The banking industry is a very competitive market, with banks constantly trying to introduce new products and services. As a bank introduces something new to the market, competitors are often quick to follow with their own version of the product or service. This competitiveness and lack of differentiation complicates the banking decisions for business owners.
Often, the driving factor in determining where business owners bank is the relationship and service intensity they develop with their banker, says Jim Geuther, manager of commercial banking for FirstMerit Bank.
Regardless of the size of their businesses, owners are likely to deal with a variety of divisions in a bank. Rather than keeping a roster of departments and contacts, it is beneficial to develop a relationship with a single point of contact; someone who can demystify the banking process and orchestrate easy access throughout the franchise.
Smart Business spoke with Geuther about what a business owner should look for when selecting a bank and what a good relationship can bring your business.
How should business owners start the process of selecting a bank?
The ultimate goal is to find a bank that meets and exceeds your financial requirements. Banks, in general, have a tendency to position products, services and locations as the primary differentiators from their competitors. Business owners, however, don’t always value these attributes the same way. In fact, market data for business owners clearly indicates that ‘knowing how to get things done within the bank’ and ‘inspiring trust and confidence’ are two of the most critical factors in evaluating a bank and, specifically, the primary contact. This points to the critical role individual bankers play in delivering value to their clients. Business owners should be diligent and critical when selecting a banker. The banker you choose can be a valuable asset to your advisory team, so it is important to pick the right one. Just like selecting other important vendors or advisers, business owners should ask their potential bankers for references. These should be readily provided from clients and other professionals who work with the banker.
Does every bank have ‘good’ relationship bankers?
The short answer is yes. Many banks have built strategies around relationship managers who can be trusted advisers to all of their commercial customers, all of the time. Unfortunately, when customers do seek advice from their primary bank, more often that not, it is of marginal value. In a recent study completed by the Business Banking Board, only 41 percent of small businesses and one-third of middle-market customers believe they receive good counsel from their banker. This shows that, while many banks have ‘good’ relationship bankers, the majority of clients are not enjoying the benefits of the outstanding bankers in their market.
What attributes should business owners look for when evaluating their primary contact?
I believe there are four major characteristics a business owner should look for in their relationship manager. He or she should be:
- Knowledgeable. The banker should have
a solid understanding in the products and
services they are representing. They don’t
have to be an expert on each product, but
they should be able to explain the basics and
involve an expert, as needed. More importantly, the banker should be knowledgeable
in your business and be able to grasp the critical trends and developments within your
industry. Also, the banker should be skilled in
understanding the financial industry. As
financial and economic markets shift, you
should find a banker who can provide relevant and timely financial recommendations.
- A team leader. You should be able to rely
on your banker to ‘quarterback’ a team effort.
Your banker should introduce you to the key
players who impact your business, including
the relationship manager’s boss, the credit
officer and even the bank’s president. It is
especially important for businesses that rely
on bank financing to know multiple layers
within the organization. These are typically
the people who either directly make or significantly influence the credit decisions within a bank. The days of hiding behind a ‘credit
committee curtain’ are over. Clients deserve
to have an outstanding quarterback leading
and representing their team.
- A team player. While the banker should
be a leader on the banking side, he or she
should work as a team member on your business side. As an owner, it is beneficial to create a team that includes your banker, lawyer
and accountant. These individuals should be
in direct contact and should meet regularly to
collectively work toward the success of your
business. Properly executed, these professionals can become an informal advisory
board that helps you achieve success.
- Stable. You should look for an experienced, well-tenured banker who doesn’t
have a history of frequent turnover. This is
important so you can have a consistent and
strong advocate for your business who
knows how to get things done.
What should you do if you are not receiving appropriate service?
Business owners have a few choices. Of course, they can remain status quo. They can instead request a new relationship manager at the same institution. And, third, they can pursue other options elsewhere. All else being equal, why settle for an average banking relationship when there are outstanding ones available?
JIM GEUTHER is a manager of commercial banking for FirstMerit Bank. Reach him at (216) 694-5683 or firstname.lastname@example.org.