Story: Why I despise the banking model

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On Saturday, I was walking past a big four bank and got hit with a feeling of disgust. Due to the bank being closed they had opened the door beside the counter to show opportunists that there was no money inside. Being inquisitive I looked past the door opening and clocked this big whiteboard filled with numbers. I stopped to take them all in and the more I read, the more I shook my head.  

It was all very clear; the bank had five employees where their main role was to sell products to customers. They all had daily individual targets to move customers to “wealth and protect – XX Super and Insurance”, ”Lifestyle –credit cards and personal loans”, “Home loans” and I struggled to read the rest.

 

As I stood there, I was reminded of a conversation that an area manager had with me during my time at one of the worlds largest banking institutions in the UK. We were sitting in my office and I was finding it difficult to see the benefit for customers of the bank to use our services and in his eyes I was putting up resistance to the work we did. I knew that the investments had a very high 4% upfront commission, the investments compared to peers were expensive and underperforming, clients were unlikely to maintain the investment for the minimum five year timeframe and whether for example doing a 100 pounds a month investment would really be the best thing for them.

 

He said “Chris, I don’t how much they do or what they do, all I care is that they do something. We only care about volume here. The value and advice however does not matter so much. You need to do 15 appointments a week, 10 will show and 5 you will sell to. If you do that I will be happy and you can become a senior adviser in 12 months”. He wisely finished his sentence by dangling a 15,000 pound pay rise in front of me. Money however was not the reason I wanted to be financial planner and I continued to scratch my forehead. He followed up in his great crisp South African accent “Chris, let me explain to you the banking model. You see the customer is here and if the bank just has their bank account there is about a 50% chance that they will move. If we add on a saving account and credit card it’s about 40%. If we add on some household insurance it drops to about 30% and a home loan it goes down to 12%. But the one that reduces this the most is wealth management. If you add a small regular saving and some insurance this drops to well under 5%. Our wealth management clients are the ones who never leave and what you are doing is helping the bank not make any real money in a lot of cases but we are stopping them going to one of our competitors.”

I was gob smacked and that was the final nail in the coffin. I went home that day and thought is financial planning really the industry for me. I love helping my clients but is financial planning really about helping people or is it just selling to them.

 

Many more stories to come on my journey as a planner so far.