If your personal finances are putting you to sleep, you might be leaving yourself open to high-pressure sales tactics by banks.
Following allegations of unscrupulous banking sales tactics, marketing expert Kyle Murray is encouraging Canadians to be more savvy about their finances.
A federal review of banking’s business practices was announced yesterday after employees of Canada’s five biggest banks revealed their use of high-pressure sales tactics and even trickery that involved duping customers into products and services they don’t want.
But it wasn’t until employees spoke out that action was taken.
“[Our indifference] comes down to a quirky reality of consumer psychology. People will spend a year planning and looking forward to a vacation, and spend the absolute minimum amount of time planning their finances, on average,” explained Murray, director of the School of Retailing. “It’s really hard to get people to read the fine print on their mortgage or credit cards. The vast majority of people just are not interested.”
Given our financial solvency is at stake, why are we so blasé about our money?
“The simple answer is that it’s boring. It’s complex, too. Maybe some are intimidated by it. And then there is the aspect of personal greed.”
Unfortunately, he added, this consumer mindset is ripe for picking by banks, which—as they compete for new customers against each other and fintech (financial technology) startups—are ratcheting up pressure on employees to do whatever it takes to make sales.
How to protect yourself
“The advice is the same as it has been for a long time. Take an interest. Shop for alternatives when you’re looking at a mortgage or chequing account. Read the fine print. Ask a lot of questions. Educate yourself on how banking products are being packaged and where the money comes from,” said Murray.
“But all of these things are boring,” he said, adding that more enthusiasm would go a long way to feeling empowered to say no when offered various services, including credit card increases and enticing loans that are technically outside of our budget.
So how do we get excited about our finances?
“I think if we had a good answer to that question, then the banks wouldn’t need to sell so hard,” said Murray.
That’s why this is a rare situation where he supports government intervention.
“We have enough to data to realize that people are not good at this. They need help. We need some better system that gives them help without selling them more product.”