Given the parliamentary election in Sweden this week, the media representatives must feel like they are drinking from a fire hose right now when all lobby organizations are pushing their press releases with testimonials, surveys and academic research that support their case. Though understandable, it is very unfortunate that media neglected the press release that proved my point that legislators actually are doing the banking customers a disservice when they impose additional legislations. I will devote this blog post to the perfect illustration that the massive compliance burden on advisory services will eventually implode and leave customers without guidance in an “execution-only” market. With this blog post, I will rest my case on a topic that I started with a previous blog post on #sovjetbanking.
SBAB Bank is the only bank that is owned by the Kingdom of Sweden and hence expected to be a role model in the industry. They are expected to be a leader on Corporate Social Responsibility and is often considered by the left wing as a potential political vehicle into the banking industry. Recently, it was suggested by the Social Democrats that SBAB should make exemptions from the rules on mortgage backing to make it easier for youngsters to get their first apartment.
Given this political exposure, it is extremely unfortunate that so few noticed the press release that SBAB posted in late August where they informed us on their changed strategy. They explained that their decision to reposition SBAB to focus on mortgages and discontinue their cross-servicing efforts was driven by the fierce competition on the mortgage market and the increased compliance burden. To me, this should be a wakeup call when the only bank that is owned by the government discontinue their services due to legislations that should be designed to protect customers. The fact that the board recently replaced the CEO indicates that they are serious with this changed strategy. And the fact that the new CEO, Klas Danielsson, was one of the founders of Nordnet, that pioneered On-Line Trading in Sweden, gives us an indication on what to expect. The former CEO used the following illustration in his last annual report for SBAB to present their DNA. According to him, their vision is to create a new era in banking. I certainly hope that this new banking era will continue to offer advisory as well as “execution-only” services. In my opinion, the legislators have to stop overprotecting us customers to preserve this multitude and realize that we are fully aware of the moral hazard in acting on advice from financial advisors, just like when we ask the dentist, hair dresser, lawyer, waiter and shop attendant for advice.