Misc Section

We Should All Be Wary Of Financial Institutions - 2 Shocking Examples

July 2005

Before the Thatcher revolution and globalisation we could trust financial institutions and big business in general. But now the power and influence of big business if frightening and they give many people the impression that they do what they want - when they want, without a lot of consideration for the welfare of the clients.

In fact, the banks in generally rely on client apathy for a lot of their profit. They know full well that whatever they do (bar outright fraud) the majority of their clients won't take their business elsewhere because they either can't be bothered or never realise what's happening. For example if charges go up many customers won't realise.

Two Examples Of Financial Institution Arrogance

1. Alliance & Leicester Doesn't Employ Enough People To Be Able To Email Its Customers

• Last month the Alliance & Leicester closed its top-paying Online Saver Account to new applicants and cut interest rates for existing customers by 0.35%
• But the bank never bothered to inform its clients of this important event including no announcement on its client website
• When contacted about this the bank said initially that it always puts up notices of interest rate changes in the bank itself, hardly much use for an internet based account
• And in a breathless example of arrogance it went on to state that it 'did not have the man-power to email all of its customers'!
• The Online Saver account remember is an account that clients apply for online including inputting their email address
• Note, for between £500-£1000 powerful email software can be bought that can send up to 100,000 emails an hour, so quite frankly the 'no manpower' excuse insults their clients intelligence
• Summary: It's not fair to single out A&L because next week it will be another bank playing the same kind of tricks, the circus moves from town to town
• PS. Alliance & Leicester has just won an 'award' for customer service saying that 'A&L believes customer service is key to the success of our business'

2. Property Fund 'Forgets' To Inform Investors That It Doesn't Own Any Property

• Investors in the NPI Property Fund are the receive compensation after the insurer failed to inform its clients that the fund had not held any property investments for over 2 years
• The fund liquidated its property holdings in 2003 and has remained in cash since
• The fund lost 2.4% over the past year as charges were higher than the interest received (another question to ask is why were charges so high when there was in effect almost no management needed)
• The performance figures are shocking especially when the commercial property sector has been one of the strongest performers since 2003 with some funds posting double digit returns
• Two financial advisors noted the bad performance and wrote to the company but unsurprisingly heard nothing back for over 2 months
• Details then started to emerge on the company website with the company offering up 'we are sorry that no notification was given. Our intention was that the move into cash would be temporary'
• Summary: Another example of a financial institution doing what it wants when it wants with virtually no respect for its clients. The fact that it continued to charge large management fees while the fund was in cash is further evidence of how many of these firms view the role of their clients.

Conclusions

Put your full trust in financial institutions at your own peril. As shown in the two examples firms often can't even be bothered to apologise for mistakes or outright shabby services. This should make customers think that in many cases the actions of big business especially in the financial services industry are motivated by nothing more than pure greed.

But the good news is that competition is very strong within the financial sector and moving accounts or business has never been easier. So keep a close eye on how your bank, stockbroker or financial advisor etc is handling your money and don't let them rely on your apathy to make profits.

See Also

• How to find a good Financial Advisor