Canadian Personal Finance Blog

Archive for the ‘Banks’ Category

Do you feel lucky? Well do you punk?

After yesterday’s parting comment about “See if you can find a lower rate somewhere else, we dare you!” caused a good reaction, I figured I’d keep going with a snarky remark theme (with proper reverence to Clint Eastwood/Dirty Harry).

Most banks these days are banking (pun intended) on you not willing to change banks, thus they treat you like cattle (don’t the waiting lines at the bank branches that are still open not remind you of lines in a slaughter house?). I have talked about this topic ad nauseum, but in case new readers are unaware, your bank does not own you, nor do they own your money, thus you should not feel obligated to stay with a bank, especially if they treat you badly, or give you bad service. This is actually true of all service providing firms (Telephone companies, Restaurants, Grocery stores, etc.,), but acutely more so with banks.

I have changed banks 3 times so far, and have accounts at a few others just in case I feel like changing again, and I have made this approach abundantly clear to my current bank every time I talk with them about a new service, or how they screwed up something else in my financial life.

As I wrote yesterday, TD has decided that they can mess with me, by changing the interest rate on my Line of Credit from being “Prime” plus 0.5% to “Prime” plus 1.0% where they effectively have said, “See if you can find a lower rate somewhere else, we dare you!”. I am pretty sure that if I walked into the BMO branch closer to my house (or the RBC branch even closer), I might get something close if not better (at least in the short term), but am I willing to roll the dice, and change?

Given the dawn of new web sites that allegedly compare different insurance offerings or cell phone plans, this might be a money making idea for someone to set up. Have a user input some simple “service needs” statement from a set of menus and then have all the different banks reply with their best offers (might even be funny to make sure the bank they are currently use, knows this customer is looking around). How hard could this be? What would even be more interesting is if someone like PC Financial or ING did this kind of service so that you could see how much you might save using their services?

Anybody who wants to try this, I will gladly kibitz for them (I am not a consultant only a Kibitzer).

Remember, you read this idea here first!

My wife and I spent about an hour working with our TD/Waterhouse rep attempting to set up an RDSP. Luckily the rep had already pre-read as much information was available from TD (i.e. not very much), and so we spent 45 minutes filling in paper forms.

What really had my head spinning was:

• The large volume of paper forms (that will have the same information transferred to a computer later)
• The repition of the exact same information

The number of times, my wife’s name, address, and other info was awesomely bad. The reason we were given is because this is a new program for TD the enrollment is not automated, and hopefully one day they will automate it, because this paper trail stuff is really for the birds. I had to live through this last year when I opened a Retirement Fund, but I believe I have an answer as to why all this paperwork is necessary.

Each group inside of TD (and any other bank I would guess) that is part of the RDSP system (e.g. accounting, trading, web interface, etc.,) want information, so they design a form that will get all the information they want. The better way would be to have a single larger form which is then shared with all the groups involved in the savings vehicle set up, but I would guess, there are no bonuses paid internally at TD (or most other banks) to streamline customer interface systems, thus the problem is unlikely to be solved in the near future.

I was also dismayed to hear that the RDSP will not be hooked into the on line banking capabilities any time soon either.

I see this constantly with large firms, that each individual “fiefdom” of technology or information inside the firm feels they are omnipotent and worse still, isolated, from other groups, so they simply attempt to make their own lives simpler, and figure out what small part of a larger problem they have, and optimize the solution for their purposes only.

I would bet there are a few consultants out there making a bloody fortune wandering around to large firms and telling them to stop letting their individual groups solve issues at the sub-micron level and to start creating Macro solution teams instead.

I don’t mean to pick on TD, but this period of time got me thinking about when I deal with Bell, Rogers, Any Bank, Hospitals and other customer facing industries/companies it is rare you run into a Customer Initiation system that makes it easy for a new customer to be created.

For those of you who are unaware, Banks try to capitalize on attracting new (and young) customers on campus these days (most Universities have entire bank branches on campus).  They are quite aggresive in their marketing to these new potential clients, enticing them with iPods and other “perks” to open new accounts.

When I was at University the on campus bank knew that a great many of the students were in Co-op, and thus excellent new victims for their bank service fees. I opened a bank account on campus at first mostly for ease, since I lived on campus at the time, but then they started enticing me with new exciting services like:

• My first credit card, because now I actually made money (4 months at a time), and I could now start learning about the joys of CREDIT (and hopefully not pay my bills on time).
• RRSP loans, to move income around from year to year (if one year I worked for 8 months, I could normalize the income with the next year, by using this loan, for a small fee).
• ATM machine access and their fees (yes I am that old that this was a new service back then).

The CIBC branch at the University of Waterloo had a pretty sweet business running, and I am sure there are people who still bank with CIBC because they started at the U of W. I changed banks after I moved off campus and Canada Trust was actually a closer bank, but I kept my CIBC credit card for a long time.

Banks are always on the look out to get NEW clients that want to pay Bank Fees and put their savings in their banks for the bank to use as well.  When you send your child/student off to school keep this in mind and maybe talk to your kids about banking and the in’s and out’s of the “Banking Game”.

Continuing on from yesterday’s post about how banks differentiate themselves from each other.

Insurance

Banks now are offering insurance on their web sites and at the branch, which makes them more of a “one stop shopping” for financial services, which is a good service for them (for customer retention).  I know I am guilty of using this “convenience” service to get quotes for various insurances when I need to, and I may buy Tenant’s insurance for my daughter (after reading an excellent article by Rob Carrick in the Globe and mail, about the importance of having Renters Insurance if you are a student).

Always get many quotes to get your cheapest insurance, however, Banks are now in the insurance business so remember to avail yourself of this service too.

Investing Services

Pretty much each major bank also offers investment services for their customers (either real stock purchases, ETF’s, Index funds or crappy Mutual funds). I use TD’s investment service, which seems competitive, but I have heard that you can get better deals with these services if you shop around, or have a lot of money invested with them (which makes sense). Are any of these services head and shoulders better than their competition? I have no idea, anybody care to voice an opinion on this point?

Free Banking

OK, only 1 or 2 really offer “free” banking (ING and PC Financial are the two I can think of), and that is the major differentiator that I can see for banking. If you can get your banking services for free, that is a major differentiator for any bank (and if you are paying too much for your banking that should be a differentiator as well). I have already ranted about this topic enough times, but remember you don’t have to pay $25 a month to a bank for the priviledge of using their services! Paying $30 for cheques is even worse!

What else?

Are there other services or things that would cause someone to prefer one bank over another? Any and all opinions or comments invited.

I have run across a few interesting things that caused me to wonder what exactly are the banks in Canada doing to make folks want to be their customers?

All of the banks advertise (I don’t have their numbers spent on advertising, but no bank in Canada does NOT advertise). You can see some of the ads on this very web site some times, so they must have very deep advertising pockets, I do like the TD ads with the cranky old men, but that wouldn’t cause me to change banks for that reason alone.

Cheques

The first thing I noticed while collecting dues for a basketball team is that  I received 4 cheques from different parents, but I noticed the cheque design for all 4 cheques were EXACTLY the same, even though they came from 3 different banks. The security patterns on the cheques were exactly the same (I compared them under a strong light), the differences were:

1. Bank Information about which bank this is, address and logo
2. Customer information (name and such)
3. What was included in the MICR lettering at the bottom of the cheque

Other than that, there is no difference in the cheque.  In fact most of the banks use the same printer for cheque designs they simply order them, and thus this service is the same.

On Line Bank Interface

This is very different in terms of who designed the interface and such, but my guess is the “back end” of the software is exactly the same. What you can do is remarkably the same, typically there is a lot of advertising around it to get you to try new services with the bank.

Tomorrow, we continue this interesting case study.