It’s your usual Thursday man, Eddie. He blogs here, but you knew that already. He also likes sloppy kisses.
This is a follow up to last week’s post about how banks are not trying to steal your money. Instead, I offer some insights into choosing a bank.
The first step to choosing a bank is to rid yourself of the notion that the bank is an obstacle. A bank, and the people who work within it, should be viewed as partners. In this way, the relationship between yourself and the bank will be put into its proper context. You should view a bank as a wide range of services and access to capital and investments to pursue your life and financial goals. While they will try to direct you into higher margin products, one must use their judgment and common sense and make prudent decisions about their financial choices.
Look for a personal relationship when choosing a bank. I have a financial advisor with a big five bank. While this is anathema to most PF bloggers, it has been, in fact, quite beneficial. Even though bank employed financial advisors do not have a fiduciary duty to me, this really only becomes an issue if there is a wide disparity in financial knowledge and if they dictate my financial strategy. Easy ways to overcome this disparity are by reading financial books (generally not single-minded and erroneous blogs – and yes, I am aware of the irony) and by closing the information gap. My financial advisor assumed I was a cookie-cutter mortgage/TFSA/RRSP type until I corrected her as to my more broad financial knowledge and retained the initiative. With a new focus, our relationship has been quite productive. Apart from getting her to crunch financial numbers and acting as a sober second thought, she has provided me with access to many of the banks resources and advice.
More Uproar for your eyeballs: Why worrying about bank fees is stupid.
More to the point above, I read a book by Don Campbell, a notable Canadian real estate investor. He admonishes the approach taken above and even suggests taking your banker out to coffee or lunch, asking them about banking and current trends in industry, and not treating them like a thief. You would be amazed at the cooperation and benefits of this type of relationship, instead of clawing for a $2 per month reduction in savings account fees. See the forest through the trees. If you don’t want to be thought of as a number by your bank, try reciprocating first.
Think of your future needs as well as your present needs. One should choose a bank with a strategic vision in place. While most big five banks are very similar, other financial institutions have different policies when it comes to breadth of services, product focus, and accessibility. For instance, Tangerine, formerly ING Direct, is lauded by PF bloggers for its relatively high interest rates on savings accounts. However, in my experience, getting a mortgage from them is difficult at best. With a conservative lending policy, no physical locations, and a narrow range of services, I cannot see them being useful for anything other than an external bank account for liquid funds in which I want a psychological barrier to access. I will forgo the 1% premium on my savings deposits, thank you.
I chose my bank because it is truly a national institution in which I can do business in any province. Several of my friends are managers and managing directors there, which provide me access to some services which might not otherwise be available. While this is certainly a subjective and arbitrary factor, it is nonetheless relevant. Lastly, I want simplicity in dealing with one primary institution with a physical location. When dealing with corporate accounts and, one day, private banking, virtual banks do not cut it.
Some other random thoughts:
I once knew somebody who changed banks over a $5 per month chequing account fee. The amount of time it took him to change over his financial affairs to another institution for $60 a year is easily dwarfed by the productive activities he could have otherwise been doing. Remember opportunity cost. I cannot stress this enough
If you have a job in a company in which you may be transferred to different provinces, go with a national bank. The last thing you need while moving provinces is to change banks.