Aweh dearly beloved fellow ruminants & groupies
Is controlling costs important? For most mere mortals if you don’t devote a significant portion of your time to controlling costs then they escalate with no limit. Perhaps if you are a billionaire you don’t need to spend time on this. Controlling costs is about as much fun as going to the dentist.
I have just completed the very tedious business of changing my insurance company for the second time in three years. Last year I went through the same process but when the insurance company was presented with a competing offer they relented and matched the competition. This year they just sent through a renewal schedule with a 17% increase with no explanation. Not even the usual blah blah blah about rising costs. Most of this is for the fleet of cars I need to manage for our household. No new cars were bought so all the cars are worth less but not the insurance. This time they just dug in their heels, so the process started afresh and I’m changing insurance companies again. I had to go through a 32-page insurance schedule understand exclusions and excesses and make sure all details were correctly captured. What fun. What will happen next year? Will I need to repeat this, or will I just accept the increase and spend my time on better things such as writing blogs.
“Nickel and diming” refers to the practice of charging small, seemingly insignificant fees or costs for various goods or services, which can add up significantly over time. This term is often used to describe a business strategy where additional charges are applied for items or services that were previously included or perceived to be part of the overall cost. The phrase originates from the idea of repeatedly charging small amounts which, when accumulated, can amount to a significant sum.
In every aspect of your life from cloud storage to music, news, and entertainment streaming nickel and diming is rife. At times, I confess that I simply lack the energy to fight back. Once you are paying for something on a monthly or annual basis the fun begins. You get pecked to death from every angle. Death by a thousand cuts. They know that inertia is in their favour and the more compliant you are the more you will get pecked.
However, it is perhaps the financial industry that are the gorillas of nickel and diming. That’s where the big money is. I’m a capitalist at heart but the 2008 financial crisis was a harsh lesson in what happens when the financial industry was not regulated sufficiently.
Increasing regulation and disclosure requirements attempt to rein in the financial industry. Disclosure requirements, index tracking, and competition have put significant downward pressure on stockbrokers. The same trends are in play for bond dealers. I spent considerable time getting to understand all the costs in my stock trading account and chose a platform with low and transparent fees. Despite talking to any number of financial advisers they focus their attention on their claimed expertise, trying to sell you products, ability to beat the market, and reduce risk while downplaying their fees. Sometimes you get a nice cup of coffee and at least I get to waste their time.
Recently my restless mind has turned to forex dealing. I repatriated some US dollars into a US dollar account with my South African bank. I don’t do many Forex deals. How much will it cost to convert my dollars into Rand? Once again, we enter an opaque and complex world. Now I confess to partial ignorance regarding this field but the concept of hidden fees is what is really interesting. Exchange rates are volatile, and it is difficult to know if the rate offered to you does not include a cut for the bank. There are things behind the curtain where the banks are making money that is not disclosed to you, and you don’t even realise you are contributing to the banker’s bonusses. WTF (Wow isn’t that fantastic). If one considers the volumes of Forex converted every day, there is big money to be made.
Most of us remain in the dark as to what fees we have actually incurred. The spread is the difference between what a seller offers and what a buyer is prepared to pay. In many cases, money transfer companies will disclose their own spread but not the banks’ spread, which is charged in addition. There is thus a hidden spread which could be an additional 0.7%. If you do not know what the interbank rate is at the time of your trade, you will never be able to find out how much your provider or bank charged you. Siphoning off money in secret is a wonderful business model. The advice is that you request all fees be specified to you in writing before you commit to the trade.
So that’s what I’m trying to do and down another rabbit hole we go. Let’s see how that works out. Of course, to those of you who understand how Forex works much better than me, I may be displaying my ignorance. I do that a lot. But dear expert, please educate me.
Perhaps there are better things to do on a Friday afternoon, beer for example, than trying to understand how my pockets are being emptied.
I want to express my gratitude for all the ideas and comments received. I genuinely appreciate them, and please continue to share your thoughts.
Regards
Bruce
Ruminant Pink Friday 