Have you ever given any thought as to the significance of your transaction account in the collective mind of the bank? Yes that was the “mind of the bank” to which I referred and not the mind of god, but it is easy to understand the confusion.
Well perhaps it is worth knowing the mind of the bank/s in this regard. Of particular importance are what the banking industry refers to as ‘anchors’. Simply put an anchor is that, or those products, which are most likely going to anchor a customer to a bank. The assumption is that once a customer is anchored to one institution their immediate first thoughts as to who is their bank will be the one to which they are anchored through that, or those, products.
Which products have been the anchor has changed over time. For that long period before home loan portability it was the home loan account. Simply because of the difficulty and cost of moving to another bank once a person had their home loan with a bank they were almost certainly anchored there for a considerable time.
With increased portability and the increase in salary deposits straight to our savings and transaction account these accounts became the new anchor. Again, it was largely the degree of difficulty in having the payroll office change our transaction account details into which our pay went that created the anchor aspect to this product.
In recent years it has been the increasing use of offset-accounts against our home loans, and the increased ease of changing our salary deposit account, that has changed the anchor to salary receiving offset-account.
It is predicted that with the ever increasing significance of superannuation in our financial lives and the increased portability of our superannuation accounts, along with the growth of self-managed superannuation funds, that will see the anchor change to, or be shared between the offset-account and super fund receiving bank account.
But is this all just academic? I don’t think it is, you see the banks are now incentivising brokers to establish your transaction accounts and super deposit accounts. The incentive is small and brokers are not asking why because as self-employed small business owners every bit of revenue is beneficial. Of course the banks are not going out of their way to explain why they are paying for the broker to set these accounts up where historically they would have been established at the branch level without any thought or question coming from the broker.
The reason, as you would have realised by now, is that the broker is setting up the anchor on behalf of the bank. From a future earnings perspective the establishment of such anchors is perhaps as important to the bank as the home loan because in many instances a customer well anchored to a bank is not even going to consider shopping around because they will just “go to their bank”.
To the client though it also means that before easily committing to the bank’s most valued products you should consider “how much does the bank want to anchor me down and how much bargaining power does that give me today?” This is certainly what I, as my client’s Private Financier am thinking about before blindly handing over the client with all of the ‘optional extras’ that will most likely anchor them to that bank. I also consider it my responsibility to remind clients, during annual Finance Reviews, that they are not anchored to that bank and that we should annually review all options using a Cost Benefit Analysis.