For generations, conventional wisdom dictated that businesspeople distribute their financial business among several banking institutions. The idea was to protect their finances and save on fees and rates. In fact, according to a 2003 survey by Forrester Consumer Technographics, banking consumers are traditionally less loyal than users of other financial services, because only 28 percent of respondents were committed to doing business with their banks. Responding consumers indicated more loyalty to their credit unions (44 percent), their brokerage firms (44 percent) and their insurers (46 percent).
In response, banks are encouraging commercial customers to form relationships with their bankers. At the center of this “relationship banking” concept is the notion that bankers who know their customers can deliver better and more appropriate services.
“Establishing good client-bank relationships is a win-win situation for the customer and for everyone,” says Jeffrey Snyder, vice president of commercial banking for Sky Bank.
Smart Business spoke with Snyder about “relationship banking.”
How does relationship banking differ from traditional banker-customer relations?
Relationship banking is about advocacy. Most banks offer a variety of products including checking and personal accounts, loans, letters of credit and online services. Many also offer wealth management, employee benefits services, insurance and treasury management.
All things being equal, relationship banking allows the client to get the benefit of specialists in each of those areas on both the commercial and personal sides. Also, by building relationships, bankers get to know their clients and their specific needs. If the banker is familiar with a client and his business, the bank can act more quickly and efficiently to meet those needs.
What are the economic benefits of relationship banking?
Generally, the more a banker knows about a client and the client’s business, the more cost effective it is for the bank. As a result, banking fees may be reduced or otherwise modified.
Also, there is a lot of gray area in commercial lending, and much of it has to do with character. In relationship banking, the bank knows the client’s history. Additionally, clients with relationships can generally get better interest rates and structures on loans and on credit lines.
How can businesspeople begin searching for a relationship banker familiar with the client’s specific industry?
Get referrals from others in your industry, from your attorney or your accountant. Interview banks to learn about their services. Talk to a commercial lending officer; tell him about your business and your needs. Ask if the bank is already doing business with others in your industry. For example, a contractor might seek a bank doing business with other contractors. Those bankers will understand the industry, the cycles of the business, and that those clients need certain products at certain times.
A banker with many clients in the same industry is more likely to understand that the needs of two clients may be different, even though they are in the same business.
What traits should businesspeople seek in a relationship banker?
Look for advocacy — that is, someone who is interested in what’s good for the client as well as for the bank. The banker should be asking questions about the client and his goals. During the interview, the banker should listen to the client and tell him what he needs now and in the future to achieve his goals.
A client should remember that he’s sharing intimate information about his finances with the banker and should have a level of comfort with that particular person.
How might a banking relationship start?
It’s beneficial for the client to provide as much information as possible to the banker. Clients can begin slowly with only a few services, such as a personal and business checking account, and then watch how the relationship develops. Over time, as the client and banker become more familiar with one another, other services can be added, and relationships can be expanded to other specialists within the bank.
Does a personnel change affect the client/bank relationship?
When a client has just one account or is using just one service, and the person with whom he’s doing business leaves, no one else in the bank knows the client. Relationship banking takes a layered approach, whereby the client is working with more people. If one person leaves, others can seamlessly continue the relationship.
When clients are choosing between competing financial institutions, they should consider the long term. Over time, clients with banking relationships can realize benefits even beyond savings on fees and rates.
JEFFREY SNYDER is vice president of commercial lending for Sky Bank. Reach him at (330) 258-4441 or [email protected]. For more information, visit www.skyfi.com.
