Today, Sainsbury’s has announced that it has agreed to buy out some shares in Lloyds Bank for an estimated £248m. This will bring to an end the joint-venture between the two companies offering mass market, off the shelf financial products. You may be surprised that the partly state owned bank was partly funding privately owned Sainsbury’s Bank or I suppose the taxpayer – and no I didn’t get any extra vouchers in the process. Sainsbury’s Bank will now be able to stand on its own removing any need to tie up with Lloyds (who are also currently part of the Lloyds Banking group with includes Scottish Widows, Clerical Medical and Scottish Widows Investment Partnership). So Sainsbury’s now have the ability to sell financial products that are not made by Scottish Widows. I imagine terms like “financial advice” will continue to be used and made all the more confused.
It is not clear who this is a good deal for. Lloyds probably welcome the funds to help payback UK plc, but longer-term may be missing an avenue to the mass market “off the shelf” basic financial products. Something that is sadly required if most people are to get even basic financial stuff sorted out. Sainsbury’s see this as a profitable opportunity, diversifying their revenue streams. Whilst I believe that we need some sort of mass market service for the majority of UK adults seeking basic financial products, I remain concerned that this seems to be “more of the same”. More of the same mistakes when it comes to financial products. Banks have messed this up over the years, big time. In my opinion, the Banks moved from providing suitable sources of finance to individuals and local businesses, to attempting to sell financial products. Jack of all, master of none, would seem to be a reasonable assertion. Sainsbury’s appear to be going the same way. Its all very well to talk of diversification of the business, but essentially a supermarket sells food and drink… what next? will they begin building homes? I would term this “over-diversification”. This succeeds only because of a trusted brand name and helpful conditions, both are easily lost in a world where names are quickly tarnished, perhaps by accusation alone, even if there is no basis to it. I’m thinking of the current social media storm surrounding British celebrities being accused of rather horrible stuff – much of which is yet to be proven, but damages reputations purely by suggestion.
Dominic Thomas: Solomons IFA