A sizeable proportion of my professional career as MoneySavingExpert has been spent disabusing the notion that you should trust a bank. In fact when doing the Teen Cash Class for ITV, lesson number one was that “a company’s job is to make money from you, not to help you; you need to understand this to be a good consumer”. Not that making money is wrong, just that it means the company and consumer shouldn’t automatically assume they’re on the same side.
When people wrongly trust a bank
If you trust your bank, you end up getting its ‘best product’ rather than the market’s best; or it gives you a ‘money check-up’ with a salesperson remunerated on commission disguised as an adviser; or it says “and you’ll need protection insurance with that” or “borrow more because the rate’s cheaper” or even, “why not consolidate your debts in to one easy repayment.”
Banks and, surprisingly, many building societies too are sales based institutions, with target driven staff, and most of the population sadly still miss out on that fact; and make abysmal financial decisions based on it.
When people wrongly mistrust a bank
And now we’ve had the Northern Rock fiasco, where a solvent bank got an additional borrowing facility and media hype started a panic. Suddenly now the bank’s “we’re safe, you’ve got protection from the Government, and regulatory regimes” wasn’t to be trusted. My hypothesis is that many of those queuing outside Northern Rock are the same people who take up “money check-ups” from banks in the first place.
Why does it work this way?
So why no trust this time, the one time, ironically you should trust a bank is when it’s following hard and fast rules laid out by a regulatory regime? I must admit I’ve no answer to why. I’d love your thoughts on it. Sadly I wish I could applaud the lack of trust as a step forward, but I don’t believe it, I think things will return to normal…. “of course sir, we welcome your new savings with us, and don’t worry we’ll give you a great rate…..” The shivers run down my spine.