Didn’t Get the Best Possible Mortgage Rate?
Didnt Get the Discount You Were Looking For?
Didnt Get the Bonus Rate You Thought You Deserved?
Heres 7 Reasons Why.
As a kid growing up in the 80s, I was constantly subjected to the influence of my marketing genius father who would always criticize the North American automobile industry for their shady sales tactics and the poor customer service he would receive at the dealership once he became a proud owner. He would always have not covered under warranty issues with Ford which would result in a letter to the CEO of Ford Canada and months of hassle and negotiation before any resolution would be made. He would explain to me that a North American company such as Ford, GM and Chrysler would sell him a car whereas a Japanese company such as Honda or Toyota would provide a transportation solution.
Japanese companies understood back then, that the average Canadian would buy a new car on average every 7 years over their lifetime. Now if you assume that the average automobile is $36,000.00 multiplied by the 7 new cars a customer will buy over their lifetime, a customer is worth over a quarter million dollars! Why on earth would you nickel and dime a customer with that much potential, on a $500.00 repair??? My recollection of my fathers first visit to a Honda dealership was Thank you for bringing your vehicle in, Mr. Davies. Would you like a coffee? Will you be waiting for your vehicle while we take a look at it or would you like a complimentary courtesy car? Here are your keys, Mr. Davies. There is no charge for the repair. Enjoy the rest of your day.This is probably the reason you will find a Honda and a Toyota in his driveway today.
Well into the second decade of this new millennium, you would think large North American Companies would have bought into this customer for life strategy by now. Not so according to new research conducted by Forbes Insights in July 2014. Over half of all marketing (58%) was directed towards new customer acquisition and only 38% was directed towards customer retention. North American Corporations still rely on new customers for 49% of their revenue and only 38% for repeat business. We all know of the phone companies offering free phone service for 6 months but because you are already a customer you dont qualify. When 377 senior executives of large North American Corporations were questioned on the average Customer Lifetime Value (CLV), 24% had no clue, another 18% had plans on calculating it, just not right now, and only 58% actively have the average CLV calculated.
I have also experienced this short term thinking of large financial institutions firsthand which is a large reason why I made the decision to start my own financial services company. Having worked for large companies in the past, I have seen all sorts of excuses for shortsighted customer service decisions made for all the wrong reasons. Here are some reasons I had to say no to customers for preferred rates and service fee waivers when I worked for a major Canadian bank.
1. Its year end. Lets lose the business now so it wont reflect our sales goals for the next fiscal year.
2. The client doesnt have enough business with us now to warrant an exception.
3. The client doesnt have enough potential. (They do however, have friends and family they can express their displeasure to which will cost us business in the long run.)
4. Customers credit rating isnt good enough for them to go anywhere else. (We got em by the short and curlies, so lets stick to em.)
5. We dont have the authority or its above our limit. Its against company policy. (OK so I sneaked 3 in one)
6. The customer isnt bringing in new business or buying a new product.
7. You have given out too many bonuses this week. Our pricing is too high to allow another exception.
Being in business for myself I cannot afford to have an unhappy customer as it directly affects both my pay cheque and reputation. A one hundredth percentage point on a mortgage is not worth the irritation of my client who may not deal with me at renewal because of the hassle created on issue. It astounds me that large corporations will allow their customers to feel frustrated or short changed.
I have a client who will smile when she reads this post because it is based upon the age old question,How much is a customer worth?Over the past 10 years she constantly reminds me of this question and it is the basis of how I conduct myself when it comes to making business decisions. I suppose this is why she remains a client of mine to this very day.
Feel free to provide feedback or use the comment section to vent and share your story of how you were dealt unfairly by a large company.
The Auto-Renewal Ripoff.
We as Canadians are generally a polite, loyal and trusting bunch. Sure we may bargain as best as we can when we first get that mortgage, GIC or Insurance Policy because the representative is in front of us providing the financial solution we need. However, something happens to us when a renewal notice is sent to us in the mail. We look at the renewal notice and wonder if we should cash out that GIC and invest in something more lucrative than the minimum interest rate the bank is paying. Or we think that we should shop for a better rate on that mortgage or insurance.
However the renewal date is far away and we have work, family and other issues to worry about right nowso the renewal notice is filednever to see the light of day again. The next notice you get is the financial institution gleefully notifying you that because they didnt hear from you, they renewed your product at the same old rate and locked you in for an extended term. Translation; We win. You lose.
And were not talking a paltry sum here. Lets say your GIC is $10,000.00 and the banks renewal is for two years at 1%. If youd cashed out of the GIC and invested in the many stocks, bonds or ETFs that historically return 5%, the difference is $800.00 over the two years! If you keep investing that $800.00 in higher yield vehicles over the years, the difference could be hundreds of thousands of dollars more for your retirement.
Of course, some people prefer the security of a Guaranteed Investment Certificate. Fair enough, but forgetting a GIC renewal date means you settle for a posted rate and you could be missing a percentage point and a half annually on longer terms by not contacting an Advisor. By forgetting a mortgage renewal date you could be looking at a posted 6 month closed interest rate at least 2% higher than a negotiated 1 year term. Ignoring a term insurance policy renewal letter and you could be paying over double the premium you should be paying especially if you are healthy.
Financial institution advertising is great. The message is always, We put you first. Its a great message, but the truth is the opposite. That customer service representative is really a company employee doing the best they can to contribute to the companys bottom line. They have sales quotas, performance reviews and their compensation depends on making the most possible for the company, often at the expense of the customer. Their agenda is to do the best they can for themselves. Yours should be the same.
During these hard economic times, there is just too much at stake to let financial institutions take control over your money. If you are not the abrasive type, or simply do not have the time, have a financial planner or mortgage broker who has access to many financial institutions, shop and negotiate for rates on your behalf. Its your financial future, dont let others decide how it is going to look.
Mortgage Renewing? The Bank is Ready for You. Are You Ready for the Bank?
The new mortgage rules that the government put into effect on October 17, 2016 has reduced sales and lowered Real Estate values in the Toronto area for 2017. Most news media has focused on thenew home buyers reduced purchasing power by the introduction of the rate stress test.My article focuses on the homeowner who already has a mortgage and think that the changes do not affect them.
Your mortgage is up for renewal and you arrange a meeting with your branch advisor to discuss renewal.Your branch advisor informs you that the mortgage rates have gone up and the best renewal rate that they can give you is1 percent higher than your current rate.You dont follow rates that closely but you do know that the Bank of Canada has raised their rate by only a half percent since you last negotiated your mortgage.So what has happened?Yourrate has gone up because the rules have changed and your negotiating power has been reduced.
Under the old rules, a household with an annual income of 100 thousand without any other monthly debt could qualify for a mortgage of about $475,000.00*.Under the new rules, that same family would only qualify for a mortgage of about $368,000.00. These new rules also apply to anyone wishing to shop their mortgage to other lenders. So if you are offered a higher interest rate at your renewal date, your lender is telling you that they dont think you will qualify under the new rules and you are stuck with them. Seems like a little bit of dirty pool since your lender knows exactly how they qualified you for your mortgage in the first place. Being a loyal customer is no longer a reason for a lender to bend on interest rates. Presenting a competitors special interest rate in a newspaper ad or on your cellphone will do little sway theinterest rate they will offer you.
So what can you do? Consult a mortgage professional before you meet with your lender.A quick conversation will tell you what current lenders are offering and how you stand when it comes to the new qualifying criteria so you can determine if your lender is playing hardball with you. If you are offered a great rate then congratulations is in order. There is no better feeling than dealing with an institution that you can trust.If you are unhappy, hopefully you discussed a Plan B with your mortgage professional.
If you have renewed your mortgage in the last 6 months, please share your experience. Did your financial institution treat you fairly?