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September 9, 2016 | Bank Cross-Selling Bankrupting Our Nations

Danielle Park

Portfolio Manager and President of Venable Park Investment Counsel ( Ms Park is a financial analyst, attorney, finance author and regular guest on North American media. She is also the author of the best-selling myth-busting book "Juggling Dynamite: An insider's wisdom on money management, markets and wealth that lasts," and a popular daily financial blog:

Our daughter started her first year of university last week.  Talking to her last night she complained that the campus is inundated with representatives from all different banks trying to sign students up for credit.  She said that kids can’t go 100 feet without another sales rep propositioning them in the halls and outside on the grounds.  When our daughter declined, one of the guys said “you’ll be backing looking for me in 2 months when your student loans run out.”  Revolting pitch.  It may well work for him, but it’s not in the best interests of inexperienced students (or anyone) to be peppered by credit pushers posing as ‘experts’.

None of this is surprising however, since the banks run pretty much unfettered today.  Therevelations at Wells Fargo may be extreme, but they are reflective of an aggressive sales culture that preys on human weakness and financial illiteracy.  This is toxic precisely because the sellers are allowed to market themselves as financial advisors.  This has to end because it is bankrupting our nations.  See Wells Fargo’s questionable cross-selling strategy:

From a bank’s perspective, cross-selling is great because customer acquisition costs are lower, and customers that use more products from a bank are less likely to shop elsewhere.

From a customer’s perspective, buying several products from one bank often means they are not acting in their own best interest by shopping around for the best offers.

In the commoditized market of banking services, the only way to base a growth strategy on cross-selling is to assume that the bank’s employees are master salespeople. It is simply not that hard for individuals to compare credit-card offers and get the best deal.

Cross-selling of banking services has its uses. But as the Wells Fargo fiasco illustrates, institutions that lean on it excessively to drive sales will hit limits. At Wells, a strategic rethink may be needed.

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September 9th, 2016

Posted In: Juggling Dynamite

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