More Bank for Your Buck

The overhaul of banking laws presents new opportunities and a series of challenges. Here's how these changes may affect you.

Brooke, a 22-year-old student at the College of Mount Joseph in Cincinnati-will face their first financial frontier. She wants her children to work with a specialist to get, for example, the most attractive mortgage rate to buy their first homes or to buy sizzling stock so that their hard-earned money will grow.

“You have kids today coming out of school making $45,000 to $50,000 a year and they need to look at things like how to best invest their money [such as through] something that offers tax shelters, and ways to enhance their incomes,” says Bouldin-Carter. “With the new law, it seems that these companies will have a lot of people who will be able to tell you a lot of stuff about everything,” she says. “But as a consumer, I want one person who spends all day just focusing on one thing to clearly and specifically explain what’s best for me.”

Some industry insiders argue that consumers like Bouldin-Carter will benefit from the fact that the new law gives them greater choices. Consumers want the best rates, easy access and convenience. One-stop shopping provides all of those options, says Judith Knight, director of the Center for Community Development at the American Bankers Association in Washington, D.C., the industry’s largest trade group. She adds that consumers still have the option to buy banking,
insurance and investment services separately and from various sources.

Proponents of the law also claim that merging banks, insurance companies and investment firms will mean lower-priced services, a greater choice of products and more convenience because of their vast operations. This could help consumers decrease their outlay by $15 billion annually, according to the U.S. Department of the Treasury.

The law also could make the market more competitive, which would be good for consumers, says Jo Ann S. Barefoot, a managing director at KPMG Barefoot
Marrinan, a Columbus, Ohio-based national research firm that specializes in fair-lending issues. She believes increased competition and growing efficiency will spur institutions to reach all markets, even small and specialized niches.

Industry experts say that Americans spend an estimated $350 billion a year on fees and commissions for banking, insurance and investment services and products. Financial institutions will likely pursue mergers and acquisitions to go after a bigger share of this money.

On the other hand, Mel Gravely, co-founder of Infrastructure Services Inc., a 30-person engineering firm in Akron, Ohio, is not enthusiastic about the new law. He says it will result in fewer choices for consumers, less opportunity for consumer issues to be heard and less responsiveness to consumers with unique needs. The new law comes at a time when mergers among banks, insurance companies and brokerages are already occurring at a considerable pace. Gravely also sees customer fees rising as a result of industry consolidation, noting that banks already charge for ATM transactions and for savings account balances that fall below minimums, such as $500.

Ed Mierswinski, a consumer advocate with the U.S. Public Interest Research Group in Washington, D.C., agrees. He says that one-stop financial supermarkets will

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