Wednesday WTF: August 22, 2017
Why I will never ask someone at the bank for advice: 3 Reasons
Good morning friends and welcome back to Wednesday WTF, my weekly rant on things that waste your money. This week at Budget Boss is all about financial advisors and the financial planning industry. Many people are confused when it comes to their own financial picture. They have a hard time knowing what to do and when to do it. This leads many of them to seek out the help of an expert in the field. Financial Advisors come in all shapes and sizes and the bank has many that help people with their financial dreams. Despite the previous statement, I personally will never use them or recommend them for these services for some very specific reasons. In this post, I will describe why you should think twice about choosing the bank for your investment, insurance or mortgage needs. This post comes from personal experience and not second-hand accounts. I have 3 solid reasons that helped me come to this conclusion.
1) What’s Loyalty?
One of the most important qualities a person can have is loyalty. I know from firsthand experience that a lack of loyalty from others, and myself towards others, can be extremely damaging. In the banking world, loyal is just another 5 letter word. In the environment of shareholder meetings, quarterly profits, stock splits, and CEO bonuses; loyalty just doesn’t quite fit. An example comes from my father who had been with his bank for over 35 years. He had 2 mortgages with this bank, one for our house and also a rental unit, liquid assets, and no debt. When he applied for a Line of Credit he was completely denied even though he had good credit and never missed a payment. Knowing that it should have been no surprise to me that I was denied a line of credit as well, being debt free, in good payment standing, and with investment assets with this very bank. They essentially turned their back on my father and then many years later, on me even though we were loyal customers. The funny thing for me was that I didn’t even want the line of credit for the purpose of fully utilizing it. I just wanted to build my credit further and have it as emergency credit with a lower interest rate than a credit card. My wishes and loyalty did not matter to them, it was all just a game of numbers. The same is true of their employees. Sweeping layoffs come with every new technological advance and lesser than expected yearly profit. These job cuts always seem to vanquish the lower level workers and not the millionaire CEO’s who could easily afford to lose their job. I have several friends who used to work at the major banks in Canada and fell victim to budget cuts through no fault of their own. It is a system based on numbers and profits and not individuals.
2) Banks make big money for a reason
I’m going to create an extremely profitable business. My business is essentially a figment of your imagination. It is a building that you come to and deposit all your hard earned money. Once you deposit this money I charge you a fee for having the privilege of storing your money in my building. Also to access your money you must pay other fees unless you access it the way I wish you to. Even better I will make it tough for you to get the things you need in life, like a house, by influencing the powers that be with my great lobbying powers. I will, however, make it easy for you to rack up bad debts with high-interest rates that serve no other purpose than enriching our coffers. Our lending capabilities will be based on the amount of savings that are held at our institution and we will lend this money out at a much higher rate than we pay you in interest for your savings. Oh and by the way, if we ever play too hard and loose in order to make a profit, we will go to our friends in power to help us out on the back of your tax money. Sounds like an airtight business model doesn’t it? There is no such thing as no-fee banking if you hold your investments or debts with the bank. This is why I will only hold my chequing and savings account with the bank. Every day the major banks in Canada make anywhere from 7-9 million dollars in bank fees. This is all the wrong ATM fees, NSF fees, and overdraft fees. You have to understand that a business built on this model cannot have your best interests at heart. It is just not possible.
3) They don’t know you and they never will
Tying into the last two points, it is absolutely impossible for a bank to know you on a personal level. The structure of their mechanism makes it not conducive to relationship building. For starters, the person who helped you pick your investments more than likely won’t be there in a few years. Their system rewards those who produce with promotions. Producing means selling products like creditors insurance and mortgages that may not necessarily be in your budget. PS: always be wary of someone who tells YOU what house YOU can afford. You should be the one determining this! Their top performers will move up to the “better” accounts and leave you in the dust. This shouldn’t come as a surprise as they were just a simple bank teller the year before. Having a model based solely on profits does not allow for relationship building. The person that helps you will almost never work with others in your family, certainly not your children. This becomes a problem when your legacy and wishes come into play. Meeting on “banker’s hours” is also an issue. Many people work exactly the time when banks are open leaving them no time to meet with their advisor. Meeting you when and where you wish builds a rapport that cannot be duplicated in the ivory walls of the bank.
The problem with our society is that we often know what is bad for us. We know certain things are a rip-off, or certain people will never do well by us and we still give them power over us. Each and every one of us has the power to vote with our dollars as well as our consciouses. We have the power to dictate what we want by choosing who we wish to represent us and our financial futures. This is why I will never leave my investments in the hands of the banks. I realize that I must have a bank account to accomplish the duties of day to day life. That being said, I do not have to owe the bank for my home, and I do not have to pay them fees for my investments. I believe in a personal touch when it comes to my investment portfolio and for me, that cannot come at the bank. Trust is key, so is compassion. Make sure who ever helps you with your investments lives by those virtues.
Thanks for reading my post today and don’t forget to tune in tomorrow as we continue with financial advisor week here at Budget Boss. Have a great day friends!
“A bank is a place that will lend you money if you can prove that you don’t need it.” – Bob Hope
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Joseph James Francis is a Financial Advisor. You can find him on various social media platforms and at www.budgetboss.ca