A bank is a big part of the financial world. It takes savings, turns them into the loans that are used to keep the basic workings of the economy going. They are absolutely essential to running businesses and buying a house.
Which is why it is indeed puzzling when they are staffed by people who know nothing about what their institution does.
That's not to say that everyone at the bank that I work it is bad at their job or even ignorant. It's just that they know the products that they service very well and anything else about the bank universe is optional.
This is why there has yet to be any successful conglomerate that has been built upon cross selling financial services. If someone mainly does work on deposit accounts, they will come to know how to structure one's deposit accounts quite well, and will be no more likely than the next person to sound knowledgeable at all about insurance.
Which brings me to my next topic. The bank for which I currently work (and shall soon be leaving) does ask us to cross sell financial services to the customers that call in. One of these is loans, specifically mortgages.
Now, I'm no great expert on mortgages. I have an interest in figuring out the ups and downs of that market that stems from curiousity and the needs of a distant future. Neither is anybody else that I work with, apparently. At least one of them did not know the difference between a first and a second mortgage. No one, our boss included knew what
subordination was. Roughly half the people on my team (we have teams) have a mortgage and were therefore, more knowledgeable than I am about the process of getting and maintaining a mortgage.
(In an aisde, one of our mortgage holders opined that getting a mortgage the first time was scary, another who had recently refinanced countered that like getting married, it's even scarier the second time).
So, in order to make us better at cross-selling mortgages Our Bank had us all take a lesson from someone who was quite good at cross selling. She was a team leader, and apparently quite good at talking customers into taking out mortgages at Our Bank.
From this little meeting I did not learn a goddamn thing. Which is good, I think. If I had learned something I hazard a guess that it would prove false or simply relate only to talking people into getting their mortgages from Our Bank.The woman who ran this meeting was not especially dim, she just was a person who was exceptional for succeeding despite not really knowing what she was talking about.
Here are some nuggets from the meeting:
Truth #1. Buying a house is the best investment you can make.
Truth #2. During the first year your house will increase in value by 10%. [sic, no qualification, no reference to location]
Truth #3. There are no investments that can earn you a return of more than 10%.
Truth #4. Interest rates are going up.
When #2 was dropped on the class, I locked eyes with my supervisor. He had an expression which said, "I know what you're thinking. Just please don't say anything."
What I was thinking was. An awful lot of people bought a house last year and did not see their house values go up by 10%.
I think she may have meant on average. Though the average home price per year increase in the United States has been 6.38% if your data starts at 1974(Which mine does). Over the same period, the S&P 500 averaged a yearly gain of 9.83%. That I might add, is the total after one of the worst 8 year stretches on the American stock market (often called "the Bush years"). Whereas the yearly % increase still reflects a housing market that by a lot of measures is still overvalued. So much for #3.
So obviously a house is not the best investment for everyone. Now, amazingly the reason why buying a house is a very good investment for most people was totally bypassed in this meeting. That is, of course rent. You've got to pay rent anyway so why not turn some of that into an investment rather than assure that it is all expense. There are, of course some situations where even considering this, it is not wise to buy a house. For instance if you interest payments end up being more that your current rent, if you think that sounds crazy, then you don't own a house in San Francsico. Or if the increase from rent to payment puts you in danger of default.
In those two cases, paying rent and then investing as close as you can get to the difference is the smarter option. But for an awful lot of people a house is the best way to invest. (Many Americans, you may have noticed, don't like to save unless they put themselves in a situation where it is actualy illegal not to).
Then there's number 4. After the meeting we were reminded by our boss that it is technically illegal for us to forecast interest rates. The woman who seemed so sure of Truth #4 admitted that she did not know what factors affect mortgage rates. Customers frequently ask me whether rates are going up, I usually tell them I would have a different job if I knew that.
After the meeting I actually asked someone who worked for the banks mortgage department. He said that the fed funds rate had an impact and was frequently a leading variable, but essentially he gave me the same line that I give my customers.
I suspect that there is a certain level of ignorance all the way up. And I am part of that great chain of ignorance.
Labels: d'oh, economics, finance, work
