If you go down to the bank today, you're sure of a big surprise...
Today I am thrilled to interrupt our regular programming and bring you a guest post by Good and Bad Japan, one of my favourite writers about Japan (and I'm not just saying that because he is a member of the forum and occasionally writes things like this for RetireJapan). His website and books were wonderful (sadly out of print now) but hopefully there'll be new ones soon :)
Today's post rings very true to me, because I have had the same experience myself and also seen it with my mother in law. Take it away, GABJ!
Ten years ago, long before I had heard of RetireJapan, a couple of nice ladies from the bank came to my house to persuade my wife and me to give them some money. They said if we gave them, say, 2,000,000 yen they would invest this for us and guarantee us a return of 2,200,000 yen should the fund reach that amount at any time in the next ten years. If it was worth more than that upon maturity we would get whatever it was worth.
That exciting date came at the beginning of this month. We got 2,209,000 yen. Not a spectacular return by any means but more than it would have been worth had we done nothing.
Not more than three hours after the amount had been deposited into my wife's account, the telephone rang and a representative of the bank was inviting us to visit and discuss what to do with all this extra cash. It seemed they would rather like us to give it back to them.
‘We’re keeping it,’ was my initial response to my wife, for by now I had discovered RetireJapan and knew about NISA and iDeco and ETFs and index funds and all sorts of things which appeared to be better than anything the bank had offered. My wife, however, agreed to go to the bank for a chat and I insisted I go with her and be the annoying fellow who thought he knew better than the professional.
Well, I'd assumed it would be a professional. Those assumptions were challenged early when her opening gambit was that I had a tall nose. She then complimented my wife on her previous investment having gained 10% in 10 years. These were ten years of mostly very good stock market gains but the bank’s representative exhaled as though that was a spectacular return. I pouted and scowled in an attempt to show that I was no idiot on these matters. I may write my address in the handwriting of a ten-year-old and be incapable of doing a non-splodgy hanko, but I know what ETF stands for and even if I’m not sure what the the words actually mean I expect that by saying them out loud and with confidence I will be treated with some sort of respect. Or at the very least that the bank person might understand that I know 10% over ten years isn’t outstanding.
My wife, though, is somewhat old-school Japanese in her thinking. Investments are gambling and any sort of return is good and praiseworthy. As the bank representative frothed and congratulated us, I bit my tongue and stared at the items on the table in the the corner of the room. There was clingfilm, detergent, tissues and some kabikiller mold spray. I wondered which one they would give us when we left and calculated forlornly that adding any of them to the 2,209,000 yen wouldn’t make it a much more positive return. A guaranteed crispy salad wasn’t a huge additional benefit to ten percent over ten years.
My wife saw my attention wandering and gave a brief explanation in English at what had been said so far, The bank representative collapsed in a fit of giggles at how kakoii my wife was for being able to switch languages like that. ‘Which language do you speak at home?’ she asked. ‘Both,’ we said, and then in our standard, many-times rehearsed retort explained that when we fight we both tend to use our own language.
Apparently that is cool, too.
The woman then started talking about an investment vehicle in U.S. dollars which would guarantee a 30% return (exchange rates permitting) after ten years and she seemed quite animated by the U.S. angle. She asked if we go back to the U.S. often. It was a little awkward to say I had only ever been once, on a family holiday when I was eleven. I mean, l loved Disneyland, but I wasn't sure that was a reason to stake my financial future and retirement plans in America. My wife politely explained I was from Britain.
'Oh, you'll be more interested in euros then,’ the woman said. ‘Well, other than yen, pounds, really,’ said my wife.
The woman looked confused. ‘Britain doesn't use the euro,’ said my wife. ‘Oh yes,’ said the woman. ‘Because they are leaving the EU.’
It was at that moment that I decided we were not giving this person any money. I switched to English and said to my wife in rapid, Scottish-accented words that we definitely shouldn't sign up for anything today. The banks representative began giggling again and I was worried she had understood. Those fears quickly evaporated as she let out a breathy, ‘Kakoii!’
She introduced some funds that might benefit us but would almost certainly benefit the bank, and we hummed and hawed and said we would think about it. I asked about iDeco as my wife has yet to to get involved with that and it seemed as good a way as any to get off the topic of high-fee risky return funds which banks may favour.
We left with some iDeco papers and our 2,000,000 yen still safely in the bank. I know we will get phone calls over the next few weeks advising us to do things not necessarily in our best interest. Ten years ago, I would probably have gone along with them. Now, although I am still very much a beginner, I at least know when to say no; I know when I don't know enough.
And as soon as the online trading platform run by SBI Securities gets over the fact that I have a middle name I will be taking control of my own finances. That is largely thanks to RetireJapan. I know this may seem like a fluffy advertorial, but I've never met Ben and I have no direct involvement in this site. It has however changed my life for the better. And isn't that both wonderful and horrific? That you can trust an Internet stranger more than you can your local bank. Not always, of course. That would be an awful rule to live by. But I feel confident that before you do something uncertain with your money, it might be worth running it by some people here on this forum. You don’t have to believe them or act on their advice, of course, but remember only that nobody is paying them to counsel you and they don’t stand to benefit in any way from the advice they offer. It is at the very least probably offered entirely unbiased and in good faith.
Oh, and we didn’t even get any clingfilm or kabikiller anyway.
Thanks, GABJ! Our standard advice on banks (including the internet ones) is that they are a good place to keep your money and have a current account, but a bad place to invest.
Banks tend to have a smaller range of products than the big online brokers (Rakuten, SBI, Monex) and higher fees. As you experienced, banks also incentivise their reps to recommend products to clients, whereas the big brokers don't have any reps ;)
If you have an idea for a guest post or would be willing to answer some questions for a reader profile we would love to hear from you.
And if you are not sure about an investment, please do post in the forum. At the very least you'll get a range of opinions and feedback, and a lot of the regulars are more knowledgeable than I am :)