NEW: Mr Banker

Opening a new account was as much of an adventure as closing the old one. This time I was given a glimpse of Secret Bankers’ Business.

His lips were (almost) sealed

A little while ago I wrote about my experiences as a customer of the bank that employs me and my laboured attempts to close a credit card account.

The closure of that account was part of a bigger transition involving the transfer of my banking activities to one of our non-bank competitors, a credit union.

My encounter with the credit union’s staff member made me realise that I may have been a little harsh in attributing the decline in customer service solely to bank cost-cutting in the 1990s.

As a new customer I had lots of questions, and the young chap assisting me was friendly and helpful. What caught my attention at the time was that his every attempt to provide a useful answer to my numerous questions was prefaced with the rider “Well, according to the Financial Services Reform Act I am not supposed to tell you, but …”

The Financial Services Reform Act was a government initiative intended to ensure that consumers were provided with financial advice that was relevant to their situation and which adequately disclosed risks. It does this by requiring potential investors to be provided with a product disclosure statement, which explains the risks of the investments that they are contemplating and by requiring anyone who provides financial information or advice to be appropriately trained.

Now the objectives appear sensible, and the measures involved seem at first glance to be practical steps consistent with those worthy objectives.

But what has happened in practice?

Almost all investments have some degree of exposure (however minute) to almost every conceivable type of risk, and there was a phalanx of corporate lawyers competing to produce the most comprehensive list of possible risks. The end result was typically a turgid mass of interchangeable boilerplate text, which surely even the most optimistic legislator would not expect their constituents to read.

Corporate bean-counters realised that customers tend to ask questions of the first person that they meet, and the cost of providing training about all of our products to everyone who might possibly encounter a customer is prohibitive. The bean-counters’ solution? Prohibit staff from answering questions by any means other than providing said customer with a copy of said turgid mass of interchangeable boilerplate text.

From the view of the proverbial bird, it would appear that the legislation has achieved almost the exactly opposite effect of that intended, but perhaps it is only your correspondent’s lack of familiarity with a broader range of issues that leads him to conclude that this is an unusual outcome.

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