Monday, July 16, 2007

'relationship' banking

Recently I had the rare opportunity to actually meet with a live staff member of our home branch at the Bank of Montreal concerning our line of credit. In today's age of online banking complete with Epost, direct withdrawals, and messaging features, I am usually staring at a screen when I interact with BMO.

I have to smile as I remember the days when I would stroll into the bank as a kid with one of my parents who would spend some time filling out those little yellow slips in order to make a withdrawal or deposit, at the 'stand up' desk while waiting in line.

I noticed during our meeting the word 'relationship' kept coming up. I am usually adamant about shopping around, and looking for value when making my purchasing decisions in life, but this got me thinking.... I know it is in BMO's best interest to lull me into a 'relationship' with them, so that I will mindlessly pay them fees and interest because they are the comfortable choice; but could this arrangement actually help me?

Is there any way someone of my meagre financial stature could benefit from a 'relationship' with a bank?

Perhaps getting to know one of their financial managers by name and not having to introduce myself each time I go in for a meeting might be a good idea. Perhaps as the years go by and I grow my assets, pay off my debts, and accumulate wealth I could benefit from a 'relationship' by obtaining a lower interest rate, flexible terms, or better service. Perhaps if I can develop this 'relationship' now, BMO could better interest rates offered by anyone else including what a broker could find, when my mortgage is up in 3 years. They did seem a little disappointed that we did not have our mortgage with them. If they know me by name, know my stable and reliable history, and loyalty, could this benefit me in the long run?

Do they want my business enough to go the extra mile?

Is this 'relationship' worth my time, should it be just another tool in my arsenal that I use before I shop around, or should I pass it off as a marketing ploy?

I would be curious what thoughts and experiences others have in this area.


cheapcanuck said...

As a BMO shareholder I would like to assure you that BMO loves you and encourage you to develop this into a relationship. Please borrow and lend from them now and in the future.

As a fellow investor who has banked with BMO, Canada Trust, TD Canada Trust, ING Direct (Canada and America), Bank of America, Bank of the West, and PC Financial I can assure you that there's no benefit to a relationship with a banking institution (for you). They just want to lull you into the inertia of doing business with them.

You will get better rates and business based on one thing: How much money you have. Whether you've been their customer for 1 day or 10 years will matter far less then the $$$ on the table.

FinancialJungle said...

As cold as it may be, you can't beat the banks at the relationship game. :) It's a two for me and one for you scheme. By the time you've fortified a relationship, you're already $$$$ in the hole.

My motto is to let them compete for your business. said...

I think if we were in the US, a relationship with banks might be an issue... How many thousands of banks do the have? All vying for your business.... competition...

In Canada, there are a few large banks that essentially have a monopoly (oligopoly?) on an entire country. They do compete, but its like a gentelmans game up here. They all know they will all win if they dont play too hard.

I dont see a relationship with a bank benefitting myself or any Canadian I know... Most of the ads are advertising 'adjustable rate mortgages' and things that only hurt the consumer! (lol, right when interest rates are at all time lows, they trick you into going with adjustable rate? LOCK IN THE CHEAPNESS FOR AS LONG AS POSSIBLE... I guess the banks really don't care about thier customers... They advertise the ARM like its a benefit to the consumer but they didn't advertise this when people were paying 18% in the 70/80's.... lol.

moneygardener (AKA investor99) said...

Thanks for the comments.

Wooly Woman said...

I once had a wonderful banker. I miss her. I could walk in and she always asked about me, my life. She was always helpful, even though I was one of her smaller clients. One day she moved on to a new job and my relationship with that bank (CIBC) has gone downhill from there. I frequently complain about it :) I think if you can find a good person then that makes the banking experience, it has nothing to do with what the banks themselves.

Nurse B, 911 said...

Business is ALL about relationships!!! The smartest financial professional I ever met was interested in ONLY attracting young people who had the potential to increase their wealth substantially over a long period of time. Banks frequently fail to realize that the LTV (lifetime value) of their youngest clients. When you figure Investments, Mortgage, LOC, Loans, can add up to a lot of money over the longterm of any relationship.

uno1taxpayer said...

Must apologize, I had a spelling error so I had to repost.
50 years ago when I was 6 my mother took me into a TD Bank to open an account with my birthday money; a whole $10. I was hesitant until the bank manager took me directly into the vault to show me where he was going to put it for safe keeping. I believed him then and to this day I have been a loyal TD customer. Over the years they have treated me to many perks. Like an extra 0.75% to 1.5% on five year GIC's. In addition they covered all the set up costs for my prime rate Home Equity Line of Credit including the property appraisal and cost to register. At one time I used my HELOC extensively to buy income trusts and paid it off with maturing GIC's. Don't use it much anymore as Income Trusts are not what they used to be. Mind you, most perks were offered because I asked for them after I found out they were offered to someone else.

FourPillars said...

I don't think there is any real benefit to a relationship with the bank.

If you want to deal with one bank then make sure you know what the competitive rates are elsewhere for negotiation purposes.