In 2007, with the US sub-prime mortgage market bubbling away, investors in New Zealand got nervous and started pulling their money out of a number of second-tier investment companies. This started a snowball effect and the companies went bust, taking with them billions of dollars in ordinary people’s savings.
And I guess it wasn’t just here, as the media illustrates with daily news stories about the global credit crisis, stimulus packages, and multi-billion dollar/pound payouts to keep companies afloat. I still have my miniscule nest egg, incubating in my high street bank. Getting a lower interest rate but at the end of the day, I still have my money.
And maybe that’s it. Maybe we got too greedy. So now where do we put our hard-earned savings? There are still plenty of financial institutions ready to take your money. But will they ever give it back?
Interest rates have plummeted in the last year, led by central agencies (the Reserve Bank in NZ, the UK’s Bank of England) persistently dropping the base lending rate. The UK offers a tiny percentage on savings accounts – seldom more than 2% on anything less than a year. In NZ we are feeling aggrieved at earning less than 4%, which is still well above the UK rate but is half of rates of a year ago.
One thing we can go on is reputation, built on trust in a brand. I’m sure everyone is aware of the power of brand – Coca Cola, Apple, Gucci, Chanel. We buy or use these products because we expect them to be of superior quality, or just have that cool factor. We trust that the manufacturer will apply excellent quality control. I find this with the supermarkets in my area. I shop at the cheap one to save money, but I’ll make the extra trip to the more expensive one for fruit and vegetables, because I’ve so often found the cheap one has poor quality. And the expensive one has consistently good quality, and on the odd occasion when I’ve bought a ‘lemon’ (haha), their customer service has treated me well.
The Readers Digest 9th annual survey of trusted brands this year named the favourite companies in a whole lot of areas. In the UK, many of the companies I remember from my days living there turned up. I don’t want to advertise, but I am interested in the finance sector, so I wasn’t surprised to see Lloyds/TSB picked as the most trusted bank. Interestingly, knocking the Halifax off its perch as most trusted mortgage lender, Nationwide Building Society is a newcomer this year. Building societies are not so common in NZ – banks do most (but not all) of the mortgage lending. Nationwide has, of course, recently taken over part of the Dunfermline Building Society, with a little incentive from the Government.
But trust can be misplaced, and consumers are definitely shopping around. My advice? Don’t get greedy, get opinions from people you trust, and do your homework.