You may recall a phrase I "borrowed" from Anthony Edmonds of AMP Capital Investors early in the year, when I’ve talked about Kiwis being "money rational" … meaning people do make very logical and rational decisions when looking at money issues. And that this has been no more evident than the success of the cash PIEs such as our Cash Advantage Fund, where people have made very rational decisions to take advantage of the unique and significant tax benefits they afford the investor.
Talking to my peers in Ireland, Belgium and Australia the same principal is coming through loud and clear re the recently announced Deposit Guarantee Schemes. Whilst NZ was probably the last of the developed economies to announce such a scheme, we have seen Kiwis very quickly grasp the significance and benefit of such a scheme – something that has been mirrored in our sister online banks around the world.
Whilst tax benefits and improved returns are important, security is paramount with investors when determining where best to place their hard-earned cash. Yet more evidence of our money rationale approach to making decisions re our hard-earned cash.
Whilst schemes like the deposit scheme, once all banks are part of the scheme, create a level playing field in terms of how safe your money is or more importantly how likely you are to get it back when you want it, talking to my peers offshore they are seeing clear evidence of people looking deeper than that when deciding where to put their cash. It’s pleasing to see that it’s not simply about the interest rate being offered.
Investors are stilling looking very closely at the fundamentals of the banks … how have they weathered the financial story; what is their history and reputation when it comes to how risky their investment and lending strategies have been in the past; and overall what are the fundamentals of the banks.
In the case of RaboPlus, people have been very vocal in acknowledging the heritage and pedigree or our parent Rabobank, with this being reflected in record numbers of people opening accounts with us and transferring even more money into their RaboPlus account. Perhaps this is also an acknowledgement of the fact that the deposit guarantees are currently only in place until Oct 2010 and so what happens after that?. Where am I best to place my money – and that’s where they are looking at the past activities and practices of the major banks.
Clearly Rabobank’s practice of operating a very conservative approach to risk and credit management and employing prudent banking practices throughout our 110-year history resonates with our customers.