Financial institutions needed public funds to survive. Now, to pay for their sinful ways, they punish the communities they serve with excessive fees and deceptive practices. The ink on the government check isn't dry and large bonuses are planned for the folks that brought us the current crisis.
I prefer an open, free, environment for business. But considering the seriousness of the financial mess and the continued bad behavior, massive regulation of the financial industry is nearly certain.
We will hear crying and lobbying to let banks and insurance companies manage themselves, but trillion in bailout money will overrule the whining. Some regulation is certain no matter what. And there should be. If you and I are asked to foot the bill for poor business practices, said practices will be made illegal.
What irritates me the most is banks and insurance companies beating on their good client to pay for their ineptitude.
The financial services industry will be significantly different in five years. Banks and insurance companies are based on trust. Once trust is destroyed, it is hard to regain.
The real question is: What can you do to protect yourself?
First, pay down debt. The banks abuse borrowers more than any other class. Interest rate changes can destroy a family's finances. Small banks and credit unions offer services for less in many areas. So, consider giving the local guy business.
Second, shop your insurance, especially if your rate jumps. Your insurance agent may have ideas to keep your insurance bill reasonable. It is better than losing you as a client.
Third, dump the credit cards and use debit cards sparingly. Credit card companies lead the list in spearing clients. Plastic also has fees that the merchant must pass along to you in higher prices to stay in business. This applies to debit cards as well.
Fourth, consider low cost mutual funds. If you need an investment advisor, you can avoid fees with a few simple tricks. The biggest fee is the sales charge on load mutual funds. You can avoid the up-front load, or high fee, back-end loaded-funds, by depositing your funds into the money market and then moving to the fund of choice. Investment reps hate this because it avoids a big commission for them. They still get paid each quarter to manage your funds so they will not go broke. The investment rep works to keep you happy, rather than sell and run.
Once your money is deposited with a fund family, you can move between funds fee free. Since there is no sales fee to deposit in the money market, you can switch to other funds in the family without charge.
Remember, you are the first line of defense in your financial life. Take the responsibility seriously. No one has your interest more at heart than you. Let the good financial services firms help you by taking a proactive role in your finances.