Consumers have a say

Tallying the votes for financial products will be influenced heavily by public opinion at this year’s Smart Investor Awards

BY John Phillips

May 1, 2009

In a ‘handing the power back to the people’ strategy, the prestigious 2009 Smart Investor Award winners will be determined with help from the Australian public.

Much controversy often surrounds the judging process of financial product awards, with continuous debate around how the weightings should be allocated for different product attributes.

InfoChoice, a finance product comparison business, will judge the Smart Investor Awards this year, for the fourth year in a row, ditching the actuaries and going straight to the public for feedback on what is most important for their lending and deposit products.

“The feedback we receive will not be the definitive judge of the awards, but will supply us with some very valuable insight into the consumer’s psyche,” says Shaun Cornelius, chief executive officer of InfoChoice.
“We will combine these consumer insights with our own industry knowledge as the basis for our scoring methodology.”

The vehicle used to collect the results is the InfoChoice Consumer Survey, accessible from the InfoChoice website, and covers home loans, credit cards, personal loans, transaction accounts and savings accounts.

Promotional rates perform poorly
Promotional rates on savings accounts appear to have very little importance, and it’s all about the base rate, preliminary results to the survey show.

Respondents were asked to allocate 100 points to rank how important a rate feature was to their savings account, with the base rate receiving 51 per cent of allocated points, 18 per cent went to interest allocated frequency, 14 per cent to interest payment frequency and 10 per cent to bonus or conditional rates, (such as no withdrawals).

Only six per cent of points were allocated to introductory/promotional rates, which forms a cornerstone in some financial institutions’ marketing campaigns.

“This was quite surprising, considering the significant marketing efforts based on promotional savings rates,” says Cornelius.

“Consumers may well be jaded by past experiences where promotional rates have not been as attractive in reality as initially advertised, based on the related terms and conditions attached.

“Recently, we have noticed a definite improvement in the disclosure of promotional rates and related conditions by institutions in their advertising; hopefully it is not a case of too little, too late.”

The interest rate paid on a savings account, as expected, is the most important factor for respondents, representing half of all point allocations when asked to rank the importance of rates, fees and features.
Fees were second (with 37 per cent of the points), with respondents considering most products to be relatively similar, allocating just 13 per cent to features.

The most popular savings accounts right now are online savings products, which 52 per cent of respondents said is their main savings product, with the accounts generally not attracting fees.

Fees generally become relevant where some banks make it a condition that customers open a linked transaction account with them, which have monthly fees attached.

Savings winners
Mutuals proved to be very popular in the savings account category, making up 14 per cent of respondents’ main savings accounts. Of this, credit unions were the dominant contributor with 12 per cent, and building societies two per cent.

The Commonwealth Bank holds 15 per cent of savings accounts from the surveyed set, boosted to 22 per cent when BankWest customers are added, and outpacing a merged St. George and Westpac entity with 14 per cent.
ANZ holds 10 per cent, with NAB nine per cent.

Suncorp holds three per cent of accounts, just pipping other regional lenders Bendigo and Bank of Queensland, which hold two per cent.

John Phillips is an analyst at financial services research company CoreData