I’ve said this before, will say it again: My two most-prized possessions are the collection of Grateful Dead concerts on my iPod and the two Gonzo Banker coffee mugs I own. The rest of the shit I own is replaceable.
And so you can imagine that it’s not very often that I find something to disagree with Steve Williams from Cornerstone Advisors (the alter egos of Gonzo Banker) about. But Steve recently wrote in BAI Strategies, in an article titled Making Financial Responsibility Fashionable:
“The financial services industry should take a tip from the diet-and-fitness industry by promoting the idea of financial responsibility. It is amazing that, after a horrible financial crisis revealed a reckless era of personal finance, banks are doing very little to ‘stand’ for the idea that personal financial responsibility is a virtue. We seem to take an ‘agnostic’ approach so that we avoid making customers feel bad or discourage behavior that might drive revenue.”
Gotta disagree with Steve on this one.
First, the level of interest that banks and credit unions — of all sizes — have in providing PFM is a clear sign to me that they “get it” and are looking for ways to help their customers and members better manage their financial lives. Having surveyed users of PFM tools, I can tell you — and the smart banks and CUs know this — that one of the most-oft cited benefits of PFM is the feeling of control it gives users over their financial lives (2nd most frequently cited benefit after “seeing accounts in one place”).
While banks might have seen PFM as simply the equivalent to account aggregation in the past, that’s no longer their view. They see PFM as a way to better engage customers, and identify opportunities for advice-related discussions. Identifying the pain points — those that Steve would say “make customers feel bad” — is core to the successful PFM implementation.
Second, I wouldn’t be so quick to recommend that banks and credit unions “take a tip from the diet-and-fitness industry.” That industry — which I would argue are really at least two separate industries — is characterized by some arguable shady marketing practices. The diet industry is always making claims regarding the potential impact of diet regimens and drugs. And the fitness industry has historically preyed on well-meaning New Year’s resolution makers to lock them into the gym subscriptions that ultimately don’t get used.
I can’t imagine that’s what Steve is really looking for banks to replicate.
Steve does correctly identify, however, that banks can find themselves in a position of conflict between what’s right for the customer and what’s best for the bank’s bottom line. Unfortunately, by not addressing this conflict effectively in the past, regulatory agencies have done it for them (e.g., limiting overdraft fees).
But what banks (and credit unions) have not had in the past is a broader picture of a customer’s financial life in which to make smarter decisions about recommending behavioral changes. That’s what PFM promises, and one way in which banks will be able to help “make financial responsibility fashionable.”
Sorry to disagree with you, Steve — I hope I don’t get DeGonzoed for this. I’m not giving you the mugs back.