How does a bank known for catering to wealthy baby boomers win over the next generation of potential high earners?

In the case of First Republic Bank, it’s by offering them student loan refinancing at very favorable rates and then pairing them with millennial-aged relationship managers who might someday help them buy that first home or finance a business expansion.

It’s by offering loans to young professionals to help them buy ownership stakes in the companies at which they work. And it’s by acquiring a hot fintech company, Gradifi, that works with companies to help pay down the student debt of their employees, some of whom have become First Republic customers.

This very intentional effort to court millennials, particularly high-earning ones, is paying off for the $81 billion-asset First Republic, which is based in San Francisco and has offices in Los Angeles, New York, Boston and a handful of other affluent cities.

Over the past three years, the student refinancing and professional loan programs have combined to add roughly 10,000 new households to the bank’s borrowing base, First Republic President Gaye Erkan told investors and analysts at an industry conference earlier this month. That represents nearly 20% of the bank’s borrower households, she said.

Perhaps just as notably, only one of those new loans is in delinquency, First Republic Chairman and CEO James Herbert said during a presentation at the same New York conference.

Jim Herbert, CEO of First Republic
First Republic CEO James Herbert said that, of all the new student and professional loans the bank has made in the last three years, only one is in delinquency.

As banks think about how to attract millennials, First Republic’s programs stand out for their targeted approach in pulling in that coveted demographic. With some 44 million borrowers holding roughly $1.4 trillion in educational loans, student debt refinancing in particular is seen is something that could help banks attract more millennials, industry observers say.

“It’s a gateway product. No question it’s super valuable,” said Stephen Dash, the CEO and co-founder of the online lending platform Credible. He said that millennials have “a lifetime of potential transactions ahead of them. That’s why I think we’ll continue to see bigger banks and larger players enter this space.”

Of course, attracting millennials is one thing, keeping them is another. That’s why when a young professional refinances her student loan with First Republic, she is assigned a relationship manager who can help with other financial decisions and be there for her when she needs that first home loan. Many of these relationship managers are themselves millennials First Republic brought in to grow alongside its expanding base of customers in their 20s and 30s.

Other banks are trying broader approaches to appeal to millennials, and digital content is an especially popular strategy for those that would like to establish a rapport with younger prospects, Dash said.

Santander Bank, a division of Spain’s Banco Santander, recently launched Prosper and Thrive, a financial advice site geared toward millennials. Doug Kalish, the chief marketing officer, said it did so because it learned through its own research that many younger customers and prospects were particularly interested in topics like travel, fitness and cooking. Therefore, the bank concluded that advice on day-to-day topics, like how to budget for a vacation or choose pet insurance, would resonate well with its best prospects.

After a certain number of visits to the site, Prosper and Thrive will prompt a visitor to subscribe to future content. The hope is to ultimately be first in mind when a potential customer thinks about switching banks, Kalish said.

(Some banks also are starting to use help with student loan debt as a tool for recruiting millennials as employees.)

Kevin Tynan, a bank marketing strategist who works as senior vice president at Liberty Bank in Chicago, said that rather than trying to reach millennials broadly, banks need to think about reaching the “right millennials,” or those who best fit their customer profile.

First Republic targets very high earners, or at least those who will be someday. Liberty Bank tends to go after working-class millennials in part by promoting its efforts to improve financial literacy.

“The first step in marketing is to really listen to what [consumers] want and then develop programs specifically for them,” Tynan said.

First Republic is certainly selective. The bank doesn’t refinance student loans under $40,000, and in exchange for offering refinancing rates as low as 1.95% to 2.95%, it requires borrowers to maintain average monthly checking account balances of at least $3,500. (Service fees are assessed if balances fall below that amount.)

First Republic declined to comment for this story, but in her presentation at the Barclays Global Financial Services Conference, Erkan described the average student loan refinance client as 33 years old, with at least a couple of years on the job already and an “excellent” credit score. “From a credit quality perspective,” she said, the borrowers are “similar to our single-family residential borrowers.”

While First Republic is hardly the only bank offering student debt refinancing, Christine Pratt, a senior analyst with Aite Group, said it’s that choosiness that sets its loan program apart.

“This is different. They’re selecting who they would like to have as their customers,” she said.

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