Building A Better “Relationship Banker”– Part 3

Elements of Relationship Banking

This is Part III in our series of articles exploring the concept and implementation of a “trusted advisor” approach to banking. In Part I (HERE), we compared the profitability of a transactional banking model versus a relationship driven model and questioned why so many banks want to be relationship focused given the higher cost and execution risk. In Part II (HERE), we explored how many banks fail to define their relationship banking model, how that results in execution failure and we highlighted some ways to fix the relationship profitability model. In this article, we further explore some secondary problems with relationship banking and discuss some solutions. Finally, in the upcoming Part IV, we will cover some conclusions on where relationship bankers should develop their expertise to garner the best “return on expertise.”

 

Going Deeper Into The Relationship Banking Model

 

To further help us explore relationship banking, we turn back to our part-time banking therapist and relationship banking expert, Nick Miller, President of the Clarity Advantage Corporation. We speak and have worked with dozens of experts this year and Nick stands out not only for his passion for banking but for his clarity of thought and practical approach to relationship banking. If there is a better company or person to help with relationship banking, we haven’t met them.

 

Through Nick’s help, we outlined the following elements of what a sustainable relationship business model looks like. 

 

Relationship Banking - Trusted Advisor

 

Definition: While service is an attitude, relationship banking (at least to us) also means more service, more data, more time and thus more expense. Defining what “relationship banking” means helps bankers determine the cost of the service. Understanding the cost of delivery then helps management have a clearer understanding of how to apply this approach.

 

Willful Intent: In building a relationship banking program, senior bank management must have intent on how they design their bank’s service, engagement level, and delivery. You can’t just call whatever you do relationship banking, you most proactively define and build a relationship banking program. Specific performance

expectations must be made clear, activities, quality standards, internal support mechanisms, account loads and staffing levels all need to be stated. There is only so much “trusted advisor” service your bankers can delivery if you require your bankers to handle 100 or more accounts. True relationship banks tend to have their bankers covering 35 to 40 customers. Whatever the case, having intent is the difference between banks that develop an effective relationship banking model and those banks that pay lip service to the term relationship banking.

 

Hiring: Not everyone can be a relationship banker. We need to change our recruiting and hiring process to better identify those candidates that would work well as relationship bankers. No matter what job you apply for, a set of questions that delve into your personality, experience, and expertise helps identify candidates early in the recruiting process and channel them to the area in the bank where they can be the most productive. Further, this effort also means, filling gaps in our talent spectrum. By recognizing our shortcomings, we can go out and find relationship bankers that have expertise in marketing, accounting, law or other areas and train them to be bankers. We can also go out and look for those individuals with a network of connections and industry expertise that also fill in our weaknesses.

 

Training: Relationship bankers are made, not born. Very few banks have a formal relationship manager training. Banks are good at providing training on the technical aspects of banking such as compliance, policies, and product skills and many provide sales training. However, many banks come up short at more intermediate and advance training.

 

Once relationship banking is defined, a specific curriculum should be identified to support the vision. Learning how to understand business challenges and solutions seems simple, but we have found this is a key element in building better relationship bankers. Many bankers tend to think transactionally about a single product instead of understanding the bundle of products and non-bank solutions that are available. At its core, relationship bankers need to be trained how to solve cash flow, sales, capital and other basic challenges.

 

In addition, learning social media, how to best leverage a customer relationship management system, sales prioritization, relationship-building management, and sales development are all secondary, but critical skills, which many banks just assume their relationship bankers have.

 

Allocation of Talent: Nick made us realize the cost of our relationship approach which led us to the conclusion that not every customer deserves, or needs a relationship banking approach. Some customers, deserve or desire to be more transactional. Asking the potential customer questions during the sales process regarding their current banking relationships, their goals, dreams, pain points and needs better helps us determine the allocation of our relationship banking resources.

 

Sales Management: Using the answers from the questions above, banks can now better hone their sales and relationship management approach. Some customers already have their relationship banking needs filled by another institution. Here, it is important to figure out why. Is it products, geography, service level, expertise, tradition or some other factor? These answers may dictate if it is even worth going after this customer’s relationship banking needs as we might determine that it is better for all parties to proactively decide to remain their transactional bank. 

 

Relationship Banking - Trusted Advisor

 

By honing our sales approach, we have created another class of clients – those that need and warrant a relationship banking approach but already have their needs filled. These customers are internally categorized as transactional but with a sales plan to building a relationship customer. This category means that not only do we need to look for ways to expand our relationship but we also need to prove the value of our relationship banking approach.

 

In contrast, some clients say they want, and need, relationship banking but their sophistication level or banking needs don’t warrant the additional expense or expertise. Here, customers should always have the choice of paying for a relationship banking-style account but should be guided into the account that best suits their needs.

 

Relationship Banking Tools: To deliver value, relationship bankers need to be supported by specialty tools. Luckily, many of these tools are already resident at the bank, so it is a matter of training and leveraging the organization. For example, every financial analysis should generate a list of areas of improvement for the benefit of the borrower. Peer data, industry benchmarks, current industry trends, economic trends, SWOT analysis and similar information, should be not just relegated to credit but should be moved to the front line for the benefit of building a better relationship bank.

 

Call Planning: One clear needed discipline in relationship banking is the importance of call planning. One benchmark that we subscribe to is to strive for six substantive calls per year with each relationship banking client. This takes planning to be able to deliver substance. Call reports and call planning should be a requirement for all relationship bankers. While some of this effort means just completing a call report and updating the relationship development plan, a large part of call planning is a conducting periodic peer or managerial review to aid in both coaching and relationship development. Many banks ignore both formal call planning, written relationship development, and pre-call disciplines. This is understandable as workloads are heavy. However, without a relationship building plan and proper call preparation, many relationship bankers will fail to be able to lead high-value conversations. One of our mantras is to “always call with a purpose.” To support consistency, training and relationship development, bank management should pre-arrange what those many purposes look like.

 

Relationship Building Plan: It is important to recognize, and train, that relationship banking doesn’t happen overnight. How we have defined it, it takes the relationship banker and the client four to six years to achieve an optimized status where they get to the point that the bank is now a valued partner and part of the “top three advisors” that the business consistently relies on. This “continuity through time” comes as a result of a deliberate plan to build trust, add value and manage the relationship. Creating and training on what a relationship development plan looks like and the associated time frame serves to increase a bank’s probability of success. Where some bankers and clients may achieve full relationship status in months, others can take a decade or more. Having a roadmap template as part of a relationship banking program and then customizing it for each client will help a bank better achieve their relationship banking goals.

 

Call Planning: One clear needed discipline in relationship banking is the importance of call planning. One benchmark that we subscribe to is to strive for six substantive calls per year with each relationship banking client. This takes planning to be able to deliver substance. Call reports and call planning should be a requirement for all relationship bankers. While some of this effort means just completing a call report and updating the relationship development plan, a large part of call planning is a conducting periodic peer or managerial review to aid in both coaching and relationship development. Many banks ignore both formal call planning, written relationship development, and pre-call disciplines. This is understandable as workloads are heavy. However, without a relationship building plan and proper call preparation, many relationship bankers will fail to be able to lead high-value conversations. One of our mantras is to “always call with a purpose.” To support consistency, training and relationship development, bank management should pre-arrange what those many purposes look like.

 

Compensation: A good way to tell if you are a relationship bank or not, is to look at your compensation plan for your relationship bankers. If your incentive compensation plan is based on building new loan or deposit totals you are a transactional bank. Compensation drives results and banks that compensate for transactions will get transactions no matter what they call themselves. To reward true relationship banking, bankers should be compensated based on a scorecard that includes retention, balance building, referrals and the client’s success in addition to new product sales.

 

Coming Up Next

 

It is not easy to create a relationship banking platform which is why so many banks fail at generating performance above their peers. Relationship banking takes planning, hard work and execution. While banks often have a select group of bankers that execute well (according to Nick, about 20% of any banks “relationship bankers”), few banks have a relationship banking team that can execute well.

 

The above elements will hopefully help banks better define their relationship banking plan. In Part IV, we will further explore the details of our framework and discuss in what areas bankers can develop expertise that gets them the best return on their effort.