In the previous sections, we wrote in detail about how to approach the issue of savings formation and how to create an investment portfolio. We talked about liquid and longer-term capital, and we touched on the relationship between investments and risk (more on this later).
In today's blog, we'll help you make the best possible decision when choosing a financial service provider and how to optimize your fees.
According to the World Bank's database, worldwide account ownership has reached 76 percent of the global population - and 71 percent of people in developing countries. 10 years ago, this figure was 51%, so there has been a big improvement in recent times, with virtually anyone in the developed world now is able to use banking services.
But which ones? Presumably all our readers have one or more banking relationships or use alternative financial services online. I myself use several services and from time to time I check which ones I use for what purpose and whether I really need a particular service or not.
We encourage everyone to review their banking services and their costs every 1-2 years as their financial situation changes. As our life situations change, our priorities will change, too. A retail account opened a few years ago may no longer provide the most appropriate services and we may find ourselves looking for additional products beyond a simple bank account. The most typical changes are home ownership (and the associated mortgage application), the use of investment services, more frequent currency conversions for travel or simple diversification, and the use of debit and credit cards.
Which financial services are important to you?
Bank Account
Mortgage
Personal Loan
Equity Investments
You can vote for more than one answer.
As a basic truth, our usual house bank certainly does not offer the best services for all our needs, nor the best prices. The right thing to do is to choose the most appropriate separate partner for the services you need, rather than the more convenient but much more expensive 'one-stop-shop' solution and to optimize your fees with using several providers.
The first step is to make a list of what services and financial products you need now, in line with your own life situation. I will share with you my own example and my own thought process: I am a dad of 2 boys, living in Zurich/Switzerland, and my children are young adults partially in need of my financial help. One of them is working full-time, the other is in his last year of a high school. I have no mortgage obligations, in return I pay off the rent of my rented flat near Zurich every month. My income and salaries are deposited in a Swiss bank in Swiss Franc, but it is important for me to be able to buy other currencies at the best possible rates: EUR, USD, HUF are my most used currencies. I also pay attention to the cost of managing my securities portfolio and transaction fees.
It is essential to have a main bank account or a similar online solution. I have an account with one of the big local Swiss banks (fortunately not the one with C all over in the news now). They provide a very user friendly eBanking service, I receive my various bills electronically (rent, health insurance, home insurance, compulsory liability insurance, telecom bills, water, electricity and others). My Swiss franc account is free of charge, I can transfer Swiss francs with no fees and invest the third pillar of my pension fund through the bank. But let's also talk about the downside: they charge a lot for securities transactions, it is expensive to hold securities in custody, foreign currency account management is not cheap either, and foreign currency conversion is very expensive by comparison.
Therefore, I have a separate online trading account for securities transactions.
I looked at the range and pricing of available providers and chose based on the following criteria. The account should not be subject to a custody fee, the fees for securities transactions (buy/sell) should be low and there should be no hidden costs. In addition, the provider should be secure, stable and easy to access, and allow for other trading options and products. So I use a dedicated online provider for securities transactions and other investment management.
Given that most of my income is in CHF, I often need to convert it into other currencies. Due to the high foreign exchange transaction costs of my main bank, I use one of the popular and simple online service provider's apps for transfers and spending in other currencies. This saves me a lot on transfer and conversion costs, and I can react quickly to exchange rate movements. In future blogs we will compare different banks, alternative online providers and trading portals to quantify the differences.
My credit card provider is also a separate financial institution.
The company's exceptional IT-security, wide range of online services, and diverse insurance options were major factors that influenced my decision. However, since foreign currency transactions can be costly when done with currencies other than Swiss francs, I prefer to use the cards linked to my online payment account, which I mentioned in the previous paragraph, for such payments. Additionally, I utilize a separate crypto wallet, various online payment solutions such as Twint, PayPal, and Wire, as well as virtual cards. I stay updated with the rapidly evolving market and its new solutions.
I have described my own situation in a bit more detail to give you a sense of how important it is to look at your own situation carefully to get the financial services you need from the right providers.
Different FinTech providers are evolving much faster than the slow development of banks and are emerging almost daily, offering exciting, useful and cost-effective solutions, competing with the banks that seemed to be the only ones a few years ago.
As a final note to our current blog on choosing a financial institution, we encourage you to review your own financial needs and make a list of the most important services you cannot (or you do not want to) live without. Depending on where you live, consider which online and traditional providers might be able to offer you these services. Take the time to compare prices and services so you can find the right mix of providers for you. This will not only save you a considerable amount of money, it will also make your finances more convenient.
Your Fortune Blog 006
Disclaimer: Important Information about Your Fortune Blog
Please note that the information provided on this website about investments is for general informational purposes only. We do not intend to sell any product or recommend any particular financial institution or investment product. The content provided is not intended to constitute investment advice or to offer any investment products or services whatsoever. It is important to note that investing involves risk, and the reader must take full responsibility for their own investment decisions. We strongly advise seeking professional financial advice before making any investment decisions, particularly if you are subject to cross-border restrictions or tax liabilities.
Please be aware that the information we provide may not be suitable for individuals subject to cross-border restrictions or tax liabilities in their country of residence or jurisdiction. It is your responsibility to understand and comply with any applicable laws and regulations, and we do not accept any liability for any consequences resulting from non-compliance.
The views expressed in this blog are solely those of the authors and do not necessarily reflect the views of any financial institution, organization, or individual. We make no representations or warranties of any kind, express or implied, about the completeness, accuracy, reliability, suitability or availability with respect to the content provided in this blog. Any reliance you place on such information is therefore strictly at your own risk. We shall not be held liable for any loss or damage whatsoever arising from the use of this educational blog, including without limitation any direct, indirect, incidental, consequential, or punitive damages.