Tuesday, December 11, 2007

Direct Marketing for Financial Services

I've spent a good part of my career helping financial services companies market their loans and other products. So, I'm always on the look-out for news that impacts this industry. Two stories, today, caught my eye.

Article #1: Freeze affects mortgage DM

The article discusses how Bush's short-term plan to freeze mortgage rates will negatively impact the struggling mortgage industry. Ok, I know that there is not too much sympathy for mortgage marketers at this point, but bear with me. Here is the new issue in a nut-shell: Since the mortgage industry blow-up, many of the surviving mortgage companies changed their tactics from focusing on adjustable-rate mortgage (ARM) loans to offering fixed-rates loans to holders of ARMs. Now that ARM rates are freezing (based on Bush's plan), they are going to have to switch gears again and some may go out of business.

And, this in an industry that has already seen huge declines. "According to Mintel Comperemedia research, the number of mortgage direct mail offers declined 62% in the third quarter compared to the same period last year." Companies like Ameriquest (who in their hey day, mailed tens of millions of direct mail pieces EACH MONTH. A decline like this naturally has impacted my fellow direct marketers, in addition to the mortgage co's. And, you know I HATE that.

Article #2: NY: New code for student lenders

This article reports on the Attorney General's push to implement a code of conduct to be followed by student loan marketers (the industry that is being most highly scrutinized in the wake of the mortgage fiasco). This one seems reasonable to me. It's all about full disclosure--ensuring that the student audience understands what they are getting into when they sign on the dotted line for a student loan.

"Under the agreement, companies would have to sign a uniform disclosure statement that would require them to list an annual percentage rate and provide students with an estimate of what their monthly payment would be and the amount they would pay for the life of the loan, the official said.

Lenders would also be prohibited from using false insignia or other devices that appear to be part of the federal government. They also won't be able to use checks, deceptive rebate offers or other gimmicks to entice students."

I truly hope that the student loan marketers out there do not need this code of conduct to guide them into doing what's right for their customers. What we've seen recently in this industry, is a new understanding that if you bring on a student as your customer, you may be a preferred financial services partner for that student for life. A life-time relationship is definitely a good thing. And, smart student lenders understand that they won't instill that type of life-long loyalty by using gimmicks or trying to cheat their customers.

And, just by seeing what's happened, and continues to happen to their mortgage cousins, it's clear that providing products that are fair to the consumer and yet still bring value to the bank are the best way to help ensure long-term stability.

That's how I feel, at least :)


Ted Grigg said...

You said "...it's clear that providing products that are fair to the consumer and yet still bring value to the bank are the best way to help ensure long-term stability".

In other words, be a good citizen and that will help you survive the rough times.

I think greed got in the way of good behavior. Both consumers and employees are suffering from poor management decisions in many of these companies.

Thanks for a thoughtful interpretation of the situation with mortgage lending.

Suzanne Obermire said...

Yep, Ted, greed did get in the way. Let's hope that the student loan industry learns from the mortgage industry experience.