Years ago I read a quote from Thicken My Wallet, the Canadian lawyer and retired blogger, that “the financial industry preys on inertia“. It was true back then in 2007, and it remains true today in 2022. For whatever reason, once people have made a financial decision, they’re loath to revisit it. The financial industry exploits this ruthlessly.
Up in Canada, I banked with TD Canada Trust for over 30 years. They’ve always had the worst deals for anything financial and over time I’ve moved all of my business away from them. First, I invested with a discount online brokerage instead of their expensive in-house brokerage. I got all the credit cards I ever used elsewhere. Then I got my first mortgage elsewhere. Following that, I set up a line of credit at another institution. Most recently, they increased the minimum balance on their checking account to avoid fees, then hit me with a monthly fee.
When I lived in the American Midwest I signed up at a local bank when I first arrived. The bankers there are very nice, but I was hit with a $10 fee for having a debit card and a $50 fee for having money transferred TO them – I’ve never encountered that before!
It was recently published that the average american hasn’t changed auto insurance for 12 years. 12 Years!!! Reading that made me want to become an insurance agent and happily cash checks from customers year after year while I nap under my desk.
Any time I talk to someone wanting to leave their financial advisor or planner, they seem as nervous as someone preparing to announce a divorce to their long-term spouse.
Why Do We Do This?
I am hyper-aware of this, yet stayed with that bank in the Midwest that was charging me the silly fees and kept my TD Canada Trust account far longer than I should have. My wife and I say we’ll set up accounts at another bank every weekend, then we end up doing something else instead.
Afraid of Problems
Part of financial customers’ reluctance is due to being afraid that money will be lost or there will be heavy fees while they transfer to a new provider. With stock investing they worry about losing their transaction histories. With bank accounts, they worry that bills won’t get paid.
Usually, the company that you’re transferring to will help manage the process. People worry about problems with the transfer far more than they actually occur.
Assume The Entire Industry Is The Same
Many customers feel that all financial services are the same.
In fact, as you dig into them, there is a MASSIVE difference between the various companies. Vanguard and Investors Group are as different as Subway and Taco Bell.
Uncertainty About The Rules
I think some customers are fearful that trying to leave a financial institution could cause them to be retaliated against in some way.
Obviously, these companies can’t throw you in jail for leaving them! They will sometimes charge you a termination fee or a transfer out fee of $50 or so, but usually the company you’re moving to will cover this.
If they did something to mess with customers’ money or investments, people would go NUTS.
Banking as a Relationship
Banks love to talk about the relationship their customers have with them. They hint that this will give you preferred service and better deals if you demonstrate your loyalty and remain a long-term and steadfast customer. In spite of this constantly being promised, I can’t remember a single instance of it being delivered. Most stories that touch on this end with the bank treating the person badly.
How to Think of This
The rational way to approach this is to treat financial service companies like any other business you interact with. If you aren’t getting good service or see better offers elsewhere, move! It may be worthwhile politely talking to your current provider and letting them know you’re thinking about moving. This should prompt their best offer to retain you. If it doesn’t, this tells you they’re ok losing you as a customer.
It really isn’t that bad to move to a new financial services company. Do a Google search for advice about moving whatever sort of account you’re planning to move, then go for it!
What financial services have you found hard to move on from? What is keeping you there? For services that you have ended up moving, how did it go?