Financial reform may affect privacy, pricing

When Congress passed the Financial Services Modernization Act, it opened the door for the creation of giant financial supermarkets offering convenient, one-stop shopping for all a customer's financial needs. But, this new law also could create headaches for those consumers concerned about personal privacy issues, according to a release from the Society of Financial Service Professionals.

"For some it's the case of being careful what you wish for because you may get it," said Villanova University Professor Robert T. LeClair, PhD, a national video teleconference panelist for the recent "Tax Conference 2000," co-sponsored by the Society of Financial Service Professionals and The American College.

By repealing the banking acts of 1933 (Glass-Steagall) and 1956, Congress removed legal barriers separating banks, insurance companies and securities firms from conducting business as a single corporate entity.

"While the convenience of conducting your affairs with one financial service company might seem desirable, how would you feel about your bank checking first with its insurance branch about your physical health before it will approve your new mortgage?" LeClair said

"As for how this new law will affect financial service institutions, expect more fierce competition, as well as turf wars, which could lead to lower pricing and fees for services. In addition, look for more strategic mergers and acquisitions to create opportunities for one-stop financial shopping, such as when Citicorp and Travelers Group formed Citigroup," LeClair added.

As financial service companies compete for the same pool of clientele, consumers will be left largely on their own and could be inundated with sales information and choices, he said.

"While having options and competitive pricing can be a good thing, knowing what financial products services are the best fit for you and your family's future financial security can be daunting," LeClair said.

"Consumers can expect to shoulder more of the financial decision-making burden, and with that comes more potential risk," he added.

LeClair outlined several proactive strategies consumers may employ as the competitive financial services marketplace continues to evolve at a dizzying pace:

Take the time to research financial service companies using information-rich resources such as the Internet;

Find out what policy the financial service company has with respect to consumer privacy and divulging confidential information between different areas of the company's business;

Make sure the financial service provider you select has a solid track record of ethical business practices;

Explore all your options before you jump into the convenient, one-stop shopping for all your financial service needs; and

Consult a professional financial adviser someone you can trust especially if you are feeling overwhelmed and confused.

Founded in 1928, the Society of Financial Service Professionals promotes excellence in professionalism, advanced continuing education, and ethical guidance for the nation's top financial advisers.