Complacency

Complacency. An unfortunate affliction or our default state of being?

I skimmed through yet another email announcing changes to opaque terms and conditions. Attention wandering, I was bored before I had even started reading. But mid-scroll, I stopped and read carefully.

The one feature that had originally caught my attention and won my business was being discontinued.

Instantly transforming the offering from best-in-class to distant also-ran. A classic bait and switch.

The product was a credit card.

Charging no fees for purchases denominated in other currencies.

Levying no fees or interest on cash withdrawals made at overseas automatic teller machines.

Performing foreign currency conversions at the wholesale rate.

In short, it had been a credit card that performed abroad just like the one I used at home.

Until now.

Once, that mix of features had been unique.

Compelling enough to seize my attention and hold it long enough that I subjected myself to all the friction and hassle involved in opening a new financial services product.

Today, none of those features is particularly novel or exciting. Numerous providers offer functionally equivalent competing products. Bank fees and uncompetitive exchange rates relegated to a mere idiot tax in the universal migration toward everything of value eventually becoming free.

I’ll be honest, the last time I paid even the slightest bit of attention to “travel” cards was when I opened this credit card many years ago. The moment I had one, I promptly lost all interest. Financial services products are not exciting, a sporadic and unpleasant necessity like visiting the dentist or paying taxes.

It was filed away with my passports. Dusted off for the occasional long-distance gift purchase, bill payment on my far-flung property empire, or (rarely during covid times) an actual holiday abroad.

The decision about whether to keep or close the credit card was automatic. No longer fit for purpose.

There was a different decision to be made about whether I still needed a travel card at all? Probably.

I sat down to do the research. Where were the best deals? Who offered the best product?

But predictably I started to procrastinate. Researching financial services products is almost as uninteresting as opening them!

Instead, I cracked open my trusting personal finance management software and took a long overdue scroll through the list of financial products I already owned. Bank accounts. Brokerage accounts. Credit cards. Flexible lines of credit. Inflexible fixed-term mortgages. Insurance, in a multitude of flavours.

How many were still best-in-class?

How many were still fit for purpose?

How many were still required at all?

I had long used a rewards credit card offered by a large retailer. In the beginning, the payout ratio was decent. A year’s worth of household spending had comfortably yielded store credit sufficient to pay for Christmas dinner with all the trimmings and feed the Lego addiction that afflicts my children.

Today, the payout ratio was little more than rounding error. Better than nothing, but not by much.

These days it rarely gets exercised, superseded by a cashback debit card with a much higher payout.

Financial service providers rely on apathy for customer retention because it works. I had been disgruntled by the regular payout ratio reductions, but not enough to do more than complain about it. The short-term friction and hassle involved in change seemingly outweighing the potential long-term benefits. Complacency wins again!

So now I had two credit cards that I either didn’t need or was unhappy with the features offered.

Thinking about that cashback debit card caused me to reflect on my bank accounts.

Each had a specific purpose in my personal finance setup when originally opened. The system had redundancy baked in, much like clothing carried while backpacking: one to wash and one to wear.

Redundancy provides options and resiliency when life happens. An account gets frozen. A card stopped. Identify compromised. A provider goes broke.

Never concentrate risk in just one account. One card. One provider. Single points of failure all.

My primary current account I have held since I first arrived in the United Kingdom long ago. It wasn’t chosen because the account was fancy, nor was the provider renowned for brilliant service.

Quite the opposite in fact, they were the only institution with sufficiently lax know-your-customer procedures to offer banking services to someone fresh off the plane. A class of customers who in the moment are homeless, unemployed, and don’t have a domestic credit history.

The account was fee-free. Offering the essentials back then: a cheque book and debit card. Later, internet banking would join the mix.

I haven’t kept the account out of any particular sense of loyalty or gratitude. Current accounts are a commodity service, with little more than branding to distinguish between the offerings. Over the years it has remained fee-free and good enough, providing everything remained on script. That becomes less true on the rare occasions I have needed to venture into one of the diminishing number of bank branches to speak to one of the diminishing number of humans about a problem that is important to me but they have little interest in helping resolve.

That cashback debit card is linked to a different current account, offered by a different provider. A time-bound promotion. Almost certainly a loss leader, aimed at helping a large multinational muscle into a new (to them) domestic market. Also fee-free.

Yet looking through my list of financial products I had a couple of others that could and probably should be closed. Opened for the purpose of spreading money across banking licenses on those rare occasions I was sitting on a mountain of cash in the run-up to property purchases or paying tax bills. Typically selected based on being fee-free and then whatever promotional inducement the provider was offering on the day. Switching bonuses. Vouchers. Event tickets or electronic goods. You know the drill.

Mortgages were another area that warranted some attention.

The largest recently refinanced, shifted to a long term fixed-rate interest-only offering that sought to preserve the historically low rate conditions for a while longer yet.

A couple of others are competitive today, but will require action before long. A quarter percent here. Half a percent there. Before long those interest rate rises add up to real money for anyone who has complacently let themselves drift onto a variable rate.

ISAs and taxable brokerage accounts took a bit more effort. The first groups of accounts to incur fees.

Running the numbers to work out whether a portfolio had tripped the thresholds where fixed fees were more beneficial than holdings based alternatives.

Doing the sums to reassess if the fee basis still made sense, as my investments inexorably drifted towards liquid ETFs and away from less liquid open-ended investment company equivalents. Checking the small print to observe how much I was being screwed by on foreign currency conversions when investing in international markets, a cost often more material than the widely compared annual fees and trading commissions.

Then stopping to consider my overall investment allocations to assess whether combining or splitting brokerage accounts might not achieve a more cost-effective outcome.

Finally, looking at pension accounts before shaking my head and deciding it was all too hard. Decades-old employer pensions that remained trapped, ineligible or unable to be consolidated or transferred to less expensive and better-performing alternatives. I went as far as confirming I hadn’t been automatically enrolled in any more insurance products within those pension wrappers. It is scandalous that this occurs at all. Disappointing that it still occurs as often.

After half an hour I lost the will to live. My interest waned. My enthusiasm vanished.

I had consolidated a couple of accounts.

Closed a couple more.

Earmarked my credit cards for replacement, subject to doing a bit more research once the high tide of my complacency ebbs once more.

My private life insurance had gotten expensive. Travel insurance had expired.

A mortgage needed refinancing.

This exercise produced a reasonable length “to do” list. A financial spring clean that was both late and long overdue.

Yet as I chipped away at it, my finances got simpler. My recurring costs reduced. Easier than renovating an investment property. An outcome more certain than achieving stock-picking outperformance.

A trick that can only be performed once in a while to achieve such tangible results. But let’s be honest, complacency wins out far more often than many of us will be comfortable admitting. Our default state of being.

Which is fine, as if past performance is any guide, it will be some time before I am jolted into going around this loop again!

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