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I am suprised by his choice of words use in the article, definitely there were Financial conglomerates like AIG and RBS that have suffered from diversifications and poor investment strategies. The 2008 financial turnoil sparkled by the collapse of Lehman has affected almost all, manufacturing, financial, service sectors were all badly affected.

There are, however, financial conglomerates which have suffered losses but not generally because of diversification. Bing Jie mention about Warren Buffett's Berkshire Hathaway is one prime example. Warren Buffett lost billions during the financial crisis but was it due to diversification or contagion from small part of the business? My opinion is that instead of divesification, it was due to the overall losses suffer during the crisis. Joyce who mentioned about confidence of investor and instuition is probably right. The fall of Lehman brother probably affected the confidence of many, causing a chain reactions from investors to consumers.

In the past it might hold true that the business strategy used on retail customers might have been product driven, emphasising transactions over relationships. In recent, years fiancial conglomerates have move from product driven to building a long term relationship. In the banking sector, you would probably see campaign like serving customer within 8 minutes, follow up within 2days. Insurance agents would probably visit you personally when you met with an accident or have a newborn in the family. All this shows that the shift has move from product driven to customer focused.

In order to keep up with competition, FIs have been offering more than just one service. Is this neccessary seem as a bad move? Take example of banks in Singapore, they are not just serving the retail customers, many of the banks are also targeting the investment and insurance clients.
Traditionally you would go to an insurance agent for insurance, investment company for investment, but the banks are working towards a all in one service provider, a one stop service as Irene call it. Take Standard Charter Bank as an example, they do not have their own insurance subsidary, but they do have a partnership with prudential. The partnership have been going on for years. If Standardard Charter Bank were to buy over Prudential, the resulting fiancial conglomerates would be able to offer clients all 3 form of service, investment, insurance and retail banking. What would you think of that?

Large financial conglomerates might be difficult to manage, but with the right experience proper regulation and supervision, things might just work.




Q2) Should financial conglomerates be allowed to continue as many critics felt that they impede competition by restricting new entrants?



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