First the good news: Consumers are increasingly interested in buying nontraditional products and services from their banks.
Now the bad: They are acting on those desires less.
In the American Banker/Gallup Consumer Survey, the proportion of bank customers who said they would be interested in buying at least one investment-related service from their banks - financial planning, securities, mutual funds, insurance - rose to 62% from 54% in 1996.
That question was asked in March of 513 survey participants who chose commercial banks as their principal financial services providers.
But among the entire, randomly selected nationwide sample of 1,002 adult heads of household, only 44% said they actually have obtained one or more such products from a bank. And that is down two percentage points from 1996, when this reading was last taken.
"There is a great opportunity that is clearly not being capitalized on," said Mike Mortensen, president and chief executive officer of Pittsburgh- based PNC Bank Corp.'s brokerage unit.
Executives throughout the industry are optimistic about consumers' openness to expanding their relationships with banks. At the same time, they voice frustration about banks' failure to capture this new, potentially lucrative, and relationship-enhancing business.
"You know what that tells me? Banks aren't out selling their services," said Mark Willis, president of the brokerage business at Irwin Union Bank and Trust Co. of Columbus, Ind. "It makes you wonder if banks have figured out the sales process yet."
American Banker surveys have consistently revealed a strong desire among consumers for financial advice. Financial planning got the highest response among interested bank customers - 41%, ahead of mutual funds' 33%. And consumers who said they have received that service from a bank rose to 14%, from 11% in 1996.
"As people become more educated, they are looking for a more sophisticated approach to building their wealth," said Pamela Dawson, president of the brokerage arm of Seattle-based Washington Mutual Inc.
It is not clear why consumers may be getting more financial planning from banks, yet are buying fewer investment products.
The number saying they had bought mutual funds was 19%. Because of the margin of error, that is statistically no different from the 20% in 1996. Those using a bank's securities brokerage fell to 10% from 13%.
"That's a little bit frightening," Mr. Mortensen said.
One way to translate consumers' interest into sales may be to ask in focus-group research how they want to learn about available products, and how they might like to buy them. Washington Mutual recently conducted two such focus groups, Ms. Dawson said.
"The results clearly indicate that we have a tremendous opportunity to continue to target the Washington Mutual customer base and educate them on what we can provide for them," she said.
The bank has not yet decided exactly how to fine-tune its marketing approach to make use of the interview results.
Like many other institutions, Washington Mutual encourages its branch personnel to refer customers to the investment area, and it uses conventional marketing tactics like direct mail and statement stuffers.
But Mr. Willis of Irwin Union said banks may need to break that promotional mold.
"Maybe if the traditional is not working, somebody has got to start trying nontraditional," he said.
The survey results may reflect the fact that some people who have done business with bank brokerage have come away unhappy. This might be due to inadequately trained brokers' giving poor advice, or not providing good follow-up service after a sale, Mr. Mortensen said.
If that is the case, the lack of a cohesive and effective sales program for investment products across the banking industry may be to blame. Fifteen years after they began a serious push to sell things like mutual funds and annuities, banks continue to tinker as they seek a formula for success, said Anne Morgan Moore, president of Synergistics Research Corp. of Atlanta.
"On the marketing side, the whole sales culture, whether selling insurance or investments, is something that is still being explored and experimented with," she said.
Bankers continue to wrestle with how to market their investment products, how to get employees to make referrals, how to pay their sales forces, and how to orchestrate the sales efforts of full-service brokers versus licensed platform representatives.
Because the banking industry has tried so many differing approaches, it is hard for customers to associate their banks with the smooth delivery of investment products, Mr. Mortensen said.
"If you go to 10 banks you are going to get 10 different strategies on delivering investment products," he said. "It is going to result in an inconsistent experience from the customer's perspective."
On the other hand, high-profile advertising campaigns like First Union Corp.'s have raised the visibility of bank brokerages, he said.
"They are changing the public's perception of banks, and that is something that is good for everybody," he said.
Ms. Dawson said such advertising should raise the percentage of customers who bring their business to bank brokerage services. "I would expect those numbers next year to be significantly different," she said.
Yet few banks have been as aggressive as First Union on the marketing front.
One way that banks can increase their brokerage business is to focus on underserved markets - young people and those with lower incomes, who may be ignored by institutions questing after the wealthy, Ms. Moore said.
First Tennessee National Corp., in a recent repositioning around the theme of All Things Financial, "determined there were customers, especially younger individuals, who are not brand-loyal to brokers or insurance companies, who are becoming more interested in their finances, and who are open to nontraditional bank products," said Suzanne Copeland, vice president and advertising manager. "These people are hearing good stories about investment opportunities, and they haven't cemented relationships with other providers."
A recent Synergistics Research study found that the consumers most interested in obtaining nontraditional services from their primary banks are first-time buyers who tend to be relatively young, have lower incomes, and have no established provider relationships, she said.
"That's the overlooked, underserved market," Ms. Moore said. "You have to get them and grow them."
Wherever they are, banks must figure out how to convert potential brokerage customers into actual customers, Mr. Mortensen said.
"The opportunity is there," he said. "That's all you can ask for - now you've got deliver on it."
