The $440 million-asset Bank Forward of Hannaford, N.D., is getting ready for retirement — the retirement of its wealthy clients, that is.
The Security State Bank Holding Co. unit, which manages $90 million of investment assets, is training and licensing 10 platform employees to sell simple investment products. The goal is to allow its three dedicated representatives to focus on handling the more complex business of income distribution and transition planning, said Mark Brakel, Bank Forward's vice president of new business development.
"It's about setting up a holistic plan to transition from one generation to the next while providing an income stream," he said. "To effectively address the needs of our client base, we had to free up dedicated reps."
Many of those needs ordinarily would be handled through a trust department, but Bank Forward does not have one. Instead, its advisers handle certain trust functions along with their other duties, Mr. Brakel said.
With wealthy baby boomers heading into retirement, large banking companies have armies of advisers poised to handle retirement income planning. And community banks like Bank Forward are positioning themselves to compete.
To do that, they must shift from helping clients accumulate nest eggs to helping ensure they do not outlive their money, said Kim Craig, the president and chief executive officer of FNB Wealth Management, a unit of F.N.B. Corp. of Hermitage, Pa.
"It's a huge cultural change for us," Mr. Craig said.
About 18 months ago FNB Wealth, which manages $2.2 billion of investment assets, adjusted its employee training to emphasize retirement needs, and it is reinforcing that training with testing, Mr. Craig said.
The program has given the 22 financial consultants at F.N.B. Corp.'s First National Bank of Pennsylvania the ability "to have a dialogue they didn't have at one time," he said.
Greg Gunderson, the president and CEO of Investment Centers of America Inc., a third-party broker-dealer in Bismarck, N.D., that works with small banks, said part of the challenge for community banks is to get customers to perceive them as the place to go for retirement income planning.
"We are trying to brand our banks to say that we can be the retirement income specialists in our town," Mr. Gunderson said.
His company's retirement program guides bank reps in assessing their clients' needs. For example, a workbook helps bring into clearer focus how clients plan to spend a typical week in retirement, Mr. Gunderson said.
"We try to get the client talking about how they view a perfect week of retirement," he said. "Our reps then work backward to what it will take from an income planning standpoint to fund that week."
Banks must focus on those who are within 20 years of retirement, Mr. Gunderson said. "Very frankly, I haven't had a banker yet say, 'We really have a strategy for this 45- to 60-year-old age group.' "
Big chunks of money at places other than banks are at stake, he said, because bankers can bring that money under their own roofs if they understand the needs of their customers.
"If I'm in this group, the 'free checking' button is not going to resonate for me, but I might move for income planning," Mr. Gunderson said. "My serious money is in my 401(k)."
Lynn Niedermeier, the president and CEO of Invest Financial Corp., a third-party broker-dealer in Tampa, said banks that have focused on selling products, rather than analyzing clients' overall needs, face a harder transition from asset accumulation to income planning.
"I think the way that some banks' sales forces are set up makes it a real challenge to change behavior," Ms. Niedermeier said. "If bank reps are not using a financial planning process, if they're just selling a product, then they don't get it."
Invest Financial's reps use videos and other educational materials to help investors understand the toll that inflation, taxes, health care, and other factors can take on nest eggs, she said.
