My Opinion: The Financial Services Industry

Sir, would you like to sign up for our credit card? It's a great way to earn reward points based on your regular spending to redeem towards free products. Do you remember hearing a pitch similar to this the last time you were at the bank?

The financial services industry is heavily tied to selling products and services to its customers. This is no secret. This is one of the methods used that helps banks make billions every year. They depend on people to carry a balance and pay interest. Of course, as you've learned previously, you can still use their products and services without paying interest as long as you are responsible with your spending habits. It just feels wrong to take advantage of people who aren't financially literate and offer them products that they may not be able to pay back. At the same time, I can understand why they are doing this. The big banks are public companies with shareholders. These shareholders have a certain level of expectations from their investments. If the banks don't produce a satisfying return on their investments, they'll take their investments elsewhere. That would be devastating to the banks.

My Experiences

During my internship, I had a chance to chat with numerous clients and was able to acquire their opinions on the financial services industry. It's no coincidence that they all shared a similar theme to their answers. Each and every single one of them told me that they always felt like their personal financial advisors were trying to sell to them instead of looking out for their best interest. Deep down, I think everyone realizes this but chooses to ignore it because there's few other viable alternatives available. The only other options are switch to an advisor who genuinely cares or handle your own investments and money management. The latter has a huge learning curve, especially for those who have been dependent on their advisors for years. The first option is difficult because who can you really trust when it comes to managing your finances? 

Okay, I'm gonna tell you a story about my life. In my lifetime, I've met great advisors and I've met bad advisors. How would I differentiate between the two? Well, it simply comes down to knowledge, morals and ethics. Speaking through experience, the very first advisor I met was not very helpful. I had saved up my first $10,000 and was very proud of myself. I wanted to invest it so I went to book an appointment at a branch near my home. When I sat down with the advisor and had questions, they were unable to answer them or gave me very vague responses. I didn't feel comfortable because the advisor was pushing me to invest in mutual funds. I also didn't understand what a mutual fund was at the time or where my money was going. I then decided to trust my instinct. I told the advisor that I would come back after going home to discuss the topic with my family and reading things up on the internet. I never came back. I felt the advisor was incompetent and wasn't able to clearly explain simple concepts to me. Even if they could, my gut was telling me to leave. I went in believing I could trust the advisor to help me invest, instead, I came out with a negative impression. Since then, I've learned lots on my own and decided to stay clear of all advisors. It wasn't until I went to school and joined a mentorship program. I was paired with a Relationship Manager who became my mentor. I was introduced to several other advisors who actually impressed me during our discussions. I unfortunately had a bad advisor that ruined my experience. These new advisors I met were knowledgeable and told me about the ethics in banking. However, because I had already learned so much about finance on my own, I never bothered going back to an advisor. 

It's important to understand that banks are simply an instrument to help you manage your finance. It's the same with cars. You can either learn to fix your own cars or find a trustworthy mechanic to do the job for you. As a former bank employee, I've had to deal with the pressure of selling to clients. I never enjoyed a single second of it but I can certainly understand the reasoning behind it. 

Have a Listen

There's one last thing I want to mention. Those pitches from the bank employees aren't all bad. You should at least listen because sometimes, there may be exclusive offers just for you to help you save money. There may be offers like locking in at a lower interest rate or performing a balance transfer. Both of these will help you save money on interest. Sometimes, there are recommendations to either upgrade or downgrade your account which can also help you save on banking fees. I understand it's annoying, especially when you want to just come in and perform a quick transaction but sometimes it pays to just listen! You can always ask questions if you don't understand something and if they aren't able to explain it to you then run like I did!