It’s now official: every bank is the country is hyping the fact that it has become a consultative, total financial solutions provider. The final bank in the country to make this claim, First National of Gila Monster, Arizona (population 602), issued the announcement last week. Everywhere I travel, banks are making bold predictions that the future of our industry lies in profiling customers and selling products based upon a more proactive financial planning process. Then I look around at our industry and see some serious disconnects between reality and the hype.
Let’s talk mano a mano here. Bankers representing themselves as financial planners is a bit like McDonald’s saying its menu has gotten healthy. We’ve got financial planning on our mind, but are we really doing anything that adds value for our customers?
Bank customers need to be cautious about the amateur “profiling” activity going on out there. Try to deposit a check and you might get asked about your life goals. Try to close a loan and you’ll suffer the wrath of a poor customer service rep filling out the mandatory “Client Profile Sheet” in rote fashion. Ask if the branch has a bathroom and you may have to get the key from a “licensed financial advisor.”
I would like to call a quick Time Out. Everybody grab a towel and a water bottle and sit down on the bench. Before the entire industry rabidly zooms down the customer profiling highway, why don’t we figure out if this approach is really effective and if the customer sees any value in this process?
Don’t get me wrong – there’s a boat load of statistics that support the fact that America needs to get its financial house in order:
Banks have a lot of opportunity to help customers better manage their financial lives. However, our industry is revving up the consultative machine with several flawed assumptions:
Flawed Assumption #1: Any $30,000-a-year employee can be turned into a financial planner.
People with money to invest are typically pretty savvy – the vision of turning platform employees into financial advisors is naïve. Any skilled financial advisor would laugh at a platform job and work somewhere else for a lot more money.
Flawed Assumption #2: Customers are willing to sit through lengthy, boring profiling encounters.
Who has the patience for a 20 – 30 minute interrogation when we dropped by the bank on our lunch hour? If bankers have no interest in being profiled, why do we think our customers will be?
Flawed Assumption #3: Today’s financial planning provides “objective” advice to customers.
This is laughable. Today, “financial planning” is typically provided by insurance people and brokers who have something to sell. Is there a correlation between the fat commissions annuities earn and the fact that bank brokerage programs make over half their revenue from annuities? I think so.
Flawed Assumption #4: Today’s financial plans are valued by customers.
Most financial plans are far too depressing. How helpful is it to tell a $45,000-a-year school teacher she needs to save $842 a month to send her kids to college? Because these models produce mathematically correct but highly unrealistic results, people tend to throw up their arms and think, “Might as well blow the last $40 on margaritas.”
Flawed Assumption #5: Online planning tools are useful.
In preparation for this column, I spent some time on the sites of institutions like Schwab, Fidelity, Bank of America, Wachovia and Citigroup. They’re all pretty lame. Who’s got time for page upon page of slow HTML data entry? In addition, all institutions tend to offer more fragmented calculators (loans, college, retirement) vs. a simpler, consolidated plan. Finally, most of these tools don’t allow you to store the information once you’ve finished – a real pain!
Flawed Assumption #6: Financial planning is a one-time, “big sale” event.
The sales propaganda in banking seems to contemplate these dream financial encounters where some poor sap comes in the door and says: “Thank you for that excellent profile. I’ll take the investments, insurance, a mortgage, the roadside assistance package and the free Pyrex set.” Sorry, these dream encounters only happen in sales training class. In the real world, bankers build deep relationships by building trust and executing well over time.
Our industry’s approach to profiling and planning has to be judged as a failure for one important reason: bankers are talking about it but their customers are not. At neighborhood barbeques, you hear people brag about their new iPods, robotic vacuum cleaners and even electronic bill pay – but no one’s bragging about being profiled at their bank. Therefore, for banks to ever really pass the important barbeque test, I offer the following process improvements:
#1: Inject the concept of “wealth creation” through the bank’s culture.
One of the simplest and most powerful ways to step toward financial planning is using the language of wealth creation and the measurement of “net worth.” Most customers don’t know or measure their net worth. Banks could easily start getting customers in the habit of monitoring if their net worth is growing or shrinking. My favorite financial planning site is ihatefinancialplanning.com. The site offers a lot of useful tools including a net worth worksheet that can be stored online and quickly updated by users. Simple tools can even be developed to help customers visually watch the nest egg grow.
#2: Follow a common financial planning approach and brand this approach with customers.
Banks typically have a wide variety of planning and investment philosophies running across their banks. The trust, brokerage, and insurance groups may all use separate tools and approaches – this comes across like a Turkish bazaar to bank customers. Instead, banks should adopt and brand one common philosophy and set of tools across all business lines. Everyone should be talking the same language of finance. Check out Financeware’s propaganda for an example of a solid, well-branded methodology.
#3: Make customer profiling a non-obtrusive and cumulative process.
Banks should quit asking for blood samples and SAT scores up front and build information on clients over time . A smart relationship manager will pick up on customer cues during a common interaction and update the profile without the customer feeling like he or she has been profiled. American First Credit Union in Los Angeles has done an excellent job with a “Mini-Profile” process, which requires only the basics from customers and builds on this information based upon numerous casual encounters with the client.
#4: Add consultative value through user-friendly, customer checklists and simple tools.
Financial institutions spend way too much time throwing mountains of financial materials at clients: thousands of words about the benefits of insurance – yuck! No one reads that stuff. However, banks could add value by casually providing customers with simple checklists to keep them on track in their financial lives. Picture a quick “Financial Assessment” checklist that sales officers could distribute to customers and use as a discussion piece. (ihatefinancialplanning.com also offers a simple estate planning checklist.)
#5: Make all planning tools cross-channel Web applications.
Banks today have different calculators and tools on their customer Web sites that are nothing like the financial planning tools being used by sales and investment professionals at the bank. In the future, banks should plan for “cross-channel” planning tools that can be used by either customers in a self-serve mode or relationship managers in a consultative mode.
#6: Make “friendly reminding” a systematic process.
Finally, the real sweet spot in bank financial planning is to systematically keep in touch with customers without sounding like an annoying salesperson. Think of the job of a banker as that of a financial personal trainer. People use personal trainers because they provide some structure and motivation to put down the Cheetos and do some tummy tucks. Bankers can provide the same discipline and friendly motivation to their customers:
“Hey Frank, this is Mary at Gonzo National Bank. I was just checking to see if you ever got yourself set up with term life insurance. I have a reminder here that your wife said she would divorce you if you didn’t get that done, so I’m just following up to see if I could be of any help.”
Like many things in life, people don’t get things set up right financially because they are damn busy. Banks can help customers revisit the checklist on a periodic basis to keep on track.
Okay, I hope this time out from the insane world of financial profiling has been helpful. The current delivery of profiling and financial planning is broken and we need to recognize it. Yet, with some more pragmatic focus and creativity, we just might get those folks bragging at barbeques about the financial tools and advice their banks offer.