Financial Services firms face challenges on a scale we have not seen since the financial crisis albeit this time the level of uncertainty in the economy is unparalleled. With interest rates and inflation rising much like the pandemic, war-driven supply chain issues, and the declining pound, the pressure on financial services firms and their customers is at a critical and precarious tipping point. This is also a time where financial services firms will face a moral dilemma of whether they should charge more when their customers are already under huge pressure.
As a result of these pressures many firms are seeking to cut costs, which of course is a challenge with the colossal rise in the cost of living and more general inflationary pressures. The savvy firms are seeking other ways to increase revenue which includes developing new product proposals. This is of course poses further challenges when dealing with retail clients and navigating complex regulation, whilst also balancing consumer best interests.
As evidenced by rapid growth in the online retail broker community, which we have witnessed over the past few years, retail customers are actively seeking out ways to access capital markets. There is an argument to say that this growth was directly linked to the covid pandemic as we were all sitting at home with more time on our hands however, based on the continuing demand there is no denying that retail investors seeking out options to invest their money and want to partner with firms that can offer them new and innovative ways to increase return.
Notwithstanding what customers want when all is well, the main challenge for firms is to offer solutions that maintain compliance and keep client assets and customers protected in case of stress scenarios.
In the short-term competition could be impacted if all firms considering securities lending did not operate on an equal playing field when it comes to prioritising customer protection and consumer duty. However, for those firms in it for the long-term, it should be a fundamental priority to stay on the right side of the regulator and ensure best outcomes for clients. Ultimately, being compliant and putting customers first should lead to long- term commercial gains and a viable place in the market.
As an industry if the relevant firms want to attempt to make the regulator comfortable with securities lending each firm has a responsibility to invest appropriately and do
it correctly.
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