*No bank managers were harmed in the making of this article.
Historically speaking and without much controversy, “Banks must, and do, manage a complete suite of banking products and serve all clients through all channels,” says investor of Capitalise.com and founding partner of QED Investors Frank Rotman Copernican Revolution. However today, as we examine our financial ecosystem, best of breed financial solutions are now emerging from a myriad of institutions, changing the business finance landscape for SMEs.
Bank managers and the role they traditionally played in supporting business owners navigating the financial ecosystem is increasingly distant due to either a reduction in bank branches or simply not as a feature of these new digital fintech such as Tide, Tandem and Starling who have traded mortar and bricks for website and clicks.
UK businesses have no-one to turn to since the reduction in bank branches and against the backdrop of an increasingly complex financial ecosystem. As a consequence demand is increasing with more questions on financial services to the accountants.
By tuning into this new and evolving range of financial solutions for the SME market, accountants can now do more than refer to bank manager. Rather, the Accountant is now taking the place of the Bank Manager to help SME owners source best of breed financial products from a wide marketplace. Moreover, accountants can help SMEs in a way that banks never could by exploring a range of financial products with their clients from the wider marketplace.
The Bank manager is dead?
High street banks have closed almost 3,000 branches across the UK between 2015 and 2018, leaving thousands of SMEs isolated from their usual source of financial guidance. In bank branches’ absence SMEs have had to make important financial decisions based on limited, poor no information. “It used to be simple to go to the bank about a business loan. It was probably the same bank where you had your personal account, mortgage, savings accountants and even investments. ” says Capitalise.com CEO Paul Surtees. Today it just isn’t the case, as multiple financial providers offer the solutions that the (theoretical) bank manager doesn’t have access to.
Whilst Lloyds Banking Group, Royal Bank of Scotland and Barclays have recently opened the UK's first “business banking hub” to address SMEs demand for physical branches for cash services, they fall short of providing a long term solution to replace the roles traditionally filled by the banking relationship manager.
This means that many financing products are often not considered due to a lack of awareness and SMEs end up paying over the odds, with unfavourable conditions attached. Added to this, the lack of a source of guidance can increase pressure and anxiety for SMEs.
Where do SMEs turn for help?
Capitalise interviewed over 1,000 SME business owners in the December 2018 Capitalise.com Small Business Survey. Ninety-eight percent of business owners answered that they had no idea who their bank manager even was. “Bank manager? At best I have a call centre.”
Nine out of ten owners surveyed rated their bank manager as having no impact on their business. But if there is no support from bank managers then where are SMEs turning? Capitalise.com found that the top three sources of advice were: No-one, friends and family, perhaps more worryingly, the internet.
It is disturbing to think that SMEs ability to access services which are most suitable to their business, industry, size and goals is left namely to the strength and effectiveness of a financial institutions marketing campaigns.
A huge range of products and change in the industry
Financial organisations have long benefited from dominating the entire SME financial service supply chain. From loans to credit facilities, and from payments to FX, SMEs have historically had to process all their financial needs through their bank. However, the fast changes that technology has brought to market in recent years mean that legacy financial institutions like banks can no longer rely on a vertical stack.
This development is already seeing SMEs avail of different funding opportunities from over 300 UK financing providers, as well as sourcing other financial service needs from specialised providers rather than from the now outdated traditional bank business model.
Demand from SMEs for support is not limited to debt funding but rather across the entire financial landscape. The UK financial ecosystem is increasingly dominated by financial institutions with high quality, narrow product sets, leaving the SME to sort through best of breed financial solutions from a myriad of institutions.
The opportunity for accountants
Will Farnell, Partner of Farnell Clarke says “We as accountants simply need to look for better ways to deliver a better client experience.” This gap in guidance and the increasing absence of high street bank branches across the UK provides an opportunity for accountants to step in. This support, exploring appropriate financial products, is increasingly important as banks and challengers further develop products which benefit UK small businesses.
Accountants are uniquely positioned to be the new gatekeeper for their SME clients and their financial needs. Moreover, they can be much improved on the historical performance that bank managers provided in this role, thanks to the shift from a vertical to horizontal financial structure stack. However, it is more promising still that financial technology is advancing at such an incredible pace that future value-added products are likely to arrive to market that will further facilitate accountants as they position themselves at the forefront of SME finance.
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