Analysis / Throwing banks in at the deep end
If bank officers have time on their hands these days, they could benefit from watching the Olympic swimming. They would find that one of the standout events is the "400 Meter Medley" in which swimmers display several talents simultaneously.
If bank officers have time on their hands these days, they could benefit from watching the Olympic swimming. They would find that one of the standout events is the "400 Meter Medley" in which swimmers use four styles - backstroke, breaststroke, butterfly and freestyle, displaying several talents simultaneously.
If the Bachar commission recommendations pan out, similar diversity will be demanded of bank officers. It will be insufficient to just offer basic savings and loans services - they will have to learn to provide customers with professional financial advice.
It is still early to judge who exactly will provide consulting services in banks and if the duty will fall upon investment advisors or specially trained officers. What is clear is the Bachar commission is signaling the banks their new role - marketers and advisors of all sorts of investment and savings packages.
The same officer will be required to explain to customers why, if at all, they should save partly in a pension fund, partly in life insurance, and partly in a provident fund.
The officer will also be the one to recommend which fund or insurance company to choose, how much to invest, and how to divide those investments between mutuals, short-term debt certificates, and short-term deposits. Officers will need to understand saving, investment, and taxation, and the optimal way to integrate all these tracks.
The deal which the commission offers is to take away from the banks everything connected to controlling or owning financial companies and properties, such as mutual funds, provident funds, and underwriter companies.
In return, the commission would enable the banks to promote and market all the long term investment and savings instruments. Are the banks prepared for this? Not at all. Are the banks interested in this arrangement? One can't be sure.
True, the banks have been burning to sell insurance polices and pension plans for years. Now the door is being opened to them but in an other than expected formula.
The banks just want to market simple policies like car,home, travel, and term life insurance, which promise handsome commissions without requiring special expertise.
But life insurance policies and pension packages require expertise, knowledge, and customizing client needs. While banks employ an army of officers, they lack the requisite training.
The banks do not strive to turn their employees into consultants, which would demand serious investment in training and replacement of regular workers with trained pension and insurance consultants.
The banks already have a tough time trying to release workers in the face of tough collective agreements with the bank workers' committees.
It is easier for the banks to sell basic polices that need no long term advising. This outlook - with encouragement from Bachar - will not last long term.
Direct telephone and Internet services will gradually reduce branch visits. Banks must introduce additional activity in order to maintain branch offices, even if it means significantly altering the type of activity and requires training or replacing personnel.
The Bachar commission, to some degree, shackles the banks and puts more responsibilities in their hands than they care for. Commission members ask, you wanted to sell insurance? Okay, do it professionally and skillfully. Selling insurance and pension plans is no moonlighting job.