When I first started investing people had a personal relationship with their bank managers, but things have changed significantly over the last few decades.
Fact is when you go into a bank, you are on your own when it comes to your own financial interests.
Everyone may be friendly and eager to help when you walk in the door, but the bank is a business, and it exists to make a profit.
That means that your bank wants to make money out of you.
Now this doesn’t mean bankers are not trustworthy or honest people. It’s just that they work for large corporations and their role is to sell you products offered by their employers which may or may not be the best financial solution for you.
So here are ten things your banker probably won’t tell you:
- They can only offer you limited options. Obviously, they won’t tell you about loan products offered by other banks which may suit you better.
- Bankers are sales people. They are incentivised to “sell” you a specific solution including credit cards and insurance. The more products or services they get you to “buy” the more money the bank makes. Sure, finance brokers also get paid by the banks for the services they offer, but this income must be declared.
- There are 3 doors into the bank:
- The front door where most retail (mum and dad clients) enter.
- The business branch available to larger accounts – the bankers here are more investment and business savvy and…
- The institutional branch – where the “big boys” go.
4. Mortgage rates are negotiable. If you ask them, they can usually give you a better deal, because the bank would rather drop the interest rate a little than lose your business.
5. An offset account can be better than a term deposit. Putting your spare cash into an offset account is effectively earning you the interest rate on your mortgage, and therefore makes you more money than a savings account or term deposits.
6. Bank fees are a big money maker. It’s unlikely your banker will tell you that fees are amongst the biggest money maker for the banks. Nor will they tell you…
7. Some fees can be waived. You bank won’t tell you this, but sometimes certain fees can be waived, just because you asked.
8.They are not financial advisers. Some borrowers assume bank employees are trained to help them make financial decisions, but that’s not the case.
9. The “system” will decide on your loan application. Many people think that their bank manager or the loans officer will decide, but in reality “the system” will assess your loan application. All your information will be fed into a computer and your application is reduced to a number.
10. You should shop around for the best loans or financial products. Many people just go to their bank for loans and other financial products. It seems easier and more convenient to keep their financial accounts with one bank and they assume that, because they have been loyal customers, they will get a good deal. Unfortunately, this is not always the case.
I guess these are some of the reasons I suggest you work with a proficient finance broker to balance the playing field.
Michael Yardney is a director of Metropole Property Strategists, which creates wealth for its clients through independent, unbiased property advice and advocacy. He is a best-selling author, one of Australia’s leading experts in wealth creation through property and writes the Property Update blog.