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COMMENT
Why is it that some of us are willing to spend several hours choosing a new DVD player, yet can't be bothered to invest a fraction of this time when it comes to choosing financial products? Even worse, the majority of British adults don't take the trouble to shop around for even the most basic financial goods -- the products that we use throughout our lives. One consumer group estimated that up to eight out of ten adults rely on a single source for financial products: the bank which provides their current account. Whatever these customers are after, they simply trot along to their local high-street branch, where they get taken to the cleaners! Of course, this situation distresses me, because the golden rule of money management is shop around. If you can't make the effort to spend a few minutes finding a better deal, then you have to accept that you're going to be taken for a ride. Banks know that a great many of their customers are bored or lazy when it comes to financial matters, so their strategy is to charge these customers as much as they can get away with. It's what I refer to as the "captive audience" problem: "You're going to buy from us whatever happens, so we'll make as much money as we can!" What's more, banks are corporations, owned by shareholders, and their sole legal and financial duty is to maximise returns to those shareholders. Nothing else is as important as providing ever-greater returns to shareholders -- customers and employees come a very distant second in this pecking order. The fact that the banks' primary concern is increasing cash flow to their shareholders creates three interesting outcomes. The first is that winning new customers is extremely important, so banks compete fiercely for new business and market share. Thanks to this approach, new customers get all the best deals, while loyal and longstanding customers are overlooked or ignored. Boo! The second outcome is that consumers are often better off dealing with not-for-profit organisations, such as building societies or credit unions. Indeed, as I warned in Big Mortgage Lenders Provide Bad Deals, small building societies often beat the big banks hands down when it comes to providing Best Buy home loans. For example, Nationwide BS, the UK's biggest building society, breaks the mould by offering its best mortgage deals to all of its customers, both new and existing. The third outcome is that the high level of financial laziness and ignorance makes shareholders of UK financial firms far richer. Indeed, because most people can't be bothered to shop around for financial products, I get higher dividends. Hence, as I have stakes in four major financial firms*, your apathy is making me rich! So, as our American cousins say, "If you snooze, you lose!" If you don't want to provide me and various "fat cats" with excessive profits, spend a few minutes finding better financial products. Luckily, the Fool has various product centres and easy-to-use search wizards which do all the hard work for you, so check out these links: Bank accounts: Banking centre | Search wizard | Best Buy Bank Accounts Made Easy. Credit cards: Credit card centre | Search wizard | Your Ultimate Guide To Credit Cards. Mortgages: Mortgage centre, including award-winning no-fee broker London & Country Mortgages. Personal loans: Personal loan centre | Search wizard | Don't Pay £1,000 Too Much. Savings accounts: Savings centre | Search wizard | Your Ultimate Guide To Saving. * Cliff owns shares in HBOS, Legal & General, Lloyds TSB and Royal & SunAlliance.
