia International has continually been at the forefront of developments in this field offering products structured around house prices and gold as well as the FTSE and other stock market indices. These products were made available to intermediaries on a commission-paying basis from 2003.
The range of structured commission-paying products has recently been supplemented by a fixed rate account and the company also offers bespoke products for high net worth clients. Personal, corporate, trust and pension business is accepted from introducers regulated in the UK, Isle of Man and Channel Islands.
The development of introduced business has been a key objective of the company in recent years and great strides have been taken to support this side of the business. This has culminated in the launch of the service Britannia International for Intermediaries. Supported by a professional and dedicated client relationship team, the service provides a single point of information and smooth administrative back-up to Britannia International's introducers both at the point of introduction and during the client relationship.
With further product launches planned for 2005, Britannia International will continue to develop its business for intermediaries and their clients, ensuring market opportunities are maximised for all concerned.
Britannia International is licensed by the Isle of Man Financial Supervision Commission for Banking and Investment Business.
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