A Consumer Advocate’s View On Financial Services Cross-Selling

A recent New York Times article about financial supermarkets reports that:

Consumers should think carefully before combining their financial accounts with one company, said Barbara Roper, the director of investor protection at the Consumer Federation of America, a consumer advocacy group based in Washington. She said the flip side to the convenience may be a decrease in investor privacy and data security.

FIRST, she pointed out that if a hacker broke into a company’s computers, “then potentially they will know all of your sensitive information.” She also said that people who combine their checking and brokerage accounts with one company should be prepared for “cross-selling,” the industry’s term for marketing many different financial products and services to customers.

She advised customers to shop around before buying additional financial products, like mortgages and CDs, and not just to accept the rate at a company where they already have an account. “Mortgages are a great example,” she said, “because the difference in cost over the life of a mortgage can be truly astronomical.”

It’s 2007, Barbara. Have you seen the research? Nearly six of ten credit card applicants, and almost half of checking account applicants, researched their decisions online. And that doesn’t even count those who researched offline. But thanks for the great advice.

Second, did you know that many consumers who open multiple accounts with one firm do so to get better rates or lower fees? Convenience and better pricing! All in one deal! It’s wonderful, you should try it — I promise I won’t tell you anyone you work with that you’re cozying up to a big bad, evil bank.

Third, are you aware of how most firms maintain their data? It seems very unlikely to me that a hacker who gets into a bank’s checking account data would also — at the same time — be accessing the brokerage or credit card systems. No doubt that privacy and security are important issues — but those concerns are not escalated with multiple account ownership.

And lastly, if you do open multiple accounts with one firm, I assure you that you won’t be the only one who gets cross-sell offers. Even customers with just one account get cross-sold. Those big bad evil banks don’t discriminate (at least not on that basis).

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There a lot of reasons why financial services firms have not been as successful cross-selling as they hoped or would like to be. But it benefits neither side of the equation — financial firms or consumers — to have “advocacy” groups raise false concerns about cross-selling or cross-buying.

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5 thoughts on “A Consumer Advocate’s View On Financial Services Cross-Selling

  1. Can not disagree with you more. We are a consumer advocate also, yet we are in the business of Real estate and mortgage, not just a general advocate. Possibly you might get a discount of .25% all though that can be disputed.
    We at http://www.loantactics.com are surprised that you would have a large company have full control of your finances. Simply if you have a dispute your whole account is in jeopardy. You have no bargaining power. What about ID, your putting your info in one basket.
    And the news is still out on if bundling saves money, we think it does not in the long run.
    With many escrow company in the news for hurting the consumers, we even question the use of impounds.
    Cross-selling, bundling,is good for the companies that sell them, ask any sales person.
    You need to tell more the story, or go to better sources. But at least you brought it up to be talked about.

  2. “Simply if you have a dispute your whole account is in jeopardy. You have no bargaining power.”

    So if I have a $400k mortgage, a jumbo CD, investments, and three car loans with my bank (I don’t, but let’s play), I have no bargaining power?

    I’d have much more bargaining power than if those products were spread among six institutions.

    I’m with you, Ron.

  3. Right. You’ve got a TON of bargaining power with a lender who you’re going to use ONCE and never do business with again for at least 15-20 years.

    And did you check out the Loan Tactics site? How ironic is it that this “consumer advocate” firm runs Google ads on its site which contains links to lenders that may or may not be “making money off the uninformed”.

  4. Have we blurred issues? Cross-selling and consolidation? Aren’t they two different things? You cross-sell me. I consolidate with you. Cross-selling is good for you. Consolidation should be good for me.

    If someone consolidates their entire financial relationship with one company, they aren’t doing it (solely) to save money. They are doing it because:
    – they get better service
    – it is convenient
    – they trust and like the brand

    People consolidating their financial picture are probably thinking something like this: “If I give it all to them, they’ll answer the phone. They’ll listen to me. They’ll give me fast answers. I can get special treatment, like on the weekends.”

    Those of us who aren’t consolidating aren’t doing so because of “privacy issues,” “security” and “hackers” (although I’m just as paranoid as the next guy). There just aren’t many financial institutions with strong brands offering the combination of service, convenience and savings to create a compelling “consolidation” value proposition.

    And here’s a laugh. This quote comes right off the |oantactics.com homepage: “Lenders can often make the most money off of the uninformed…” Would that include people like Kris, who runs a site called |oantactics.com but thinks “escrow companies are in trouble for hurting consumers.” Oh brother…

    Kris, are you a comment spammer, pimping a site capitalizing on the consumer advocacy topic du jour? Outside of Google ads, I’m struggling to see how your site “monetizes its business model.”

  5. Thanks for commenting, Jeffry. This isn’t just a blurring of “issues” — it’s wrongly interchanging the two terms in the first place. Just because I open up a brokerage account with the bank that has my checking account (as a result of a cross-sell offer, lets say), it doesn’t mean I’m “consolidating” accounts.

    Consolidation implies closing other accounts and opening them up with one firm. I can’t imagine anyone even coming close to doing this.

    Kris’ comment doesn’t bug me. Let him/her pimp his/her site. It’s Barbara Roper’s completely clueless remarks that are scary. And, of course, the NY Times, as self-proclaimed leader of the witchhunt against all evil, was happy to print her comments.

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