>Someone out there is probably mentally screaming at me "you fool!" at this point. With hindsight, I agree...
I was hoping the piece would end with what you would do now (or what should you have done) when Alex called you. Did I fail to understand something in the piece, and simply staying on the phone with Alex would have somehow avoided the fraud situation down the line? It doesn't seem so?
If I were to get such a call, today, my instincts would be to engage in the same "I'm fine" get-off-the-phone-fast actions. What is the alternative?
What the bank is probably mainly trying to do is not "extract a higher margin" from you, but rather to "maintain your business." While Alex might not have recognized that a startup that took in a bunch of financing and plopped it into a cash account and then didn't do much with it is a customer who might disappear at any time, on some institutional level the bank is aware of it. They want you to regard them not as an interchangeable place that money sits, but as a valued partner who helps you do things with your money, and as a result you feel like it would both be a risk and a bother to extract all your money and go to some other bank.
If banks want to keep a customer, you might think the most important thing is to just not annoy or screw over their customers.
Why do they continually treat good customers like shit? I'm in New Zealand and my bank just continuously pisses me off. I don't want any upsell (the arseholes tried to upsell insurance when I got a credit card the other day). I've got a six figure facility at risk (US:HELOC?) and my bank's security practices are shockingly bad (we're way too trusting in New Zealand). Little things like access blocked from oversees for a month (phone banking was theoretically available but I couldn't call international so it wasn't). Aside: I would like to block phone banking because it feels so insecure. I've been looking for a better bank, but I wouldn't get the same mortgage facility, soooooooo I'm kinda stuck (maybe that's the reason they don't need to be good to customers).
Mitchell kept getting annoyed by the bank's activities. They wanted him as a customer but their internal systems didn't know how to make it easy for him. Systems with negative impacts are too common even when you're the guy making them money...
I hand the cashier my credit card. She looks at me like I’ve just asked her to barter goats for spices. “Can I have your name?” she asks. “No,” I reply. “You can have my money.”
Then comes the phone number. Then the email. [] Finally, after this interrogation, I’ve spent $300 and she asks if I’d like a bag. Of course I want a fucking bag: “That’s 25 cents,” she says. Why can’t stores just build the damn bag into the price instead of insulting me at checkout? I’m not asking to be hand-fed grapes like Julius Caesar.
And God forbid I need to call anyone about anything. Changing an airline ticket? Calling my credit card company? Forget it. Every road leads to an automated voice system with the warmth of a Soviet switchboard.I'm sure Schwab would rather me have my money in a mutual fund than have a bunch of cash, for the reasons the other commenter pointed out (more complex arrangements and a view of the bank as a partner rather than an interchangeable "money box" is 'stickier') but this was a real double win for me and one of the handful of stories I call upon when I am asked why I do most of my financial business with that company.
In 2022 I lost my business banking and had to shut down a business that I owned for 20 years because it was related to the adult entertainment industry and, despite being completely legal and aboveboard, a single wire transfer that got a little bit of scrutiny resulted in them asking questions about what we did and, knowing that I was doing absolutely nothing wrong, I answered all of their questions truthfully and completely. A few months later I was told that we "fell outside of their risk appetite", our accounts were being closed... and for two months we searched for any bank or credit union in Canada but none would take us.
A lot of industry insiders had that exact reaction: "Are you stupid? Did you not know?! You NEVER admit that you're in this industry you moron!" etc. We even had a very sympathetic branch manager suggest that we re-incorporate, re-brand and hide what we do (a front, in other words). I couldn't do that. And I mean, we had no issues for 20 years. 10 of which were banking as a corporation (was personal accounts before that since we ran it as a proprietorship) and I thought that being in Canada we were pretty progressive. No one I told on a personal or professional level had ever cared. So why would the banks? We were lawful so why should they care?
The industry is rife with this kind of fraud, and chargebacks represent tangible risk of financial loss, so banks just blanket ban working with certain industries.
People who sell precious metal jewelry for credit card payments are another.
source: used to run porn websites back in the early 00s.
The banking services they terminated consisted of a single business checking account, business savings account and company credit card. That was it. That was what they deemed "too risky."
We learned from someone who used to work at Chase's compliance department that most big banks just have a flat-out ban on working with any customers that are involved in the industry in any capacity what-so-ever due to concerns over serious things like human trafficking. It was the fact that we were distributing [lawful and traceable to the producer] content that made them not want us as a client.
This can bite you, though unlikely. Look at Fed Lisa Cook. Probably at some point she thought it'd be okay and she's good for the money and it's just a bureaucracy to bypass. It's a very small thing if you compare to ... uhm ... what Trump did. But it's biting hard now.
More likely, the bank will put a ~$1b hold on your account while they investigate suspicious transactions, and your options are to whistle, sing, scream, or twiddle your thumbs until they are done.
So having 4-5 total accounts, ideally unrelated to each other in terms of legal owners (differently-named subsidiaries are usually the way to go, I understand, though I am far from an expert in such matters), will enable you to continue to operate your business while bank A does compliance on your accounts.
If you run into a situation where banks A through F all put holds on your account, you need a good RICO lawyer or equivalent. Different class of problem, and different likelihood of happening, and the kind of thing a great CFO plans around.
Your whole arrangement of having an operating account separate from your wealth accounts is highly regular.
Edit - sorry realized I replied to a reply! Put air quotes on You/Your
What I think it was:
1: Chase's business account wasn't appropriate for a tech startup; nor was it appropriate for the amount of money Mitchell was handling.
2: When your bank calls you after a very, very large money transfer, you should take the call.
That being said: In today's world where every other phone call is some telemarketer trying to scam you or otherwise sell you something you don't want or need, I can sympathize with why Mitchell blew off the first call.
It is a bit weird how actively the guy tried to engage but it probably is just because it was one of the largest accounts opened through that branch - if they'd opened an account with the same bank but a branch in down-town SF instead of in the suburbs of LA then they would have had an account manager more accustomed to that kind of business and it presumably wouldn't have been as weird...
https://news.ycombinator.com/item?id=45058480
> If you are the customer you want a bank that understands what kind of inflows/outflows you’ll typically have. The bank wants to manage the risk, and you want a bank that doesn’t freak out at what seem to you to be very mundane transactions.
https://news.ycombinator.com/item?id=45058894
> A bank account is only insured up to $250k by the FDIC.
Interest rates weren't great back then, but even still you could get 1.5% easily.
All in he probably left a few hundred thousand on the table.
>1: Chase's business account wasn't appropriate for a tech startup; nor was it appropriate for the amount of money Mitchell was handling.
What properties make it inappropriate for a tech startup, specifically? What would be appropriate instead, and why?
>2: When your bank calls you after a very, very large money transfer, you should take the call.
He did take the call, but I take your answer to mean that Mitchell and Alex didn't have the right kind of conversation on the call. Is that correct? If so, what ought to occur on a call that follows a large transfer?
I would echo this question. If my bank called me and asked if I needed help, why would I say yes? I got money, the bank is holding it, everything is going great! This really feels like Alex was trying to ingratiate himself with a big client but communicated that really poorly, such that the message of "you are a big deal so I want to give you top tier service" never came across.
Until your account is many orders of magnitude larger than the other accounts. I suspect the typical "business" account was well under a million. See https://news.ycombinator.com/item?id=45058480 to understand why this was a big deal for the bank.
But again, Alex would not have been able to do this because Chase might not have had any policy about how to redirect customers to the appropriate type of banker. Which is kind of stupid for a megabank of its size.
Mitchell didn't take the call. He ended the call as quickly as he politely could, short of hanging up on Alex.
Edit: I've had a few bank tellers advise me on how to adjust my bank account correctly in the past. I'm going to assume this is what Alex was trying to do.
I might also point out that, around this time, Wells Fargo tellers were very pushy and would make calls like this. (I got one) It later came out that they were under intense pressure to sell banking services that nobody wanted.
So there is some set of services that are useful specifically to a tech startup but not a restaurant, but then there are a category of services that "nobody" wants, neither restaurant nor startup. Do you have an examples of any of those categories?
I am not asking because I disbelieve you. I am asking because I find this all fascinating, but it seems my imagination is lacking! What would I want from a bank account as a tech startup, versus a non-tech startup, versus a restaurant, that the bank wouldn't already give me when I sign up for a normal business account?
You said you were "advised to adjust" your account. Again, I apologize if I come across as ignorant, but what kind of adjustments?
My understanding is that people with financial training don’t think about money, they think about risk. If you are a banker and ask yourself “What is the probability that this 100 deposit will be here in another 30 days?” you might answer differently depending on what you know about your customer.
- If you think that your customer will withdraw 50 in the next 30 days, you might take the other 50 and invest it in a 30-day CD, and take the other 50 and just hold on to it.
- If you think all 100 will remain in the account the entire time you could invest all 100.
- etc.
If you are the customer you want a bank that understands what kind of inflows/outflows you’ll typically have. The bank wants to manage the risk, and you want a bank that doesn’t freak out at what seem to you to be very mundane transactions.
He also didn't get any extra controls on the account - you can see from the end of the story that they just forgot about it and someone stole $100k of it!
It wasn't a specific service, it was that Wells Fargo employees had a "performance metric" (which I understand in certain postapocalyptic hellholes translates to "a threat to your livelihood and your ability to receive medical treatment if you fall ill") on the number of products each customer was using. So they would encourage customers to open extra savings accounts, credit cards etc. (or some of the more enterprising employees would skip the phone hassling stage and just open these accounts).
I visited the bank a few days earlier because they sent me a debit card that I didn't want. (I wanted to switch it to an ATM card because it's harder to commit fraud with them.)
The teller basically didn't listen to me and tried to push services on me for 15-20 minutes. Eventually he realized I was getting extremely frustrated and helped me do what I needed to do.
The call from the teller a few days later was extremely unexpected, and I was justifiably curt. I said something like, "I don't want any new banking services, there's no reason for you to call me."
A few months ago, a teller offered to move my savings account to a higher interest version. I just had to maintain a minimum balance. A similar thing happened when I had my first summer job before college: A teller offered me a higher-interest money market account, it was just limited to something like 4 withdrawals a month.
> Do you have an examples of any of those categories?
I'm not an expert in startup finance, but I'll try my best.
The mistake that Mitchell made was kind of like keeping all your liquid assets in a checking account. Imagine if, instead of investing in a 401k (or similar,) retail investments, CDs, savings accounts, ect; you just put your entire life savings in a single checking account. Not only would you sacrifice a massive amount of interest, you would probably lose FDIC protection as your account grew, you'd be at risk of someone forging checks, and you'd be at risk of debit card fraud.
Startups often talk about their "runway." This is how long the startup can pay their employees, rent, and other bills; if they have no income. Don't quote me, but this is usually something like (roughly) 2-5 years.
Now, keeping the "runway" money in a single account is kind of, to put it bluntly, dumb. (It's like if you kept all your liquid assets in a single checking account.) Most of it should go to low-risk investments, like CDs and other high-interest savings accounts. I'm sure Silicon Valley Bank has a very straightforward way (for startups) to do this, that Chase doesn't have.
> What would I want from a bank account as a tech startup, versus a non-tech startup, versus a restaurant, that the bank wouldn't already give me when I sign up for a normal business account?
Remember the term "runway." Restaurants are typically profitable from day one, or become profitable quickly. They spend roughly as much as they take in. Startups often run at a loss for many years before they become profitable.
Likewise, a restaurant might have to pay back a loan that it used to buy equipment, renovate, or purchase the business. Startups hold onto their investment as "runway" instead of paying back a loan.
I'm going to assume that Silicon Valley Bank has products built around the fact that a startup has a large sum of money that it spends very slowly, versus a restaurant that needs loans and spends money as quickly as it comes in.
That's what SVB assumed, and they were very wrong.[1]
[1] https://en.wikipedia.org/wiki/Collapse_of_Silicon_Valley_Ban...
> Some banking experts said that the bank would have managed its risks better had it not been for the Economic Growth, Regulatory Relief, and Consumer Protection Act (EGRRCPA), enacted in 2018 and supported by SVB CEO Greg Becker, which reduced the frequency and number of scenarios of required stress testing implemented under the Dodd–Frank Wall Street Reform and Consumer Protection Act for banks with under $250 billion in assets.
Considering how we receive so much junk communication from banks one would imagine they'd be more vocal about what the issue was.
I think Chase starts “Private Client” at $250 or $300k. (Don’t use Chase, however.)
It might in some cases be more trouble than it is worth, if you are right around the threshold. A “normal” retail checking account and a brokerage account at another institution with the ability to transfer between them is probably sufficient for most. If you need loans or mortgages or other stuff, it might be worth the hassle (and phone calls).
(Not trying to diminish private client services. But they’re night and day different services.)
That sounds high to me. Maybe American banks? The smaller Swiss banks will start taking your calls at about $2m.
The non retail banks that have a good reputation are even higher.
They don’t outwardly advertise their minimums because “it depends.” For example if you’re an up and comer in your field where it seems like you’re LIKELY to one day hit the mins, they’ll start the relationship early.
They also invite you to all the bank's private events, so you can schmooze with other high net worth people. Banks are always sponsoring fancy events everywhere, and private banking clients generally get free invites.
Seriously though, just wander into any big ass bank(Chase, BOA, etc) and ask them. They have multiple tiers of private banking, depending on your wealth level. Generally the bottom tiers start around $100k and go from there. To get into the fancy tiers you generally need $1M or more of bank assets. To get into family offices, you generally need $100M or so. Though shared family offices are sometimes available at the low 30-50M range.
Just be very careful of fees. Generally the larger the private client services, the higher the fees.
Which one(s)?
(Better than fine, in fact, in that they refund your ATM fees.)
I basically never want to talk to anyone at any bank, like any other utility.
every time i have to interact financially with americans its always focused around these random transfer apps like zelle, cash, venmo etc.
The EU has PSD (Payment Services Directive) and PSD2 which stipulate what kind of transfers have to be possible to customers.
Because of that the US just has a bunch of startups which offer services that unify the payment landscape. The alternatives at a bunch of banks is still that you need to write checks.
> depositing a quick check.....Zelle.
Good lord
American banking really is in the stone age. I don't think I've seen a cheque in 20 years. As for private banks, in Blighty they all (?) offer 'retail' services that out perform high street offerings.
Incidentally, all high street banking is free in the UK. Only private banks tend to charge for their services.
Zelle limits the amount you can send per day, starting at $500, so you can't even necessarily pay your rent in one go the first month.
With Chase, I don't have the ability to do ACH transfers to accounts I don't own (I hear other banks allow free ACH transfers), so if Zelle limit is too low, my only option would be a paid wire...
The other day I was just poking around the investment section of the app to see what kind of rates they offered, and almost immediately I got a call from my personal banker, haha. I actually ended up trying the investment since the returns looked good.
My company had an exit, I did well financially. This is not a secret. I'm extremely privileged and thankful for it. But as a result of this, I've used a private bank (or mix) for a number of years to store the vast majority of my financial assets (over 99.99% of all assets, I just did the math). An unfortunate property of private banks is they make it hard to do retail-like banking behaviors: depositing a quick check, pulling cash from an ATM, but ironically most importantly Zelle.
As such, I've kept my Chase personal accounts and use them as my retail bank: there are Chase branches everywhere, its easy to get to an ATM, and they give me easy access to Zelle! I didn't choose Chase specifically, I've just always used Chase for personal banking since I was in high school so I just kept using them for this.
Anyways, I tend to use my Chase account to pay a bunch of bills, just because it's more convenient (Zelle!). I have 3 active home construction projects, plus pay my CC, plus pretty much all other typical expenses (utilities, car payments, insurance, etc.). But I float the money in/out of the account as necessary to cover these. We do accounting of all these expenses at the private bank side, so its all tracked, but it settles within the last 24-48 hours via Chase.
Otherwise, I keep my Chase balance no more than a few thousand dollars.
This really wigs out automated systems at Chase. I get phone calls all the time (like, literally multiple times per week) saying "we noticed a large transfer into your account, we can help!" And I cheekily respond "refresh, it's back to zero!" And they're just confused. To be fair, I've explained the situation in detail to multiple people multiple times but it isn't clicking, so they keep calling me.
I now ignore the phone calls. Hope I don't regret that later lol.