Why local is best for savings: the story of small lenders

Jul 10, 2013   //   by Keith McDonald   //   Banking and Savings Accounts, Guest Post  //  Comments Off on Why local is best for savings: the story of small lenders

Cambridge Building Society

Chris Taylor, representing the Cambridge Building Society, shares a few ideas about why smaller banks and building societies might be preferential to larger high-street competitors.

Besides friends and family, money is just about the most important thing in most people’s lives. It’s something that affects the kinds of lifestyle we lead, ruling over the choices we’re able to make, and – while I shouldn’t say this – to a certain extent, how happy we are.

Considering this, it makes sense that we should be in complete control of our money; our savings and future – and that of our family’s future.

While there might be thousands of institutions out there whose job it is to be responsible and measured when it comes to looking after our savings, arguably there’s a case to say that saving with a local firm is best.

Why is this, you ask? Well, there are a handful of reasons.

Smaller lenders have smaller interests

There’s a debate to be had that local savings providers look out for their customers’ interests more than larger providers. When you take things like customer service and customer satisfaction into consideration, you might find that national branches excel where the bigger, more established international names are known to flounder.

Often this is because many home-grown savings and building societies are held directly accountable to their customers, or simply because the bank prides itself on outstanding service rather than servicing shareholders or investors.

Small lenders’ interests are focussed on listening to feedback and implementing changes for the benefit of the user and no one else.

An example of this can be found in the products offered to savers at a time when a government lending scheme has driven down returns. The Coventry Building Society has bravely fronted the market for most of the year, offering rates above 2.5% while major banks have embarked on a downhill race to cut rates on bonds, savings accounts and ISAs.

Yet, this accountability to customers extends to the responsible handling of savers’ deposits, avoiding excessive risk-taking with questionable investments and lending practices.

The Co-operative Bank (often thought of as a mutual) is currently risking a revolt after overburdening itself with bad commercial loans following its merger with Britannia in 2009. To recover its position, it is asking investors to absorb a huge loss on their funds, and its reputation as a local or ‘alternative’ lender will undoubtedly take a considerable hit as a result. But even then, it’s hardly the worst offender for capital ‘shortfalls’.

Co-operative Bank

More control

This issue of control and financial responsibility does – in some cases – extend to deposit holders having a say in the way that institution is run.

At the Cambridge Building Society for example, savers are entitled to elect the Boards of Directors for the organisation at the Annual General Meeting. According to the members’ spring magazine Your Cambridge, this board is up front about how it is put together too:

The Board of Directors are accountable for the Society’s overall performance and are fully committed to looking after your interests. Even though the number of candidates matches the number of Board vacancies to be filled, an election still takes place.

‘Supporting Your Board’, Your Cambridge (Spring 2013), page 3.

Savers are also privy to accessing inside information about several intricate documents that detail how the board and the organisation is performing overall. Surely this level of access and transparency is something not on a par with what the closest, big lenders can offer?

Similarly, customers can help decide how local fundraising attempts are spent by their local branches, ensuring that profits come back into the community – and in some cases, they might even benefit from the success of the savings organisation, in the form of dividends – which is common to some building society/mutual financial organisations.

Flexiblity and communication

Flexibility can mean many things when it comes to banking and personal savings. However, in this example, I’ll be treating flexibility in the context of being able to get in touch with and access your bank when you need to.

The geographical placement of your bank is one big bonus when you look at certain smaller lenders over bigger ones – or especially online banks.

Cambridge LocalTo have a branch geographically located just down the road has its obvious benefits (in the case of highly-localised city-based branches), such as being able to chat in person about your account, the availability of local branch managers with autonomy over decision-making, or by being able to complete transactions face-to-face.

This is a far cry away from trying to get in touch with an online provider whom might only offer telephone or email services – or if you’re lucky – live chat.

A bricks and mortar branch on the other hand will likely offer you all the perks of an online bank – including online savings services – in addition to being open for you to pop in.

You’re more likely too to feel like an individual at these kinds of building societies and savings providers, thanks to more personalised and regular updates direct from the institution; be this by email, text or letter.

In summary

While many people side with the big players of the banking sector, it’s worth considering the perks that come along with the smaller lenders. Certainly the personal touch that smaller savings providers offer is something that we’d all appreciate in these days of impersonal, mass-market electronic communication.

To be cared about – and for our savings to be looked after responsibly and accountably – is also something we’re sure to find more desirable considering the recent banking crises.

About the Author: Chris Taylor is a brand journalist who contributes this piece on behalf of Cambridge Building Society. The Cambridge, considered a small lender by big-bank comparison, has been providing funding for people wanting to buy their own home for over 160 years and prides itself on offering uniquely personal customer service.

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