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Sunday, July 23, 2017

Reposted for our Newest Readers : SkiRacer from TNT "Choosing a Bank and Accounts", 23 JULY

Note: This is geared toward new/beginner Dinarians and please consider the banking fees  and account information as examples ………they all may have changed since this was originally posted......and they may change several times before the official rates are released and we are exchanging.

SKIRACER :  LESSON 2:  CHOOSING A BANK and ACCOUNTS

(This is what I sent to my circle.  If it helps you -great, if not, no problem ,skip it and the others. It is my effort to complete my training for my circle and am sharing it FWIIW here.)

BANK TIERS:

Banks are classified very generally by two different criteria: 1) amount of money managed (or deposited), and 2) services offered.  There are "tiers" for each of these, which creates a good deal of confusion to call both "tiers." But there you have it.

It so happens that these two criteria often track one another. For example, banks that provide "services" like foreign exchange and wealth management typically are large enough to support such activities so they have larger depositories as well. So it is a sort of 2-fer deal sometimes.  
....
It is the Tier 1 SERVICE banks that are our target. Of course we do not ignore the advantage 1) above gives us, but it is the Foreign Exchange (FE)  service in particular that appeals to us at the moment.    We wish to seek out a bank that itself offers FE services.

That means it operates its own FE division or department where currencies are verified and funded, even if not every branch has this function. This means personnel trained in FE work for this bank as employees.  That means the bank has a vested interest in making sure FE works right.  I like that.

Some of such banks are the Big 4: Bank of America, Citigroup, Chase, Wells Fargo.  USBank may also offer these services in larger cities. HSBC offers them in San Francisco as best I know and I think BNP Paribas offers them in New York. 

Banks that do not themselves offer FE services normally contract with the banks that do. However, that means that your dinar/dong will be in transit "inter-bank" via some transportation means, which may open the door for some funny business. It also could mean delays in crediting your account, from a few days to upwards of a week or so.  In our case, Seller beware.

Tier 2,3 and Community Banks

There are multiple banks that are not Tier 1 and are excellent banks.  The safety of your deposit should be utmost in your mind. Pick a local bank that has 4 or 5 star ratings. Check the internet in your area by Googling "regional bank safety ratings [zipcode]."   This returns pretty amazing results that I was not expecting.

A word of caution: One bank by a certain name in one area (zip) may be highly rated, but the same named bank in another zip may have a much lesser rating. This is because of past performance and likely the local management.  So do your homework.  And BTW this includes the Tier 1 Big-4 banks as well!  This also surprised me.

FDIC INSURED BANKS

As far as I am concerned this is all bogus hoopla. It is not worth a dime. The FDIC has 99 years to pay you your money back, even the $250,000 insured amounts per signature on an account. Next, only 6% of all FDIC deposits are actually insured. If there is a run on banks, do you really think you will be in the 6%? Then you get to wait up to 99 years for it.  So I recommend private insurance if you are worried, or don't be using banks at all.

BANK SERVICES:

As we've discussed FE is one important service. Another we might be interested in shortly is wealth management services. This essentially allows you to invest in various instruments  (Pay attention:) offered by this bank, such as stocks, mutual funds, annuities, etc. So each bank has a specific tailored set of instruments it offers, compensates it employees for selling, commissions are normally paid to them, etc.  So one must query whether such instruments:

    are the best available on the open market

    are selected based on the incentive to earn the commission or to put you in the right instrument
    are serviced by the most knowledgable individuals in such instruments

    provide you with the most experienced possible persons, (or someone in training?)

    what monthly charges will using said services impose? Are they fixed or dependent on the balance managed?

My own personal objective is to find the very best wealth manager I can who has a proven track record, is acting in my best interests and not their own, etc. I do not plan to use a bank for such services. I'd rather pay someone for performance rather than selling to me. Each of you will need to decide these matters for yourself.

CHOICE:

So your dilemma becomes what you want in your bank. Is it full service, one stop shopping? Is it timeliness during the exchange process? Is it personalized service? Is it a full range of comprehensive wealth products?  Is it being recognized and acknowledged when you set foot in the door?

If you know your objectives it'll make it more obvious which bank fulfills those objectives. Now is the time to ferret out those decisions.

ACCOUNTS:

Once you have chosen your bank it may be wise to have your accounts already opened before you try to do your Currency Exchange (CE). Here are the accounts I recommend:

    One account for dinars, due to different tax treatments

    One account for dongs, due to different tax treatments

    One account per currency type to sequester taxes for that dreadful day when your first Estimated Tax payment is due (If any)  At one point the UST  was going to track your asset-backed funds ad infinitum Let's see if there is additional info on this.

I shall refer to 1&2 s the "mother lode" accounts.  These accounts will hold all your disposable proceeds from the CE, which is likely more money than any of us have ever seen.  So here is my plan:

A. Neither Mother Lode account will have any checks printed for it, not have online banking of ANY kind, no credit or debit cards, no wiring allowed in or out, etc.

B. When I wish to access funds to move to "working accounts" where I do have checks printed, etc. I will present myself in person to the bank and do a withdrawal and deposit into a separate account.

C. I shall request that no low-level teller has access to the Mother Lode accounts. Only my personal banker is allowed to access it at the bank.

D. I shall severely limit the signature authority on the Mother Lode accounts.

E. I shall evermore refuse any "special high roller credit cards" of any and all kinds forevermore.

These merely advertise to anyone who gets it that you have money and you have now blown your cover of privacy.  Ask yourself, "What would a waiter in a fancy restaurant do with a credit a card against an account KNOWN to have hundreds of thousands of dollars in it?" duh
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F. The jury is still out for me on whether these Mother Lode accounts will be interest bearing (IB). My dilemma is:

    I'd like the minuscule income interest produces

    I don't know if making them IB causes me to enter some kind of default contractual agreement with the bank wherein I am the lender for the bank and permits the bank to leverage MY money for their benefit and my detriment.

    If non-IB accounts prohibit such usage.

These answers have not been easy to obtain, but it concerns me greatly.

Choosing a bank is a personal decision on many levels. Identify your objectives to help wade through the morass of choices.
BANK CONTRACTS and FEES:

At one time we were told the banks would have contracts for us to sign that would specify a percentage of the money that had to remain at the bank for some duration, such as 12 -24 months. I now think that has gone by the wayside and may have been replaced with a flat fee to be charged by all banks.

 That fee may be  2%, which is a whopping fee, and represents the profit the bank will get, less the small fees due to the UST.  So the 2% should be the total fees you will be charged, payable to the bank out of the proceeds of the CE.

 I do not feel shy about trying to negotiate this. I probably don't have enough dinar or dong to sway a reduction in this policy but some of you might.

It is worth the try.

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