Please Help Me, Bank Insider

The Financial Blogger, a Canadian bank insider, has put up a series about The Way Banks Look at You. What he wrote was not entirely consistent with how I saw banks, so I asked if he wanted to start a dialogue to help me reconcile the things I see day-to-day with what he knows from the inside. To my great excitement, he took up my request and we agreed that I would throw out the first entry and he would respond on his blog. I hope we can try an inter-site dialogue this way to see how it works. When he posts his reply I will link to it from this post. UPDATE:His response is here.

My qualifications to complain about banks: I am a fairly frequent retail customer of several banks and other financial institutions

I have:

• 3 mortgages at 2 banks
• An unsecured line of credit and a home equity line of credit
• 5 investment accounts of all types at 4 institutions:
  • Self directed RRSP, margin trading, and company pension both within bank brokerages and non-bank brokerages.
  • Most of my accounts are "Buy and Hold" but I also have a fairly good sized active trading account that I play with.
• 4 bank accounts at 3 banks
• Family has 5 credit cards, and I have 2 personally
• I have moved several times, even from one side of the country to the other, which of course involves moving my finances.
• I believe I am a perfect low maintenance customer. I hardly ever overdraft, I always pay my credit cards to zero, and never miss bill payments.

Now, on to the opinions!

Banks should be among the most trustworthy, on-your-side, competent businesses you ever have to deal with. They dress the part don't they? Marble pillars, expensive art, complimentary snacks. The hushed no-sound of private financial matters efficiently resolved. The frosted glass, behind which billions of dollars are managed and moved. The suit-wearing tellers just daring you to make a request they can't handle. They reek of professionalism, skill, and wisdom about how the financial world works. Walking into a bank seduces me into believing that any business I conduct here will be pure perfection; optimized for my benefit.
Too bad the facade is only a parlour trick; like dressing up a pig. Practically every bank I've had the displeasure of dealing with has done its utmost to rip me off, mislead me, and make me suffer through incompetence or bad policy.

Let's start by what banks should be, to the end consumer. I believe they should start by simply providing two essential services:

1. A safe place to store money until I need it.
2. A trustworthy infrastructure through which I can move money around.

For these two services I am willing to pay, but the cost must be very low because I know it ought to cost the provider practically nothing and therefore be a commodity.

Most money nowadays is not in the form of cash but in the form of banking entries. In the simplest terms, if all transactions are done electronically, providing both the above services consists of merely keeping plus and minus records. Example: If I want to pay the grocery store $100 then all the bank has to do is subtract $100 from my account and add $100 to the grocer's.

This is a no-brain commodity on the surface. It is so simple, and so universally important, that I would even suggest governments should provide this for all of their citizens. As a government service it would be totally trustworthy and give all citizens equal control over their money. There is a very desirable purity in the ability for someone to exist in today's electronic age without any private company having control and total knowledge of your financial situation.

Now we come to what banks actually offer when we simply want a place to put our cash: A very complex and costly blend of "products" with fees and penalties for every imaginable combination of "convenience" bundles. They only put out the weakest pretences of making sense.

Simulated explanation from a banker on two common fees:

"Transactions cost the bank money to provide so that's why we need to charge you $0.50 per peek at your balance even if it's through our website. It has to do with all the massive improvements we are making to the bank balance pages on a constant basis.

Oh, and if you don't make any transactions for too long we're going to have to charge you as well, let's say $25 extra if you don't touch your account for a year. That's because, umm, it costs us money to maintain your account. In fact, it costs us more money to maintain your account when you don't use it, which is why we must charge you a fee over and above your monthly plan fee. If we didn't charge it we would loose money plain and simple."

The worst for me is the feeling that my banker, the intimate financial partner that he is, the one who has all my money and knows everything about me, is only out to take as much as he can from me. We are forced by practicality to use private banks, whose only concern is to make a profit. It shows from how I am treated when I have something the bank wants but doesn't have, versus when it has something.

The prime example is deposits: Deposits are free at every bank even though the reason for transaction fees is because supposedly handling transactions cost a lot of money. If you think about it, deposits should be the most expensive type of transaction because someone has to physically touch the cash or cheque, determine if it's counterfeit, put it in the safe or sent if for further processing, etc. Even ATMs need an entire separate mechanical subsystem devoted for accepting and holding deposit. Yet they're free. The reason? Banks want your money.

Once they have it then the juice starts and there's no way you are getting it all back.

Same thing with loans: When I want a loan I am treated to very friendly and competent people who will happily try to get me into the money because I will generate profit. They know everything about how much I can afford, various risk scenarios, insurances that I might need, and so much more. Nothing but problem solving from those people. However, once the loan is in place, I am tormented by the most incompetent or inflexible or uncaring people possible. This website has several articles documenting repeated failures of trivial administrative tasks or unilateral decisions by the bank for their own advantage.

I'll leave it here for now to find out why the banks appear to be so obscene about the customer experience. I believe customers only want and need something very simple but there is no way to get it. Is it an accidental byproduct of miscalculated budget or marketing decisions from the top, or is it conscious strategy to lure customers and then systematically separate them from their cash?