The banking industry of the 1990s requires relationship managers to respond to business clients' changing expectations and to increase client-interface skills.
Recent research suggests that this will be true across all markets, from Fortune 50 to $25 million privately held companies.
Though they generally understand that they are less sophisticated than their relationship managers in financial products and services, clients see the gap narrowing rapidly.
Therefore, they are becoming more discerning about the coverage they receive from bankers.
Do Your Homework
"I'm tired of bankers calling with the product of the month and trying to sell us something we clearly don't need," the chief financial officer of a West Coast software firm recently said. "If they did their homework, maybe then we could do business."
His statement is representative of recurring themes in research interviews.
Smaller middle-market clients are often more tolerant of the "shake and howdy" call than their larger cousins, in part because smaller clients want access to working capital via bank loans. But research indicates that most clients are becoming increasingly intolerant of such low-value calls.
With major banks in the process of downsizing weaker relationship managers will be weeded out. Some will go down-market while others will be forced to leave banking altogether.
To survive in this marketplace relationship managers will need to provide the "value-added" interface that today's banking clients want--and sometimes demand.
Clients consider various questions when deciding whether a relationship manager is providing that extra value. But though these questions may vary according to the client's size, sophistication, interest, and so on, they generally include:
* Do you know our organization?
* Do you know our industry?
* Do you understand our short-term and long-term business needs?
* Do you understand our preferred financial alternatives for attaining our financial objectives?
* Will you provide us with valuable intellectual capital via tailored ideas?
* Can you "make it happen" in our organization? Will you?
Helpfulness Pays Off
Also, clients reward relationship managers who bring valuable "you should know" ideas and "you should do" recommendations tailored to their specific business needs.
Successful relationship managers say that "you should know" ideas can lead to IOUs with clients. High performers often find it possible to cash these IOUs in the form of deal opportunities, better pricing, cross-selling, and referrals.
Most bankers understand the value of "you should do" recommendations, usually sent in the form of proposals. But they often fail to communicate "you should know" information to their clients.
A tip: Position the value-added idea before sending it to the client.
One banker offered the following approach: "We're putting together some ideas on the recent changes in issue X (which could be cash management, or 401(k)s, or tax-loss carryforwards). Would it be beneficial if we tailored a package for you?"
And quick followup often pays off: "Was the idea helpful?" "What other issues and areas should we be focusing on when bringing you ideas?"
Window of Opportunity
A major investment firm recently invented a product that was highly innovative, effective, and commanded a lot of public attention.
In order to take advantage of the window of opportunity presented by this innovation, the firm quickly conducted a series of "you should know" presentations for key clients.
Even though many of its accounts were not prepared to take advantage of this product, the investment firm did not want its clients to be educated by competitors.
Moreover, the clients appreciated this information. They were grateful for the free tuition and market knowledge.
That gratitude translated into business down the road.
The action taken by this investment firm demonstrates a shifting mind-set for bankers: from being just lenders to also providing financial alternatives and ideas.
Commercial banking clients have stated in numerous research interviews that they reward bankers who educate them and take a genuine advisory approach to the relationship. In addition, bankers who provide ideas and "take a view" are often given the first shot at discussing business opportunities.
The controller of a middle-market firm in the Southeast recently said he values banks that provide something "extra" in the relationship. "And by |extra' I don't mean calendars, key chains, rain bonnets, and golf outings," he said, "I mean good ideas and advice."
He said - as did a majority of those interviewed - that he was more than willing to reward bankers for consistent, value-added interface.
A Client-Oriented Mentality
Attorneys, accountants consultants, and investment bankers refer to the people and institution they deal with as clients. McDonald's 7-Eleven, Big Mike's saloon, and many commercial banks call them customers.
Research indicates that wholesale banking relationships benefit from a client-oriented mentality.
High-performing bankers suggest that the key is to quickly distinguish the clients who will reward them for value-added coverage from those who will not.
As one high performer at a major commercial bank in Chicago recently said:
"We've give first-class service to first-class clients and good service to our super-saver clients."