Selling Financial Services Over 10 years ago

 Retail Finance In 1998 Composition

Harvard Organization School

9-799-051

December 18, 1998

Selling Financial Services over 10 years ago

Delivery of retail financial services in the US was undergoing significant realignment. With all the relaxation of regulatory constraints on traditional financial intermediaries—banks, mutual cash, insurance companies, and brokerages—products and services were becoming increasingly similar. Banks and insurance companies had been selling mutual funds, and Fidelity and Schwab were offering a full line of banking product or service, although unbundled and separately priced. Investment advice, when the hallmark of full-service brokerages, was being provided by almost everyone in some manner. (See Display 1 for any list of item offerings in 1986 and 97 of some of the world's greatest financial institutions. )

At stake was your $27 trillion of used household possessions, growing annually at 10%, only 27% of which was professionally maintained in 1995. With the introduction of 401(k)-based retirement strategies and the developing personal responsibility for retirement finances, US consumers had been becoming increasingly interested in capital market segments, albeit in a unsophisticated level. A wild array of services and products, and great quantity of information inside the popular press and on the web, had become more intense consumer alternatives. With twenty percent of buyers generating 80 percent of the success in price tag financial services market segments, financial intermediaries were focusing on two important segments: wealthy investors (the baby rate of growth generation which will stood to be the beneficiary of your estimated $10,50 trillion dollars in resources by the turn of the century), and technologically savvy traders who manufactured their own decisions and performed them on the net.

Ten years ago, there were objectives that a " supermarket” of retail finance would come up with organizations such as Pep boys, American Communicate, Prudential-Bache, and others, vying for customer control. In 1998, Pep boys was no longer in the business, American Express got retrenched, and Prudential-Bache got run into expansion difficulties. With the blurring of traditional boundaries between banking, mutual cash, insurance, and brokerage, broadline retail finance had resurfaced. As the growth of independent financial advisors further difficult the mix, there is great desire for how it would all shake out.

Most competitors were trying to adjust their retail landscape, which includes First Union Bank, a regional anxiety about expanding geographic reach and highly automatic branches; Faithfulness Investments, the mutual cash giant which offered merged banking and investment accounts, as well as insurance and usually are; Travelers Group, which had recently joined up with its broker agent and insurance operations with Citicorp's bank business, forming the planet's largest financial services firm; Merrill Lynch, the full-service broker selling a huge array of product or service within the context of individualized financial guidance; and Charles Schwab, the aggressive price cut broker increasing its products, and adding exhortatory services intended for the do-it-yourself investor. Study Associate Takia Mahmood ready this case underneath the supervision of Professor Sophie P. Bradley as the foundation for class discussion rather than to illustrate possibly effective or perhaps ineffective controlling of an management situation. Copyright © 98 by the Director and Guys of Harvard College. To order replications or request permission to reproduce elements, call 1-800-545-7685, write Harvard Business College Publishing, Boston, MA 02163, or go to http://www.hbsp.harvard.edu. Zero part of this kind of publication could possibly be reproduced, kept in a retrieval system, utilized in a spreadsheet, or sent in any form or by simply any means—electronic, mechanical, photocopying, recording, or perhaps otherwise—without the permission of Harvard Business School. 1

799-051

Full Financial Services in 1998

Banking

After you have a customer base, the only restriction on everything you can sell can be your very own...


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