How objective are referrals from your banker?
Outside ServicesIf you're asking about services the bank doesn't provide, you may get reasonable advice. Say you're looking for an honest mechanic.
However, you're limited to your banker's network and can expect a bias towards their clients. What if they don't know much about mechanics? There's also the fear of making a bad recommendation. Saying nothing is safer but does little to help you.
Does the banker have enough conviction to make the recommendations public (e.g., a testimonial on the mechanic's website)? Unlikely. Bank policies probably prohibit this anyway. It's also bad business since the banker's other mechanic clients won't be happy when a competitor gets endorsed.
Affiliated ServicesYour mechanic may know that Pirelli tires are perfect for your vehicle but if they only stock Michelin, guess what you're getting?
Banks are like department stores. If you're asking about services that another part of the bank could provide (e.g., investing or insurance), guess where you'll get referred? It seems that bankers are required to make internal referrals even if they know of better options outside. These employees may even have mandated targets internal referrals. Who knows?
A banker who specializes in manufacturers may not have a diverse network. A banker who deals with clients in a geographic area loses site of better resources elsewhere.
Your RiskOne bank may seem like the rest. Even if you perceive and value the differences, moving accounts is a hassle. Ah, inertia. The more products you purchase from the same organization, the more painful to move. If you have your banking, credit card and line of credit all at the same place, you're likely to stay. Your banker knows this.
You risk getting taken for granted, though you may get small discounts as a reward for your loyalty.
We use different institutions for our savings account, chequing account, Line of Credit, credit cards, safety deposit box, RESP and investments. This diversity wasn't entirely intentional and may seem extreme. We lose out on bundling discounts but get to pick what seems best in a category. This a transactional approach: we're not building relationships.
Other WaysYou could ask your connections on Facebook (or other preferred social network) for advice. You could ask in a forum. A web search might lead you to a recent comparison of choices.
Finally, you could ask a banker from a smaller bank which doesn't offer many affiliated services.
- Are we placing too much faith in banks' advice? (Globe & Mail, Nov 7, 2012) new
- Sales pitch often buried in bank's advice (Globe & Mail, April 6, 2011) new
- The car mechanic: do you pay for effort or results?
- How referrals lead you astray: the big lesson from a wet basement
- The RBC Canadian Open and unintended consequences
- Annoying pest or welcome guest? The Do Not Call list.
- Image courtesy of Miriam Writer (US)
Podcast 110 (3:59)
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PS We once had a personal banker who sent us a coffee basket. She dumped us when we wouldn't buy enough services. How proactive.