You can’t trust your bank manager

A new survey from Lloyds TSB has revealed that more than half of us (55%) have not seen our bank manager for over ten years. It’s a shame that this percentage isn’t a lot higher. Seeing your bank manager can be seriously detrimental to your financial health.

It never used to be that way of course. In days of yore, bank managers were among the most respected members of community. Getting a mortgage was a tortuous process with banks unwilling to lend any money at all unless you went on bended knee and offered your first born as security for the loan.

These days mortgages, loans and credit cards are handed out like sweets and bank managers are little more than financial salesmen. Rather than being a good person to go for financial advice, asking a bank manager whether a product offers good value is akin to asking a barber whether you need a haircut.

Another reason why few of us see our bank manager anymore is that is can be impossible to get hold of a local branch over the phone. Calls are diverted to central offices and setting up an appointment can be arduous. With many branches closing, contact over the telephone is often the most practical option. But banks have made it difficult to do this as they have relentlessly focused on cutting their costs.
The dreaded financial review

If you’re lucky enough to find a bank branch that hasn’t been converted into a wine bar then it’s a different matter. You may be asked if you’d like a ‘financial review’. Usually this will be free to make you feel you’re getting something for nothing. However, a financial review is simply an excuse for the bank to sell you a load of expensive products you don’t really need.

The problem here is twofold. Firstly, banks can only advise on their own products. So this means you’re only seeing a tiny fraction of what’s available across the market place. The quality and features offered with regards to most financial products varies little from bank to bank. What does differ is the price and often this difference can be vast.

For example, an ordinary branch based savings account could pay as little as 2% a year. The highest paying accounts, usually internet-based, offer a rate that is more than three times higher. Sadly, no one bank is competitive right across the board. Most will have a few products would could be classed as Best Buys. So this is why it pays to shop around and have your mortgage, credit cards, savings and so on with separate companies.

When you’re stuck in a bank manager’s office, surrounded by glossy marketing posters, it’s difficult to know what’s good value and what’s not. You won’t be able to access the internet and see how the rates you’re being offered compare to elsewhere. As many as us only buy financial products very occasionally, we’re unable to make a snap judgment as to whether we’re getting a good deal.

Investments are a particular problem area with funds sold by banks often among the worst performers in their sectors. Sadly many of these ‘dog’ funds have many billions invested in them, with their performance trailing the market year after year.

High pressure sales tactics

The second problem is the larger of the two though. In order to drive up profits, sales targets are used across branches so each manager will have a set number of products such as mortgages to sell each month to get their commission.

Naturally these sales targets are based upon how profitable each product is for the bank. Now it doesn’t take a genius to realise that what is most profitable for the bank is likely to be the most costly for the customer.

Often it is not the core products that are the problem. Many personal loans and mortgages offer good value for money. But the insurance products sold alongside them, protecting your payments in case of accident, sickness or unemployment, are not. Indeed these side-products are often where the bank makes the majority of its profits. Often people have been told taking out these products are a condition of approval, a practice which is illegal and is at long last being clamped down upon.

The Lloyds TSB survey does make the good point that most of us don’t review our financial affairs as often as we should. They also asked which celebrity would make the best bank manager. Simon Cowell was top with 17% of the votes. Now, I’m no X Factor fan, but I’d trust him more than most bank managers I’ve come across.