“Customers don’t know what they want until we’ve shown them.” – Steve Jobs
Yes, I know the correct quote from the bible is “…they know not what they do” (Luke 23:34 or something) but I’m just using it to make a point. This is not a religious article. And no I wasn’t paying attention in scripture 42 years ago.
I recently had the need to re-tile a swimming pool. I scoured Google. Nothing. Found pool specialists who sent pool tilers that spent less than three-minutes pool-side and then gave me a quote for a 90 sqm tiling job. Finally, a friend in the pool industry recommended a tiler whose jobs he’d seen and been impressed by. I called. He showed up the next day and spent 20 minutes measuring my pool (61.5 sqm). He then sat with my wife and I and showed us various samples, photos of previous work and steered us away from mistakes. The most common mistake was using tiles not meant for pools in pools. The second most common mistake was tilers using the wrong glue and grout.
He also sold the tiles to us at cost price plus a small margin which he declared. When we compared him to other quotes we found others were charging us almost triple the cost of the tiles (same brand) – not to mention an extra 50% on the size of the pool.
He told us that his services were in great demand and would we mind waiting four months. That would place us in the middle of winter, so perfect. He showed up on the day that he said he would. He took three weeks to complete the job and we couldn’t be happier with the finished product.
The above experience got me thinking about the way we, as consumers, talk to professionals. These days, with the assistance of Google, we know just enough about a topic to be dangerous.
Finance is similar. People come to us having experienced one or two loans in their lives – sometimes from five or ten years ago. They know it all. They think they’re in a negotiation until we tell them some invaluable truths.
Some customers don’t like hearing that they’re not a good credit risk for the banks. So they leave in a huff and puff and eventually return a few months later having seriously damaged their credit rating by applying to (and being rejected by) many lenders.
Some argue with us as if we had some sway over lenders’ policies. We don’t.
Some actually listen to what we’re telling them and work with us. With these clients we have achieved a 100% funding rate – even with the most difficult to place loans.
Some are just not bankable at the moment. We tell them that.
One example we’re very proud of is a gentleman that approached us around 18 months ago. He had a current home loan, various credit card debts, personal loans, pay-day lender debts, a bad credit rating…you get the picture.
Initially, he thought we could take him to a large bank and refinance all of his obligations. The message we gave him was that while he had good servicing and a house as security, his credit history meant that no bank would touch him (for now). We explained that getting to be a client of a major bank again would require an interim step. Our client had always been an upstanding financial citizen. He had always been a prime credit risk. It took him many months to accept what we were telling him to be the truth.
In the interim, we set about helping him:
- Repair his credit rating
- Consolidate all of his debts into a home loan (instead of paying more than 20% p.a. for some debts)
- Managed his expectations
From the above, number 3 was very difficult. The gentlemen in question is very intelligent. He has a lifetime’s experience but he fell on hard times during the GFC. He was jobless, had a family to support, a mortgage to pay, etc. He did what he could to get by. Our job is not to judge it’s to examine the evidence before us and see if we can be of some use.
When he found a job, he had many dents in his credit score. A very large unpaid and disputed telco bill, which he settled, a payday lender that he owed tens of thousands to and a couple of maxed out credit cards.
It was quite clear that no bank would touch him.
After a process of elimination, we targeted two lenders that we thought would approve the package we placed before them. The enquiries we made were anonymous – in that, we did not use the clients name until we had a positive answer. Why? So we didn’t further damage, his already fragile credit rating.
After all of this, last week we received unconditional approval from one of the two non-bank lenders. Initially he will have to pay around 5.3% for 6-12 months and then – if he behaves himself – the price starts coming down to around 4.3%. After 12 months on the lower rate, we can then look at a bank.
We don’t charge him for this service. We get paid by the lender. We get paid less by the non-bank lender than we would have had we placed the client with a bank.
The client was ecstatic at this result. He, a banker himself, knew how hard it was to achieve this result.
What is the point of this example? Well, in our business, the client is not always right. In fact, there is legislation that clearly states that we, as brokers, are not allowed to recommend a product that is unsuitable to a potential client – yes, even if they ask for it.
If we do, then ASIC could demand that our broker’s license be revoked.
So, the old adage that the customer is always right is of little use when they have to tick the right boxes. It’s the checklist (provided by the lenders) that dictates whether or not our customers get what they want. What makes it even trickier is that the checklist is a moving feast at the moment.
So the next time you engage a tiler, a surgeon or a broker, listen to their advice before arriving at a conclusion (especially a surgeon). They do what they do daily, whereas you dabble from time to time (hopefully not in surgery).
Remember, you as the customer can always be right if you’re advised correctly.