What to do About Generational Retention

One of my colleagues that I truly admire, Trent Fleming, wrote in his blog last week about Generation Retention. This topic concerns every financial institution but especially the rural communities.  Here's what Trent shared...

Generational Retention

This material originally appeared on my Rural Economic Revitalization Blog at www.arkansawriverwriter.blogspot.com The Des Moines Register recently reported that 50% or more of those expected to inherit farm land will sell it.  This reminded me that Generational Retention remains a key to the continued viability of many community banks. I will expound on each of the three key issues, but I felt it appropriate to include this general post as a reminder:

General Transfer is a key issue for most rural banks. One challenge these banks have is relationship retention. If you've taken the first step (and some are frankly afraid to look) and found that many of the heirs to your current deposits are "somewhere else" then you realize the challenge. Two parallel tracks are necessary. First, address the heirs who are still local. Reach out, through parents if necessary, to form relationships and help these heirs learn that your bank can be a valuable tool for managing the assets that will be left to them, be they a business, land, or simply deposits. Second, put together a plan to reach out to absentee heirs with essentially the same message . . . we are here to help you manage your inheritance. Your plan for resident and non-resident heirs is comprised of three main parts: relationship (a face); services; and technology.

Generational Retention: Relationships

In keeping with the theme of what community banks can do to preserve relationships as older depositors die off, my last post indicated there were three keys. This time, lets look at the first key - the Relationship Factor. If you want to keep banking relationships beyond the current generation, you must - well before a "transfer inducing" event occurs - establish solid relationships with heirs. This starts early in life . . . even during elementary school. Kids savings programs, and financial education, can serve to implant your brand into kids thinking. As kids grow older, work with mom and dad to make sure the kids feel that the bank is a trusted friend and adviser. We'll talk more about technology in a future post, but it is essential in staying connected to these youngsters if they leave home. Hosting events, or webinars, regarding estate planning, generational transfer, and asset management will strengthen your position as that trusted adviser, and make it easy for heirs to look to your bank for money management advice and services. That's the goal . . . when parents retire or pass away, you want to keep your relationships with the family money, the family business, the family farm. Building strong relationships is the key.

Generational Retention: Technology

Lets look at the second of the three keys to retaining banking relationships across generations: technology. Banking has been quick to adapt many new technologies, and a lot of them are customer facing. From the advent of automated teller machines, through voice response systems, to today's mobile banking platform, customers are demanding, and banks (most of them anyway) are providing a variety of technologies to make access to information and transactions simple and painless. A large part of maintaining and preserving relationships with heirs and potential heirs is ensuring that it's easy for them to do business with you. This includes Internet Banking for individuals, and Internet cash management for businesses, along with remote deposit capture for those customers who still handle checks as a primary payment method for their business dealings. The rising popularity of Smart Phones makes mobile banking - as an extension of your Internet Banking product - a must.

Packaging and promoting these services is important . . . as a part of your overall bid to serve out of town (and of course local) customers. Put together a brochure (print and electronic) and perhaps a web site to promote your ability to assist families in preserving and enhancing wealth across generations . . . include descriptions of all the ways that you can help. Remember that promoting a comprehensive package casts you in a much better light than waiting to react to requests for services. If you are serious about surviving generational transfer, make that evident to all that do business with you.

Generational Retention: Services

The final of our three keys to success is services. Some of this has already been covered under technology - but there is more to it than that. Business specific expertise is an important part of helping families realize that there may be more value to keeping the family farm or business than selling it. Land management, timber management, business valuation, estate planning, and general business planning advice are all important, depending on the economic landscape in the communities you serve. These capabilities will set your bank apart with current and future generations. For example: the death of the farmer in the family need not mean selling off the land, if you can aid the surviving spouse in leasing out the land for farming. Doing so can provide comfort to the family, by keeping the land, and generate needed income for years to come. There are many examples across many family oriented businesses.

As I stated previously, packaging and promotion is critical . . . as a part of your overall bid to serve the heirs to your current customers. Remember that promoting a comprehensive package casts you in a much better light than waiting to react to requests for services. Again, if you are serious about surviving generational transfer, make it evident to all that do business with you.

About the Author

Trent Fleming serves as a trusted adviser to financial institutions. For more than three decades, he has worked with banks on matters as diverse as strategic planning, business continuity, employee education, and operational efficiency. Fleming's presentations on technology, management, and strategy consistently get the highest marks from his audiences. He serves on the faculty of the Graduate School of Banking at the University of Wisconsin, and regularly contributes articles to industry publications. He also publishes the very popular banking newsletter “Trent's Comments.” Trent holds a Bachelor of Science in Economics and Finance from Christian Brothers University. More information at www.trentfleming.com or on twitter @techadvisor.

Still learning!

Honey

Technogy and Cost controls

In my last blog I discussed the critical importance of keeping up with technologies. I have a technology associate who recently wrote on how to utilize technology to control the costs of running your bank or credit union branch.  Of particular interest is the recognition of the opportunity to not only save money but make some money by getting customers to use their debit cards.  Here are some excerpts from “Trent's Comments”  in January – February 2013

Leveraging New Technologies to Reduce Costs byTrent Fleming

As you invest in new technologies, much of the focus is on the “sign-up” phase – getting customers to sign up for mobile banking, e-statements, or Internet Banking. Clearly, it is important to get folks signed up as the first step. This is not the desired result though . . . the intent is to get folks to adopt behaviors that reduce your operating costs, and improve customer satisfaction. Effective employee education and targeted marketing campaigns can help you to achieve your goals.

Let's look at four currently popular technologies as examples:

Mobile Banking
While you certainly need to have mobile banking from a competitive standpoint, it is not until a substantial percentage of your customer base begin to actively use mobile banking that you will see cost benefits from the technology. Measuring unit costs is difficult. However, as customers become more comfortable with using their mobile phones to perform increasingly complex banking functions, visits to your branches and calls to your call center should decline. This will lower the cost of serving customers, and increase customer satisfaction, as they are able to quickly and easily handle many of their banking needs with no outside help. Our society is increasingly reliant on mobile devices, so it is important that you reserve your “place” on these devices. You will then be poised to offer additional mobile-based services.

E-Statements
E-statements offer you a significant cost savings, every month, over paper statements. Thus, getting customers to accept electronic statement delivery is a worthy goal. Think about the number of times companies that you do business with (utilities, delivery companies, etc.) encourage you to accept electronic statement delivery. Your customers are getting this pressure from all sides, and most are willing to go along with it, for everything from cost to privacy reasons. As a bonus, e-statement delivery paves the way for delivering other notices electronically, reducing costs and improving customer service (same day notification of returned items, for example.) In general, you should be able to reduce the costs of statement production by at least 50-75 cents per account, per month. Do the math. You want to save this money, and your customers want electronic statements. In addition to straightforward promotion of e-statements, you should include e-statements as the standard offering for new accounts, and use them as an incentive to customers who may be seeking a free account, by including accepting electronic statement delivery as one of the required terms for a free account.

Internet Banking
Internet Banking, properly deployed, should greatly reduce your costs of customer service by allowing customers to handle more of their banking activities on their own. In particular, the ability to transfer funds, and see images of paid items will mean that, like mobile banking above, your customers require much less call center contact to address their banking needs. This reduces your costs and improves customer satisfaction. Another key part of Internet Banking is bill pay. Many banks have had poor experience, penetration wise, with bill pay, as their initial offerings were cumbersome, required advanced payment, and may have even cost extra to use. The reality is this... many of your customers have been driven to on-line payments through the biller's sites, and won't change their habits unless you find a way to make it easier ( I think aggregation of bills on a hand held device might have a shot) For now, concentrate on those of your customers who are still check writers, and promote the ease of bill pay to them. Each time you convert a check to an electronic form of payment your transaction costs go down significantly.

Debit Cards
Debit cards are immensely popular with customers. Generally, when banks promote debit card utilization, it goes up in response. When promotions cease, it then levels off - it does not go back to prior levels. Thus, we can acquaint usage with adoption. Even the most expensive debit card transaction (customer enters their PIN) is significantly less expensive than processing a check. Signature based debit card transactions actually generate revenue, via interchange fees. Efforts to convert check writers to debit card users will, at a minimum, reduce your transaction processing costs, and may even increase your interchange income. Continuous promotion of debit cards is always productive. Don't overlook debit cards for your businesses, as well. Most ATM/EFT
providers offer you a better interchange fee on such cards, and transactions are usually larger, so there is good revenue to be had.

Still learning,

Honey

www.interaction-training.com