Estimated reading time: 5 mins
It wasn’t that long ago where if you had a finance problem, such as needing a loan, you’d go see a Bank Manager. Picture the stereotype – a pompous man in a pin-striped suit and bowler hat, behind an enormous, leather-topped desk, smiling gravely whilst brimming with the power of Yes or No. That was then…
… but this is now: there are more options available to us than the bank. But first, what is the role of our bank?
Banks are providers of financial services. Borrowers, creditors, households. They are the money-keepers and money-lenders that have been around for millennia. They’re a commodity of a sorts with little to distinguish one from another. Most of us can open an account, add money, withdraw that money, get an overdraft, loan or save for a rainy day. Many banks do more (and charge for it) such as providing (or re-selling) insurance products, mortgages, credit cards, etc. and online banking.
Really, banks are great because if you tried to do many of these things without them…. well you couldn’t. For me, they’re a bit like buying postage stamps: we might moan about the service, but if we had to get carry letters and parcels ourselves then it would work out very tedious, very time consuming and very expensive. Right? And to be fair, most banks and their managers aren’t like the stereotypes portrayed in cartoons and the media. I think they’re the good guys, but not necessarily always the best choice.
Since the late nineties, in many countries, we have had the benefit of consuming financial services online, from the comfort of our own homes. What we might know now as fintech, new financial services businesses operating in increasingly finer niches provide a great deal of choice.
A New Breed of Banks
We find challenger banks that are startups aiming to disrupt the major incumbents. They bring fresh ideas and no legacy to slow them down; they make it easy to open accounts (e.g. without visiting an outlet or signing on real-paper) and all servicing of accounts is digital. Customer services are provided by chatbots, more frequently than real people, which means customers often aren’t talking to anyone at all. Consumers aren’t always ready for this, and the lack of a ‘human-being’ at the end of a phone can be frustrating. Not like talking to the Bank Manager!
We’re also used to buying insurance online now, making it easy for us to cover almost anything. We can cover our pets, our cars, our lives, our health, our TVs and jewellery. We can also insure our weddings. Our events. Even our faces are insurable. Did you know that? We don’t need to speak to anyone – just google it and there is probably an insurance policy for it. It might even be said that some people are over-insured. It’s quite likely I am too. I don’t have the time to review all my insurance policies to check for overlap, or any restrictions I haven’t been made aware of. Sound familiar?
Hornet Partners: Mortgages and Loans
When I last chose a mortgage, I did everything myself online. Did you? I assessed my needs, scanned the market, and made a choice from a shortlist of providers that could meet my needs? Have I made the right choice? Who knows – only time will tell. I didn’t speak to an advisor – the buck stops with me! I am confident that the deal I chose was right, so I am not worried about it, but that’s maybe because I have worked in Financial Services for 20 years. Other people, who aren’t familiar with the industry, might not have the comfort of such confidence.
A more recent innovation is in the field of automated advice, or ‘roboadvice’ as some people call it. This is amazing, and perhaps scary for some people. We can now, from our homes (you could even do it whilst lay in the bath) receive complex financial advice online that takes into account our many financial objectives and circumstances. Computers using Artificial Intelligence and Machine Learning churn away millions of datapoints to advise us to do something with our cash. How about that?
Hornet Partners: Talking to a Financial Advisor
But we needn’t do everything online – you can still find real advisors to talk to, if you have enough money to pay for it, that is. With tightening up of regulations by governments in many countries (e.g. RDR, or the Retail Distribution Review, in the UK) as a result of the financial crisis in 2007, it is generally much more expensive (or sometimes perceived to be) to get personal financial advice. Financial Advice used to be free, and now we have to pay for it (that’s a myth, in fact, because most of us used to pay for that advice without knowing it, through commission payments paid from the product provider to the advisor.) What’s more, bank managers and other ‘non-qualified’ people aren’t even allowed to give financial advice any more, in fear of prosecution. Same goes for mortgage advisors.
But it can go terribly wrong…
It’s no wonder that with all this choice of solutions, products and suppliers of financial services that some people make mistakes. It’s so easy to buy a financial product, even with all the safeguards. Without advice, it’s easy to get into trouble. There are government bodies and ombudsman organisations that help protect our interests, but sometimes even they can’t help if nothing illegal or immoral was done. You can find assistance with financial matters from specialist companies that are experts in navigating the minefield of laws and regulations. Their sole aim is to get you out of trouble. Companies like Hornet Partners, for example, specialise in debt management in areas such as:
- Outstanding loans
- Late payments
- Credit card debts
- Debt restructuring
My suggestion is be careful when choosing a financial product when you haven’t received advice (which let’s face it is almost all of the time nowadays.) Read the small-print and scan the market. But if you do find yourself in hot water, don’t suffer in silence, and instead seek the help of professionals who can advise you on the best way forward.