Reuters Money

Big banks want your big bucks, but you have other options

Big banks just don’t want to sweat the small stuff.

Despite receiving some $4.7 trillion in taxpayer bailout funds, the largest of them are moving more towards wealthy customers with assets to invest and away from low-margin checking accounts. That doesn’t mean you should invest with them, though.

The banks side of things is that that want well-heeled wealth management or brokerage clients, not people who are writing small checks to pay bills. For instance, Bank of America, which recently announced a $5-a-month debit-card fee, said about two weeks later that it was planning to nearly double the number of “Financial Solutions Advisors” for its mass affluent clients.

The growing array of banking fees — common at most big banks now — are a red herring for bankers’ larger agenda of generating more income from advisory and brokerage accounts, as brokerage accounts have the potential to generate hefty commissions and advisory fees.

I suspect that BoA, which recently fell to the second-largest bank by assets, would rather get more customers into its Merrill Edge account. BoA is offering $100 plus up to 30 commission-free online trades to sign up. Just deposit at least $10,000 in cash or securities in their Merrill cash management account first.

What if you have some serious retirement or discretionary money to invest? Are big banks giving you more bang for your investment buck? As you shop for new investments, keep in mind that big banks may continue to raise fees and charge high commissions.

Here are some key questions to ask your bankers if they want your business:

Data breach victims more likely to be fraud targets: Study

Victims of data breaches are far more likely to become the victims of fraud than other consumers and credit card issuers need to do more to protect their customers, a new study from the firm Javelin Strategy & Research found.

About four percent of consumers are victims of fraud, Javelin said, but if you’ve been a victim of a data breach, that risk rises to 17 percent.

The annual report from Javelin comes on the heels of a flurry of massive data breaches that exposed millions of consumers’ personal information, credit card numbers and other details and punctuates the real risks victims face. The sophistication of hackers has been particularly problematic, the company said.

Breaches of customer data from Sony customers exposed more than 100 million accounts and came following an attack on email marketing giant Epsilon. But it was the far smaller attack on Citigroup in May that really ratcheted up the pressure on banks as lawmakers started pushing hard for a data notification law.

“A new wave of hacker attacks threatens the current security model, resulting in a call to action for issuers to take a strong look at the processes in place for detection and prevention of fraud,” said Philip Blank, Javelin’s managing director of security, risk and fraud.

About $37 billion was lost last year in the U.S. to credit card fraud, Javelin said. New account fraud — when an account is created in someone else’s name after their identity is stolen — was the biggest area of loss at $17 billion.

Even though losses per consumer are often in the thousands, fraud victims are protected from having to pay the fraudulent charges. However, the process of clearing up the charges can be extremely time consuming. Javelin said the mean amount of time for a consumer to resolve someone opening a new account in their name is 49 hours.

Consumers warned about bank fees

Consumers can’t get straight answers from banks about fees that are lurking at every turn, according to a April 12 report by the national advocacy group U.S. PIRG.

A survey of 392 banks and credit unions in 21 states found that fewer than 40 percent provided upon request a document required in the Truth in Savings Act that is supposed give consumers easy access to fee information. That number grew a bit when multiple requests were made. About 45 percent of the banks either provided no information at all or a combination of wrong or incomplete documentation, U.S. PIRG said.

What should be on a bank’s fee schedule include:

• monthly account service fees
• fees to open or close accounts
• fees related to using ATMs
• fees for processing special transactions including stopping payment on a check, bouncing a check or sending processed checks that would otherwise have been held by the bank

U.S. PIRG said the banks often pointed consumers to their websites to get the information. But what the survey found was that while some basic information was available, the required fee schedules were at best difficult to find and quite often buried in a pop-ups filled with legalese.

“Some banks required consumers to take other complex steps before fee schedules even became available on the web,” the report said. “For example, one required the consumer to first read an electronic disclosure disclaimer agreement; one required a consumer to drill-down into the ‘open an account today’ menu before allowing the consumer to generate a fee schedule.”

The group allowed that not every bank was a poor performer. U.S. Bank, SunTrust and Bank of the West were noted for providing “simple easy-to-find online pages with lists of fee schedules for the states where they do business.”

Five reasons to dismember Bank of America

Bank of America should be broken up. It’s the sick man of finance that isn’t going to get better in its present state.

It would be prudent for shareholders, good for taxpayers and even better for the global financial system. As its stands now, it’s too big to succeed, has more financial migraines than California and Illinois combined and needn’t be a candidate for another public bailout. Been there, done that.

As one of the world’s largest banks with the biggest U.S. branch network, brokerage/wealth management division and the top municipal-bond underwriter, it’s a behemoth that’s difficult to manage and a poor value proposition in its present structure.  The bank just posted its second straight quarterly loss, partially due to a $2 billion write down of mortgage follies, which are far from over.

The value of its parts — the commercial bank, retail operations, Merrill Lynch, credit-card unit (disclosure: I have a BoA credit card) — are likely worth more than its whole.

Estimates of the break-up value range from $29 to $53 a share, potentially liberating up to $170 billion in value. It’s been trading under $20 a share for the past year and trails smaller rivals Wells Fargo and JPMorgan Chase, which have been trading at double BoA’s stock price.

One bad decision after another in the last decade didn’t translate to “bigger is better” at BofA. It took more than a trillion dollars from the Federal Reserve and U.S. Treasury to keep it afloat after the 2008 meltdown. With unknown mounting liabilities in mortgages and related securities, it’s in many ways where GM was five years ago. It will need to spin off some units to survive. Here are some other key reasons:

It will continue to be swamped by mortgage security losses. No one quite knows when this will end since the bank will likely be in and out of court over the next decade or so. Of 17 leading jumbo mortgage securities firms, BofA had the worst delinquency rates. The bank will be tied up for some time trying to manage its liability in this area.