Amelia Young is the founder of Upside Consulting Group Inc.
I want my bank to be more like Amazon.
Brad Stone's book The Everything Store contains the following Jeff Bezos quote: "We don't sell products. We help people make purchase decisions." The statement was made way back in 1996, but we see this philosophy at work in the way Amazon does business today. I happened to be reading this book while going through the process of renewing a mortgage, and was struck by the contrast between that experience and the founding principles of Amazon.
Here's what my experience looked like: I went into my branch to inquire about rates and was given a quote of 2.65 per cent. I mentioned that HSBC's 2.39-per-cent offer had recently been featured in a newspaper article and was told I'd have to show proof this was a current offer for my bank to consider a price break.
A few days after providing this to the branch, I was told the best they could offer me was 2.44 per cent. In addition, they would waive my (exorbitant) account fees for six months to make up the difference, less the fees I'd have to pay to discharge the mortgage. Essentially, they priced the product in such a way that made me pay part of the cost of switching anyway; I didn't get the market-leading rate, but I got some discount without having to switch. As a business person, I understand this strategy, but as a 22-year customer, I felt exploited. When we went in to the branch to sign the paperwork (having left work early to get there before the 5 p.m. close), my husband quipped – "at least we got a piece of Canada Day cake."
Imagine what the process of renewing your mortgage would look like with Amazon. First, it would have been scouring the Internet for the best available rate throughout the life of my mortgage, pro-actively alerting me to any opportunity where the interest savings would exceed the break fee. As the renewal approached, they would send me comparisons of available offers and use the information they have about me to offer "one-click" completion of the deal.
Picture a similar approach to all your financial affairs. It would use your current earning and spending behaviours to educate you about how much you should be saving for retirement or your kids' education, prompt you to increase your retirement savings when you get a bonus or a raise and scour the thousands of available investment products and recommend those that offer the optimal balance of risk, returns and fees.
It would constantly keep you up-to-date on how you're doing, show you how you're doing relative to other people like you and proactively suggest ways you can do better. Best of all, it would answer your questions instantly, contextualized based on your individual situation.
Picture an interaction such as this: "Alexa, how much should I contribute to my RRSP?"
"Well, you've missed the past two years so you have $25,000 of unused contribution room. You only have $10,000 in your bank account right now," Alexa would respond, of course telling you how much it would cost to borrow the rest at the best available rate on the market. "Your car payments are complete in six months so that $750 a month will help you pay off the loan more quickly (assuming you don't buy that new BMW I've seen you researching). Before you do that, though, your daughter turns 2 next month and you haven't set up her RESP. Shall I open the account and deposit $2,000 so you can get the full $500 government grant?"
The Ontario Securities Commission's No. 1 priority for the next year is to implement a best interest standard. This regulation will require financial advisers to act in the best interests of their clients. The industry has voiced several objections to this, foremost among them that it's too prescriptive and too difficult to implement. Amazon demonstrates every day that such a principle can indeed be implemented, and most importantly, that doing so builds customer loyalty and increases profit. What the financial services industry needs to do is look at the world through the lens of helping people make decisions instead of selling products. Fintech startups are already applying this wisdom. I hope my bank starts doing it soon.