Meeting with my bank account manager

23.4.2011 par Gilbert Issard.

I have had an appointment with my account manager at the bank. No need to give any name, since all banks have a similar approach to customers like me who are neither very wealthy nor poor.

I had opened a savings account online a few days ago, since the rate was interesting, and I wanted a liquid investment. I might need to get the cash back rather soon. So my choice had been to open a special savings account bearing 2% before tax. Not bad, special rates, rates could go up in the future, I can take my money back at any time if I needed, etc..

Of course, my bank account is monitored by the salesman, who called me and asked for an appointment. I agreed, willing to know what his investment advices might be.

The guy is young, wearing a dark suit as any banker is supposed to do. He wenty straight to the point and advised to pull the money out of the savings account and buy a “contrat d’assurance vie” (a life insurance contract), a very fashionable investment in France at the moment.

If I buy such a contract my money would be transfered to an insurance company which would have it invested for 8 years. The interest of such an investment lies in the reduced tax rate  if I don’t take my money back before 8 years. I could also invest in mutual funds. etc.

I find it quite amusing that banks, currently struggling, or at least being focused on their liquidity and on how to make sure its level is adequate, recommend to a client like me to move the money from a deposit account and transfer it to an insurance company. If I follow my account manager’s advice, this would result in less liquidity for the bank. Of course, the salesman will then get fees for saling a product.

Is it better to have liquidity or have fees? is it better to maximise the short term revenues or preserve the balance sheet ?

Are banks truly consistent ? not really sure. ALM and treasury people are focused on how to get liquidity at the cheapest price and commercial businesses at maximizing their short term revenues.

The question ends in ALM and the Fund Transfer Price that is made on deposits. Perhaps, the ALM should price  liquidity internally with the fee earned on mutual funds and insurance investments in mind.

After all, the only question is: how much is liquidity worth ?

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