Back in the day, banks lured new deposits with the quaint siren song of a new toaster
Today the incentives are limited only by the ingenuity of marketing departments. Citibank offers cold hard cash
as does Bank of America
. TD Ameritrade hedges its enticements with free trades + cash
, and the S & H Green Stamps
of the new millennium 25,000 United Mileage Plus Miles
or 20,000 Starwood Star Points
. Fidelity also offers the same Mileage Plus miles
and also aligns with American Airlines for 25,000 AAdvantage miles
, Delta SkyMiles
or American Express Membership Rewards Points
offers miles on Continental, Delta, Midwest and United Airlines for mortgage loans.
The catch? You have to be a "new" customer to take advantage of these offers. Fidelity goes so far to note that these offers are only available "once per household per lifetime."
And they mean it. BrandCultureTalk
has been a Fidelity customer for more than a decade, but we never took advantage of any of the mileage offers and thought we would try to fund a new account to score some miles. But try as we might, a variety of Fidelity representatives were equally emphatic that under no circumstances would miles be awarded, although one suggested if we closed our account we would possibly
be considered a new customer after seven years and our records were no longer retained under the requirements of Rule 17a-4 under the Securities Act of 1934
If an additional dollar of assets is the ultimate fungible commodity as long as the source of funds is legal, why do financial institutions court fresh account registrations with the ardor of college students on a spring break spree? Why do loyal customers later feel the stark contrast between courtship and commitment outlined in Shakespeare's As You Like It
men are April when they woo, December when they wed
maids are May when they are maids
but the sky changes when they are wives
offer fancy lingo like "status quo bias
" and "hyperbolic discounting
," but it basically boils down to laziness, apathy and inertia.
Like the Black Flag Roach Motel, once our assets check in, they rarely check out.
Your bank or broker may have switched on you, e.g. First Interstate Bancorp, Security Pacific, MBNA, NationsBank, FleetBoston, US Trust, LaSalle Bank, Countrywide, Merrill Lynch -- and these are just
some of the acquisitions of Bank of America -- but when was the last time you
, dear reader, switched banks or brokers? Shopped your auto or homeowners insurance? Moved your IRA? Changed credit cards? Even switched investments or sold an underperforming mutual fund
? A 2008 study in Great Britian
found that only 6% of bank customers had switched banks in the prior 12 months. An astounding 47% indicated that they had not even thought about switching. Even the wealthy stay put; over half of high net worth individuals with at least $1.5 million in investible assets surveyed earlier this year by Barclays Wealth
indicated they would not be adjusting their asset allocation at all despite today's changing and challenging market conditions. A 2007 JD Powers survey found that typical customers maintained coverage with the same auto insurance carrier for more than 10 years
. And so on.
Not only do we pay scant attention to what actually matters to our financial health, we're further distracted by dreaming of acquiring rapidly depreciating frequent flyer miles
. Too often instead of paying attention to fees, long-term value and performance, like the eponymous protagonist of Jack and the Beanstalk
, we cast our lot with magic beans. Vanguard Group founder John Bogle commented this folly noting, "By adopting the customary and time-tested techniques used to sell cosmetics, aspirin and frozen foods, too many firms have come to view themselves as businessmen selling hot products, not as fiduciaries offering trust services." And this was in a speech delivered in 1987.
So don't act like a potted plant
when it comes to financial products. Don't perendinate. Don't let a shiny toaster or a trip that you may never get to take get in the way of your better judgment. Make financial firms earn your business continually, rather than once a decade. Just maybe they might start to fight as hard to keep current customers as they do about enticing new ones.