Banks treat new customers better than their existing customers

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My previous experience at a major bank made me see that banks like sticky customers who they can sell as many products to as possible. Unfortunately what I also found is that they are not so good in proactively reviewing the loan of existing customers.

Even if you had written your home loans targets, the banks wanted more from their customers, ‘Why not sell them credit cards, the insurance on their car, income protection, personal loans, different transaction accounts?”

At times I refused to sell a credit card because I just knew an additional credit would not work for them, some people just aren’t good with credit cards as the funds are easily spent and it can have harmful effects on their credit ratings.

Despite the knowledge, the bank pushed on with their strategy of creating a sticky customer

For home loans the banks have a standard variable rate, it’s their headline rate. To win new business the banks will offer a discounted rate, For example, if their rate is 5% they may offer a new customer a 1% discount, a competitive 4% home loan rate.

However, as time moves on some banks offer a further incentive to win new business which may mean a new customer receives a discount of 1.4% and their rate is 3.6% whereas the previous customer I mentioned is still at 4%.

The strategy of focusing on new business means existing customers are not obtaining the best value from their bank and if they have a number of products it makes it more difficult to swap to another bank.

For many generations, people trusted the banks because they are so big and renowned and that’s the way it was. Unfortunately, the trust factor has eroded as they continue to offer new customers greater discounts than their existing customers. Very rarely do you see a bank thank their loyal customers by proactively offering to review their rate and going one step further by lowering the rate in line with the discounts offer to a new customer. The bank’s focus is on profitability and shareholder value.

I was never comfortable with this strategy. So many customers would make contact and ask if the new deals were available to them and it hurt to have to say “Sorry mate, they are really good rates, but it’s only for new business.”

It is why I left and became a Mortgage Broker. I feel as a mortgage broker I can keep things honest.

As a mortgage broker, I can proactively review my customer’s loans to make sure they are as competitive as possible and saving money. The opportunity to be proactive also helps my business as my existing customers appreciate the support and offer referral to their family and friends.

In our business, the systems and processes we’ve developed ensure we stay in touch with our clients. We review their loan, the interest rate and identify opportunity where we can save them money.

We often let them know that we’ll call their existing lender on their behalf and ask them what their prepared to do to keep the clients business. Nine times out of 10, the lender will simply reduce the rate to match other offers and it becomes a big win for our clients.

As a mortgage broker, we need to be proactive.

When a customer calls a mortgage broker to review their home loan it is important we provide as much assistance as possible. For whatever reason, most customers don’t ask questions or don’t know how to review their own loans. We don’t expect them to review their own cars when they get them serviced, that’s why they take it to a mechanic. It’s the same principle with a mortgage.

If the banks don’t support existing clients, then they lose business. It’s as simple as that.