Santander UK Plans to Return to Investment Advice Sector

The UK arm of Santander, the Spanish bank, is considering the pros and cons of returning to the investment advice market, which it had abandoned in late 2012 because of tough laws.

Santander had jumped into the banking sector after cutting down its investment advice arm because of laws that re-defined how investors could pay for financial advice and demanded better, but expensive training for staff. Owing to the retail distribution review (RDR), as many as 800 financial advisors lost their jobs. Today, Santander offers financial advice services only to clients investing over £50,000.

Ever since 2010, the year in which Santander entered the UK after acquiring Alliance and Leicester, Abbey National, and a portion of Bradford and Bingley, its growth has been rapid. Customers showed a preference for its current accounts, featuring the seven-day switching scheme, which attracted more new customers to Santander than to any other bank.

But the bank cannot expect to continue to grow in this way as it expands into one of the largest banks in the market. Santander UK now has 14 million customers, 9 million of who hold current accounts. The bank is expecting decline in application for current accounts after it announced a fee hike with regard to its credit cards and current accounts. Now, the bank wants to launch more products to attract more new customers.

Steve Pateman, the UK banking head, said:

“You get to a point where it is not necessarily about acquiring more customers; it is about developing broader relationships with them. For instance, we do relatively little in terms of pensions advice today, we are relatively light in terms of investment activity, and these are things I would expect us to do more of in the coming years. It is about having customers who see you as their prime financial provider across a whole range of products.”

He wants to achieve the long-term goal of getting up to 8 million loyal customers for at least two products. The bank currently has only 3.6 million loyal customers and wants to increase this number of 4.8 million in the next three years.

Initially, there were plans to float Santander UK as an entity independent of its Spanish parent company. But now Santander has no plans to become a publicly traded company in the UK at least for the next three years, according to Pateman, who says that

“the UK is one of the better performing businesses within Santander.”