Do you still trust your Bank?

Wednesday, 21st January 2009 16:22 - by Resident IFA

The news has been choc-full of headlines about Banks for around 18 months now. Of course, 99% of these headlines have been negative: ‘Northern Rock nationalised’, ‘Banks reeling from toxic debts’, ‘Brown gets tough with Banks’, etc, etc, etc. In the past week, I have read articles reporting Gordon Brown’s urging of Banks to ‘come clean’ about the extent of their toxic debts and problems. Add to this the fact that the Inter-Bank lending market (and thus lending to consumers) is at a stand-still, Royal Bank of Scotland (Epic code: RBS) is almost nationalised, and RBS, Lloyds TSB and Barclays shares are trading at 66p or less currently, then I think trusting your Bank is a rare and forgiving quality! The Government has guaranteed savings with each institution (Banks and Building Societies) up to £50,000 per person, but would you still be happy to leave them there were this guarantee not in place? - especially as their market capitalisation has dropped dramatically and the Financial Services Authority (FSA) has effectively further lessened their capital requirements from 8% to 4%. Moving the focus from your savings to financial advice, I ask the title question again - Do you still trust your bank? I say this as it seems a logical link from a to b. If banks have been so troubled, how can we trust them to provide sound advice on Protection products (Life insurance, Critical Illness insurance, Income Protection insurance, etc.), Mortgages (don’t laugh!), Pensions, and Investments. This does not take account of the fact that a lot of Banks only advise on their own product ranges, not the whole of market. This gives a very limited product choice and higher profit margins, relying on the captive audience of Bank customers to keep buying from them. As anyone who reads this column knows, I am an unashamed fan of independent financial advice, where an Independent Financial Adviser (IFA) generally works for their Client, not an employer, using the entire marketplace for sourcing appropriate products and solutions. A bank may well be bigger than an IFA firm, but IFAs have to adhere to minimum professional indemnity insurance and ‘capital adequacy’ regulations - so their Clients are still properly protected against unfortunate events i.e. the IFA providing bad advice or going bust. Please let me know your thoughts on Banks. Do you now have a mattress stuffed full of the ‘folding stuff’?! Do you still see them as the first port of call for major financial planning advice and decisions? Has your view of them remained unchanged, more seeing them as victims of circumstance? Do you have an IFA, and do they offer you a service you are pleased with? Until next time...