Happy New Year to all our clients, referrers, readers and friends.
On New Year’s Eve we had our usual family bash at our house. This year we invited some people that we’d banished from our lives some 15 years ago.
I am not known to be a forgiving person. I hold grudges for life. At least I used to.
One thing I’ve learned over the last two years is that you cannot live life not forgiving those who have wronged you. Otherwise, you become a walking lump of bile and pus. Whilst I would tread with caution in dealing with those people ever again, I have come to the realisation that all people deserve a second chance…no matter how much I may despise them (just kidding).
So, NYE came and went and the world didn’t end. I got through the night without feeling the need to stab anyone in the eye with a glass. Although when one of my guests started preaching of his reasons for loving Trump (and he is as entitled to his political beliefs as I am – but Trump? Seriously?) and how global warming is a hoax perpetrated by the Chinese, I seriously thought my glass would be crushed in my trembling hand. Instead I excused myself, put my trembling glass down, quietly stood up and walked over to another conversation.
Deep breaths. Forgive. Blah, blah, blah.
The new conversation involved my older son, nephews and nieces. They were talking about various topics (ok, girls and boys). I sat, listened for a while and resisted the temptation to participate or correct lest I stop the flow of the discussions.
This conversation was not full of bile and hatred. It was full of hope and possibilities.
Then I went outside and my younger son was playing basketball with his new found second cousins.
Clearly my kids didn’t care (or know) why I had never invited these people to my home before. It was the same family with differing views.
Which brings me to people’s hatred of banks and the lifelong grudges they hold against a particular bank.
We speak with many current and potential bank customers. Most people think banks are interchangeable – that’s not our view. Most also form their perceptions about banks from the negative stories that abound in what passes in Australia for the media. Recently there’ve been many negative stories about the major banks:
- mis-selling financial planning products to their clients
- staff misleading customers into home loans to achieve budgets
- staff stealing money from client accounts (always refunded by banks)
- FX scandals (from a few years ago)
- The manipulation of interest rates – although this has yet to be played out in court for one major bank. The other banks accused of this owned up rather than have their name in the press for the duration of the legal proceedings. This article offers no view as to the veracity of the charges brought by ASIC.
The list can go on and on. You could be forgiven for thinking that the above list would deter customers from banking with banks. It doesn’t. Then you would think that increases in interest rates and bank fees would encourage people to leave. Not really as the other banks usually follow the one raising or dropping rates.
We’ll return to the above list a little later.
It’s easy to see why people hate banks. But hating them doesn’t equate to leaving them.
No, in our experience the only reason many businesses change banks is when they’re forced to. In other words, the bank asks for their money back because the client has either defaulted or otherwise breached their financial agreement.
Before I continue, this is usually the worst time for a business to change banks. You have no leverage and you’re probably difficult to bank by the time a bank asks you to leave.
These people (business owners) usually hold a lifelong grudge against the bank that “wronged” them. It’s like a breakup that they weren’t in control of. They didn’t see it coming. They were doing their best…and many other reasons why the bank should not have ended their relationship. In short, they take it personally.
Look at it from the bank’s perspective. You entered into a contract and you breached that contract (you may not be aware of the details of your contract but the bank is). Or, the regulator may ask the bank to reduce their exposure to your industry. Or the bank’s appetite for your industry has changed…
I knew a business client who changed banks when a major bank acquired the regional bank that he used to bank with (and I worked for). He was a model client so it came as a surprise when he informed us he was leaving. His reasoning was that some 56 years ago the major bank had foreclosed on his father’s farm. It had ruined his family. On further questioning, it turned out his father had not made a single interest payment for two years.
Pretty strong stuff. One can understand the emotion involved. But as a former banker I can also understand the bank’s point of view.
Also, everyone who had anything to do with foreclosing on his father’s farm was either dead or long retired. So, he was taking revenge on people who weren’t even born when the decision to foreclose was made.
This (breach of contract) was not the fault of the bank alone. You enter into an agreement with a bank and you should read that agreement carefully. If you don’t understand that agreement, get legal advice as to what it all means. If you’re not sure that you can honour the contract don’t sign. You risk losing everything if you do. Remember, if your loan is a business loan it’s not covered by NCCP regulations.
As former bankers with a combined 45 years of experience we’re accustomed to where borrowers may fall over and understand what is and isn’t negotiable in a finance contract – particularly in the area of financial covenants such as interest or financial charges cover, minimum equity, security and much more. That’s part of the value we add.
For instance, I bet most business borrowers don’t realise that making additional repayments to a business loan may actually contribute to them failing a year-end Financial Charges Cover covenant. I can hear bankers saying that they would act reasonably in that instance. But what if the credit manager didn’t see it that way? What if the credit manager was looking for a reason to reduce exposure to your industry? What if the credit manager and the banker don’t get along?
Holding a grudge for decades against an organisation is just a little silly. Particularly in business. It’s an emotional decision not a rational one.
Let’s return to the list…
What do the points on that list above have in common?
The achievement of financial targets by bank staff to ensure the payment of periodic commissions to individuals or teams. Or putting it more succinctly BONUSES.
It’s a dirty word to non-bankers. Usually people equate this word with multi-million dollar payments to CEOs of banks. It’s fair to say that a bonus to a Client Service Officer or Teller is either measured in hundreds or thousands of dollars (usually four digits at most). So, we’re not talking millions. Remember that most bankers have taken a pay cut (in real terms) over the past seven years.
These days (in our home loan business) we see sales employees in the retail sector who earn more sales commission than some of these bankers earn in bonuses.
That may be one of the many explanations for the mental health issues being experienced by many bank employees currently. Sure, many other factors also contribute to the despair and hopelessness being felt by an increasing number of bank employees these days (unachievable number of client meetings, cultural change, less social interaction – people working from home – and many others).
While corporate and institutional bankers can earn bonuses in the hundreds of thousands they’re few and far between these days and they achieve those positions after many years at the bottom earning very little (relatively speaking). Of course, there are exceptions to this rule.
So, the next time you feel you’re being mistreated by your bank come and have a chat to us. The problems with your current bank can sometimes be fixed with a little communication and a conversation with a more senior banker. Failing that, you can always leave and we’ll help you. But not until you have a good reason to and it’s actually a positive step for your business.
Finally, you shouldn’t decide you’ll never bank with a bank again. In a competitive world, they’re changing all the time – your business can learn and benefit from that. Who you actually bank with is an individual. We know the best individuals at banks because we deal with them daily. Do you?