This article first appeared on the Yahoo7 website at this link: https://au.finance.yahoo.com/news/why-poor-aussie-financial-literacy-is-to-blame-for-banks-overselling-their-financial-products-222825364.html
Why poor Aussie financial literacy is to blame for banks overselling their financial products
Watching the parliamentary appearances of the Big Four Bank CEO’s this week revealed many things, but one that was most striking was the implied weakness in financial literacy of the general population who it seems often sign up to expensive services they don’t understand, didn’t ask for and don’t need.
It is all very well to criticise the banks for urging their staff to be overly aggressive when cross-selling different products to their customers, but it is another for the customer to succumb to this pressure and sign up for the new products. Rather the customers offered new products should give a friendly “thanks, but no thanks” reply when the sales pitch from the bank teller comes along.
On the rare occasions that I go into a bank branch now days (someone sent me a cheque recently!) the teller usually asks whether I want a new credit card limit, retirement incomes advice or to speak to a different advisor about investment strategies I may wish to pursue. Given that I only wanted to bank a cheque, the short and very polite answer from me is always “no’. It might sound a bit like a truism, but if everyone who didn’t want a new banking product didn’t sign up for that new product, few if any customers would be left with products they really do not need.
Which is the crux of that aspect of the banking inquiry.
It is curious why someone going into the bank branch to deposit a cheque or to buy some foreign exchange or undertake some other transaction, would ever walk out with a new banking product they knew nothing about before they went in. Unfortunately, it implies customers are gullible, unaware what they are getting themselves into including, more often than not, getting something that will end up costing them money and causing grief.
If only the customer could just say “no” when approached for a new product. It should go without saying that they only sign up to the services from the bank they need and do so with the full knowledge of what they are getting in to.
It also shows that consumer protection laws are needed to protect people from organisations going for a hard sell. A tightening and broadening of those laws could be one important consequence of the bank inquiry.
Every one needs a bank account and the banks offer a range of financial services which people need. Most of them are appropriate, well structured and well regulated. The problem with the banks was when they had a strategy to cross-sell products to everyone who walked into a branch or was on a mailing list and doing it without consideration to the circumstances of the individual. When people began to realize that they had often costly products that they didn’t need, the banks were caught out.
With banking issues getting such a high media profile in recent months, it should also be hoped that consumers are more alert to their personal finances. If so, many more will reject the ‘generous’ offers from the banks for more products and in doing so, they will avoid much heart ache.