← WSJ Your Money Briefing
WSJ Your Money Briefing
Relationship Pricing: Banks Want to Be Your Everything
00:09:12
Wall Street Journal reporter Katy McLaughlin explains how banks increasingly offer attractive, relationship pricing in the hopes of being the banker, mortgage lender and financial adviser to a customer.
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- [00:00]
A
This podcast is brought to you by relioQuest. Cybercriminals are constantly attacking. They want your data. They want your identity. They want your innovation. RelioQuest fortifies your business with agentic defense AI that detects, contains and eliminates cyber threats in minutes. It helps your security team move faster at the work that matters most to protect the business now and delivers insights to help them predict what's next. ReliaQuest agentic defense for the enterprise. Learn more at reliaquest.com that's R E L I A Q U E-S-T.com.
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B
Here's your Money briefing. I'm J.R. whalen at the Wall Street Journal in New York. Mortgage rates are low, but banks can be cajoled into giving you a sweetheart deal with a rate even lower. We'll chat with a Journal real estate reporter with details in a moment. First, some money and market news you should know. Colorado is known for skiing as well as leisurely activities that occasionally go up in smoke. But be sure to put home price stability on that list. Specifically, Boulder, Colorado is the nation's leader in homes that are least likely to see a significant price drop. In fact, A study from SmartAsset puts the odds of a 5% price drop at 0%, and properties in Boulder have increased an average of 268% in price since 1994. Denver and Fort Collins, Colorado, also made the top five, and San Jose, California and San Francisco entered the home price stability top 10 this year. And Amtrak says it will begin running limited nonstop Acela trains between Washington and New York in September. The nonstop route is a test of sorts to offer more frequent service on its business class line when a new fleet of trains arrives in two years. Now, starting in September 23, the nonstop service will run a single round trip on weekdays, leaving New York at 6:35am then departing Washington at 4:30pm New York to D.C. is Amtrak's busiest and most profitable route, and the railroad says that skipping stops between the two stations will save about 15 minutes and puts the travel time at about two and a half hours. Amtrak has also been doing track improvements along the route, essentially restoring what was a four track wide rail line so that its trains can pass lower commuter and regional trains. Should a bank be your friend? Well, more and more banks are cozying up to customers, offering them attractive rates if they keep specific sums of cash in an account. And Wall Street Journal reporter Katie McLaughlin is on the line with us with some details. So Katie, you know we're not just talking about rates on deposits that Banks offer in what's known as relationship pricing, some banks will shave a fraction of a percentage point off the mortgage rate.
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C
That's right, that's the offer. We will do better for you on your mortgage if you get into business with us either by depositing funds with us or letting us even better, letting us manage your investments.
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B
And in terms of if you were to hold cash for the bank, we're talking about in the neighborhood of upwards of a million dollars, is that right?
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C
No, the banks have, they have kind of a sliding scale and some of them are fairly transparent about what they offer. Citibank even publishes a schedule. If you put, I think it even starts at like a dollar. Up to this amount they'll waive one of the $250 fees. If you go all the way up to a million dollars or over a million dollars, it can become half a point or three, eight of a point off of a mortgage rate. So it really, it really depends. But yeah, it's a sweeter deal as you get, as you do more business with the bank and give them more money to either deposit or manage.
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B
And this makes sense for the banks. They make a good deal of interest and make a good deal of money off of cash customers hold in accounts or they make a good amount of money in managing the mortgages where they really make money.
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C
And what they really like is to, to manage your investments, to be your wealth advisor. So they really like that. They want wealthy customers to be banking with them and they want to manage their money for them because there's lots of fees and transaction fees and percentage fees, you know, depending on how they structure their wealth management compensation to be made off of somebody who has a lot of money under management. Also if they manage it properly, that money is growing. So they, you know, they really like that and they really want to encourage these relationships.
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B
Now the idea of pitching these relationships and pitching these sweeter deals, is this something new or is just something that, that's more pronounced now?
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C
It's not totally new but it's more pronounced and more banks care about it. More banks really like those jumbo loan customers and they really need to compete in order to manage money. Don't forget you can, there's lots of robo managers, there's lots of ways you can self manage your money. Now they're really easy and there's lots of competition. So they, so they have to compete and they, you know, that's part of what they're, that's why they're sweetening the pot on Mortgages.
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B
But for customers, they really need to do some homework and make sure it's worth it and if fees will outweigh the attractive rates that are being offered.
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C
Yeah, these are very complex questions. And so it was interesting as I talked to lots of different financial advisors, what they thought of it. I talked to financial advisors who had their customers make deposits. They had cash that they were holding anyway. So if they just moved it, like, I talked to an advisor who had clients who moved it into Chase accounts, and they got this fabulous deal on the mortgage, and they had no obligation to keep that money in those accounts. Once the mortgage closed a couple months later, they were perfectly free to take that money out. So let's say you're buying an expensive property. You know, you're going to need a lot of money to do renovations on it. You know, you could really make this work for you. You could, you could hold your money in accounts at a bank that's going to give you a great offer on a mortgage, and then you can just take your money out when you want it. So that worked beautifully for those clients. It can be a lot more complicated than that, though, and it can be very difficult to say, how much is it really going to cost you to, for example, move a portfolio from one place to another? There's just lots of stuff that's not transparent. First of all, when you move investment accounts from one place to another, you may need to change the custodian. You know, your custodian might be Charles Schwab, and let's say you're going to move it somewhere else. Well, the custodian may charge fees you need to set up with this bank that wants to do the managing for you. Who's going to cover that? There are certain investments that you may be in that have surrender fees or that do not easily move from one place to another. So really, the advice that came from the private financial advisors I talked to is, you know, if, if somebody else wants to manage your money, let them do some work for you before they, they get those funds. Let them figure out exactly what's. What is it going to take and exactly how much is it going to cost? And another really important thing, and this is important in relationship pricing, and this is important whenever you are going to work with a wealth advisor, the major question hey, what does it cost to have you manage my money? What do you charge? How do you make money? Where are the fees? Are you always going to be advising me under the fiduciary standard where all the advice I'm getting from you is to my financial benefit, not to yours. That stuff all has to be worked out. So before you blithely go and grab the better mortgage rate, and we all like to, you know, play this game in a smart way and get the best rates we can, before you go and grab, you really need to sit down and run all these numbers.
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B
And that's a really good point you make in your story in the Wall Street Journal is that when it comes to fees and rates and costs, the customer should not be afraid to negotiate.
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C
Some banks have told me that there is flexibility. Others have told me, no, no, we have our schedule and we stick, stick to it. I suspect that everything in life is somewhat negotiable. And you should not be shy. You know, these are businesses, they're banking in order to make money and you as a customer should, should get the best deal possible from them. So I did talk to a consumer who really sounds very savvy and how he spoke to Wells Fargo. He wanted to get a really great rate on a seven ARM loan. And although his own bank had offered him what seemed like an attractive rate, he felt he could do better. He thought Wells Fargo would be in a mood to negotiate because Wells Fargo has had problems that led to really bad publicity on its retail banking side. He thought, well, they're going to want to win some customer, you know, get back into the good graces of customers. And he thought, if I offer to put a million dollar portfolio I hold somewhere else with them, they probably will be interested in making me a really great offer. And he felt that that's what he got from them. So it was an example of how somebody can recognize the leverage that they have in order to get the very best deal that might be available.
- [09:31]
B
All right, and check out Katie McLaughlin's full story in the Wall Street Journal. She's good enough to come on our show today. Katie, thanks for coming on the line.
- [09:38]
C
It's been my pleasure. Thank you so much.
- [09:39]
B
And that's your money briefing. I'm JR Whalen in New York. Thank you for the Wall Street Journal.
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A
This podcast is brought to you by reliaQuest. Cybercriminals are constantly attacking. They want your data, they want your identity, they want your innovation. ReliaQuest fortifies your business with agentic defense AI that detects, contains and eliminates cyber threats in minutes. It helps your security team move faster at the work that matters most to protect the business now and delivers insights to help them predict what's next. ReliaQuest agentic defense for the enterprise. Learn more at reliaquest.com that's R E L I A Q U E-S-T dot com.