Direct Deposit, Online Billing
Make Switching Banks Harder

Finding a bank or broker that wants your business is easy. Dumping them is the hard part.

Just ask Michelle Voon. When she moved to New Jersey this past March, she took all her money out of a bank in Brooklyn, N.Y., and closed her account. She also called her insurance company to reroute a monthly automatic debit from her checking account.

But a month later, Ms. Voon got a statement from the Brooklyn bank with a $30 overdraft charge. It turns out the insurance company never shut off the automatic debit, and the bank never closed the account. In all, Ms. Voon says, it took three months, even more overdraft charges and numerous phone calls to the insurance company to close the account: "It was just a whole nightmare."

A growing number of banks and brokerage firms are seeking to provide one-stop financial services for their customers from cradle to grave. That's one reason banks are pushing online bill payments; once they're set up, a customer is between 70% to 80% less likely to defect, according to Gartner Inc. Brokerage firms, meanwhile, are offering everything from home mortgages to credit cards with generous awards to entice customers to keep all their finances in one place. (See a sampling of what various banks and brokerages are doing to keep their own customers and steal customers from other firms.)

But such lifetime relationships have a big drawback: As people's finances get more intertwined with a particular bank or brokerage firm, it becomes that much harder to move your money elsewhere. "The more services they provide, the less likely you will leave the institution," says Robert Tetenbaum, executive vice president of First Manhattan Consulting Group. Indeed, banks lose just 14% of customers annually on average, says Celent Communications.

As competition heats up, some banks are now trying to make it easier for customers (of other banks, of course) to switch. Washington Mutual Inc. and Bank One Corp. both provide new customers with "switch kits" that include the forms needed to move automatic deposits and bill payments over from their former bank as well as a prewritten letter to that bank requesting it close the account. FleetBoston Financial Corp. is testing a similar "switch checklist" in about 50 branches that it plans to roll out companywide. Commerce Bancorp, the fast-growing Cherry Hill, N.J., bank, not only offers a "quick switch" kit, but will actually have a bank staffer manually plug in all the account information for customers who want to pay bills online.

Some brokerage firms are taking similar steps. Charles Schwab Corp., for instance, assigns "concierges" to assist customers who are rolling over a retirement account from another firm.

When it comes to switching brokers, the firms themselves will do much of the work. But there are still hassles. Investors submit a transfer form to their new brokerage firm, and then must wait for their old broker to hand over the assets. The process is supposed to take no more than a week but can end up taking months due to incorrect paperwork. The old firm can reject transfer requests, for example, if the transfer form is incomplete or inaccurate -- even if just one digit in an account number is wrong.

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One way to minimize problems: Make sure to attach a copy of your most recent brokerage statement to the transfer form to avoid mistakes. If you still have problems, file a complaint with the Securities and Exchange Commission at sec.gov. The SEC will ask the firm to send a written report that responds to your complaint.

Brokerage firms with many online customers are trying to automate as much of the process as possible. For example, customers moving assets to E*Trade Group Inc. or Fidelity Investments have to type in pertinent information like their name, address and account numbers only once. Transfer forms are then created automatically with the customer's information already filled in. Fidelity customers still have to print out, sign the forms, and mail them in. E*Trade offers an e-signature option.

Other firms, such as Morgan Stanley, assign a financial adviser to each customer who will help them with any paperwork and keep the client updated throughout the process.

The more money you have, the more help you will generally get when switching. For example, J.P. Morgan Chase clients who have at least $100,000 parked with Chase or $250,000 in other investable assets are assigned a banker and a financial adviser who act as concierges and help clients fill out account transfer forms. If the client can't make it to the branch Chase officials will even make a house call to help them complete the documentation.

But many people who switch banks end up doing it themselves. It took Rashad Wareh, a trust and estate attorney in Manhattan, three months to switch banks when he moved from Virginia. He had to reroute all his automatic deposits, deductions and bill payments by contacting each company individually in order make sure none of his checks bounced. "You're locked into the system," he grouses.

In the end, Mr. Wareh, decided to keep one of his old accounts in Virginia for now. Instead of rerouting the utility payments on the home he's selling there, he is waiting for the house to sell so he can simply terminate the payments.

Write to Michelle Higgins at michelle.higgins@wsj.com

Updated August 14, 2003