We at Thyme Financial are often astounded when clients tell us they had banked with a particular institution for decades and now in their late sixties they are met with bad service, products that are irrelevant or a loan rejection. That rejection may be for an investment loan, a bridging loan, a car lease or even a credit card.
Happy Birthday Daniel.
We’re not surprised that they’d been rejected. That’s a given. We’re shocked that they thought they had a relationship with the institution. Now. In 2016.
Here’s the thing. Maybe a few decades ago your relationship manager at the bank had some level of authority to approve small amounts of lending to you. Maybe you had a bank manager that called you in for a chat once or twice a year and really knew your business. Or maybe you had a senior banker living next door that would assist you.
All of that disappeared with the arrival of the Global Financial Crisis in 2008. It hasn’t run its course yet.
Let me repeat here what has been happening in banking for the past eight years.
Firstly, you do not have a relationship with your bank.
Your relationship manager’s authority has either been revoked, diminished or made so conditional as to render it useless. All authority is in the hands of a credit manager or a credit team. Chances are you will never meet these people.
So the role of the person that you deal with has changed dramatically. This is akin to starting a date with the person of your dreams only to have them turn into a zombie half-way through the evening. They look the same but there’s something missing that you can’t quite put your finger on.
We had a client come to us a few months ago who was a successful business owner and he had a relationship with one of the largest banks in the country. He had banked with them for forty years. As he had been retired for a number of years he walked into a branch and asked for a loan to buy a property. Our client is 67 years old. He has a monthly income of $20k and assets in excess of $10M. He was looking to borrow $1.2M until he decided what he wanted to do with the home that he currently lived in (worth around $3M).
When the young loans officer pulled out a form and started ticking boxes and taking notes he (our client) was a little taken aback but he went through the process and was rejected immediately.
Talk about a one-way relationship.
Our client’s reaction was one of incredulity and anger. He stormed out and called his financial planner who put him onto us.
At our initial meeting with him he was a little sceptical that two strangers – that were asking the same questions as his bank – would be able to get him a loan where he (someone with a four-decade relationship) couldn’t.
It was then that I asked him a few critical question.
- How many times had the bank changed relationship managers in those four decades? His answer would be familiar with most long term clients of banks – around every 18 months.
- When you walked in to the branch and were rejected what did you ask for? He said he had asked for a home loan for investment purposes. The standard home loan term is 30 years. The banker had no choice but to reject him as the client would’ve – in theory – had the loan until he was 97.
- Did the banker – at any stage – ask how long have you been a client of the bank? No. Why? Because it’s irrelevant to the credit decision process.
So, I reasoned, he didn’t really have a forty-year relationship. He had a series of 18 month relationships over forty years. Each time a new relationship manager was appointed, he had to reset the relationship and start again.
Using the date analogy, that’s like getting married but your spouse decides that they will move on and send in a substitute every 18 months.
When we were tasked with getting this dejected soul a loan we applied (with the client’s agreement) for a 15-year term. As the loan was interest only the term did not matter – eventual exit from the loan would be from the sale of his existing home. Approval was granted within 48 hours of application (with a subsidiary of the bank that had rejected him) at a price that was 0.4% better than what he would’ve received had his initial loan application been approved.
Our client has now successfully bid on the property that he had in mind.
As a final point. The model that banks have adopted these days is a model that is designed to fail you. It is one where relationship managers are so overloaded that it would be impossible to service all of their clients the way clients expect or deserve. This is because they feel (because they have such a large market share) they no longer require relationship managers.
We, as brokers, are very happy that banks have adopted this model as we rely on them failing their customers.
So far they have not disappointed us.