banking

Bank services on top of checking accounts

Banking » Bank Services On Top Of Checking Accounts

Have a checking account? You probably also need a mortgage, investment services and all kinds of other financial products, right? At least that's what your bank is hoping.

In the face of declining income from fees on checking accounts and with plenty of cash on hand to lend, banks have become more aggressive about pitching checking account holders on everything from mortgage refinancing to investment services, says Sophie Schmitt, a senior analyst at the consulting and research firm Aite Group.

"Cross-selling is key to getting profits per client up, to making the synergies that the bank can provide work," Schmitt says. "To carry out that one-stop shopping model, you need to get cross-selling to work."

But banks' push to cross-sell is also born out of necessity, Schmitt says.

"Banks have been suffering since the crisis," Schmitt says. "A bunch of regulatory reforms have impacted the retail bank side."

Between the Durbin Amendment to the Dodd-Frank financial reform bill, which limits the amount banks can charge businesses to process debit card transactions, and changes to regulations on overdraft fees, banks are pulling in much less revenue on checking accounts, she says.

Have I got an IRA for you

One of the key products banks are looking to sell is wealth-management and investment services, Schmitt says.

"The retail bank isn't generating as much revenue, and so banks are looking to the wealth-management division," Schmitt says. "If you're a high-net-worth client and you have most of your investment money at (Charles) Schwab and you just use Bank of America for bill-pay and your checking, clearly they're vying to get some of that investment money."

But what's good for a bank's bottom line isn't necessarily good for you, says Barbara Roper, director of investor protection at the Consumer Federation of America.

It's important to remember that just because an institution does a good job servicing your checking account needs, its investing services will not necessarily be up to snuff, she says.

"People trust their banks and are likely to bring that trust over to a relationship where it may or may not be warranted," Roper says. "They need to evaluate this new set of services on their own criteria. Are they competitive in terms of the fees that they charge? Are the products they sell highly rated? Are they salesmen who are operating on commission?"

The standards that banks' investment professionals are held to are particularly important, Roper says. Many investment professionals are held to a "suitability standard," which requires them to recommend only investments that might be suitable. On the other hand, the more stringent "fiduciary standard" requires investment advisers to recommend only investments that are in the best interest of the client.

That can mean the difference between an investment professional offering you a stock or bond mostly because it will earn him a commission rather than because it will help you reach your financial goals.

Loans! Loans! Get your loans!

But brokerage services aren't the only financial products you'll probably hear about from your bank's staff. Banks also are looking to sell mortgages and other credit products to customers who they deem qualified, Schmitt says.

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