ISCOVER
The majority of consumers still pick their bank based on parental influence, according to new research, potentially missing out on better rates.
The Customer Owned Banking Association (COBA) has released new data showing that more than half of Australians chose their primary bank due to parental guidance.
A survey, commissioned by COBA and conducted by Pureprofile, found that 33 per cent of respondents had their bank accounts opened for them by their parents, while another 20 per cent opted for the same financial institution their parents used.
As a result of parental influence, 61 per cent of Australians had never switched banks.
For those who have changed banks, the primary reasons were better fees or rates (53 per cent) and poor customer service with their previous bank (20 per cent).
COBA warned that the trend means many consumers risk missing out on competitive rates and fees, better customer service, and banking with values-aligned institutions.
In comments to The Adviser, COBA CEO Michael Lawrence said the trend highlighted the need for better financial education.
“Many Australians aren’t aware of the breadth of financial institutions available beyond the major, traditional investor-owned banks, or the distinct advantages offered by customer-owned banks,” he continued.
“Better financial education can empower individuals to understand the different fee structures, interest rates, and service models offered by various providers, which helps them when shopping around.
“Education can also help consumers understand what to look for to find competitive rates and fees and look beyond that – such as customer service quality, community investment, ethical practices, and personalised experiences, which customer-owned institutions are renowned for.”
How brokers can help
Lawrence flagged that brokers can help borrowers find a financial institution that aligns with their needs and values.
“This is particularly important for clients who rate customer service highly, and who want to feel good about where they are banking and how their money is being invested,” he added.
Kristie Gould, broker and franchise owner of Mortgage Choice Warners Bay, told The Adviser that she believed most people were unaware of how many lenders there are in the market.
“They’re often only seeing the ones that are branded at the shopping centre or when they’re walking down the street. I don’t think they know that there are often other options available, and that’s just because they might not have heard of them, and they might not have a branch,” she said.
However, the Mortgage Choice broker added that most of her clients want to consider a range of options.
“We don’t tend to see too many of our clients want the same lender as their parents. I think the reason is because these people have already made a decision to come to a broker and want options. They’re wanting us to provide different loan recommendations, different options, interest rates, etc,” she said.
“So I feel like people who are coming to brokers are coming to us for a purpose... they’re just coming with an open mind and understanding that we have these options and we’re going to provide a solution that’s right for them, not necessarily just a specific bank.”
Gould added that brokers are typically offering more lending options, noting that she now typically uses around 10 lenders a month for her clients.
According to the regional broker, the changing needs of borrowers – and the widening array of policies from the lenders – have driven her brokerage to offer a wider range of lending options.
“I think [this] has changed a lot in the last three years,” she said.
“That’s because clients’ requirements and needs have changed a lot and lender policies have changed. Serviceability is significant too.
“So I think we’ve needed to change the lenders we use and broaden out how many we’re using to really suit everyone’s different needs.”
COBA chief operating officer Stephanie Elliott concluded: “By not making a proactive choice on which institution you bank with, you could be overlooking competitive rates and fees, market-leading customer service, or the chance to bank with an institution that truly aligns with your specific needs and values – all qualities customer-owned banks are renowned for.”
[Related: What do brokers think of the major banks?]
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