At long last, the delivery mechanism necessary to offer customers financial services across all product lines is being proposed with the Citicorp-Travelers merger.
Citigroup, as proposed, would combine banking, securities, and insurance products through a worldwide distribution network of bank officers, brokers, and insurance agents.
Domestically, although Congress has failed to integrate the regulatory framework under which such a delivery system could easily be accomplished, Citigroup could operate under today's regulations and laws. While it isn't easy, given the morass of federal and state regulation, to structure the seamless delivery of financial services, it is possible now without a broader legislative solution.
If that is so, why hasn't any entity made proposals similar to that for Citigroup? Perhaps because the Citigroup proposal is far more significant for its demonstration of management confidence in the viability of the "financial supermarket" concept than for the novelty of the idea. Clearly, there is nothing new about the Citigroup concept. What is new is management commitment to the concept by Citicorp and Travelers, two admittedly aggressive organizations. Obviously, there has been some considerable thought given to melding products and sales cultures.
Any entity ready to embrace an integrated product spectrum and seamless delivery system must be prepared to face itself first. For banks, brokerage firms, and insurance companies, the first question after Citigroup is: What internal hurdles must be overcome to make the concept work? This involves true self-examination of management commitment to the concept, personnel qualifications, training, and compensation.
Assuming the commitment question can be answered with some confidence, banks, brokerage firms, and insurance companies are likely to address the more mundane, but still critical issues. These are:
What does the product spectrum look like, and where are the gaps? This involves an examination of what the entity has to deliver to the customer and how that delivery is or is not being accomplished.
After Citigroup, far more interest is likely in joint ventures, acquisitions, or other mechanisms to allow the integration of insurance with securities and bank products (with new pricing opportunities).
How does the entity deliver financial services to the customer? Are traditional delivery structures, such as separate brokerage and trust sales forces, getting in the way of seamless product delivery? Can the bank relationship culture survive with the brokerage sales emphasis?
Marshall McLuhan said, "The medium is the message." No matter what happens to the Citigroup concept, the message is that the future is now. There is no more waiting, no more time for debate.
Citigroup would be so large that few domestic or foreign entities would be competitive from a size perspective. However, with management commitment to the concept, there is no reason why the seamless delivery of financial services by banks, insurance companies, and brokerage firms cannot now take place. What has been lacking is confidence. Perhaps that is the real lesson of the Citigroup proposal.
