Traditionally, banks and building societies have offered little in the way of products and incentives...
Unlike investment groups, banks and building societies have the luxury of their own banking outlets where they can offer their products and services without the need to coax intermediary distribution links.
While there are few signs of this changing, intermediaries will often go out of their way to advise clients on banking services.
This survey focuses on banks and building societies based in the financial centres of the Isle of Man, Jersey and Guernsey. The majority of respondents have UK parents with bases throughout the Channel islands and the Isle of Man. However, other nationalities include the South African Investec Bank, HSBC Bank International and Switzerland's Credit Suisse.
Growth in the banks' deposit base has been increasing steadily in all three centres. Latest figures for Guernsey, for example, show that deposits stand at £57.59bn, up 2.4% on the quarter and 7.8% on the year. On an individual basis, banks have been seeing similar increases with the exception of Sun Bank Offshore which has doubled its deposit base in the two years it has been in operation.
The low interest rate environment and booming stock markets have not helped deposit-takers. This has seen many clients going into investments which capitalise on rising stock markets. As can be seen from the table, banks have responded by increasing rates paid on accounts or by launching investment products.
In terms of product launches, the euro has concentrated the minds of players. Lloyds TSB Offshore Banking launched its Euro Club, offering a package of services for British and foreign expatriates and the bank also launched its euro debit card for UK and islands residents as well as a series of term deposits.
In November 1999, NatWest Offshore launched four new products; a euro Visa chargecard aimed at frequent travellers to Europe who prefer to be billed in euro, a high-interest cheque account in a choice of currencies, plus an internet banking service. The NatWest community website was its latest launch, aiming to give expatriates all the necessary information.
Investec Bank (Channel Islands) last year added more currencies to its multi-currency services, as well as a euro-denominated cheque book. In February this year, it took advantage of its ownership of top UK stockbroker, Carr Sheppards Crosthwaite, to offer a multi-manager service for clients with in excess of £20,000, as well as a Discretionary portfolio management service for clients with in excess of £100,000. Its latest product offering is a Gold Visa Debit Card for its private banking clients.
The Woolwich Guernsey has also launched a euro deposit account, an international debit card in sterling, euros and US dollars and a guaranteed equity card.
Turning to fixed-rate offerings, Britannia International has regular fixed-rate bond offerings, as well as a direct saver account that allows immediate access to funds without penalty up to four times per year.
HSBC Bank International recently launched a three-year stepped-rate bond. Its Guaranteed Capital Investment Bond product is aimed at cautious investors looking for preferential returns.
Jersey's Sun Bank has maintained a simple product structure that focuses on a small deposit range. However, it did reduce its minimum deposit to £5,000 in 1999 to open the market to investors accessing the offshore market for the first time. While Cheshire Guernsey's current policy is to maintain and increase balances providing a choice of access, notice, annual and monthly interest and fixed rates.
Traditionally, very few banks and building societies have actually courted intermediaries. There is, therefore, little in the way of bespoke products which creates problems for intermediaries with clients who expect cash management but do not have the minimum investment levels or the requirements of a professional treasury service.
Close Bank Isle of Man's Advantage Account, launched in early 1999, fills this gap. The account offers fixed weekly rates, linked to the London one-week rate and clients can withdraw funds without penalty on the Tuesday. Funds withdrawn on any other day are backdated to Tuesday.
It is interesting to compare product launches with the biggest selling product. Over 62% of respondents have indicated that their best-selling product was fixed-rate deposit accounts. However, this only accounts for 21% of new product launches. While 21% still represents the lion's share of product launches, with charge and debit cards a close second on 18%, it still represents a possible mismatch of client needs. Of course, any analysis of the biggest selling products is always going to be retrospective, not taking into account the fact that the economic environment may have changed enough to demand new product lines.
More light is shed on this when looking at future products - while many respondents have chosen to keep future launches under wraps, some have been forthcoming.
Sun Bank Offshore plans to launch an income product in June which offers clients a choice of monthly or quarterly income product, with no depletion of capital.
Investec Bank says it is launching a multi-manager investment service in mid-June. Although, as is usual, it will use the 'best of breed' funds, it believes it can differentiate this service by offering bespoke fund allocations, based on clients' background, geographic location and tax base.
Internet development features big in future plans. Without exception, respondents have some sort of web capability now up and running (see table for website addresses). However, the level of sophistication varies. Isle of Man-based Britannia International has a website offering basic information and is used as a marketing tool.
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