Executives at banking divisions for high-net-worth investors talk relationship, relationship, relationship when asked what counts in gathering wealthy people's assets, but the message is not always evident at the platform in some banks.
Charlene Stern, an experienced mystery shopper and a senior vice president at NewGround, a St. Louis financial services branding company, visited randomly chosen branches of Washington Mutual Bank, Citibank, Bank of New York, Sterling National Bank, and Fleet National Bank along a few blocks of Park Avenue in midtown Manhattan early this month with an American Banker reporter.
They also visited a branch of J.P. Morgan Chase & Co. on Avenue of the Americas. The firm is one of several banking companies with which NewGround has a consulting relationship. (Others include SouthTrust Corp. in Birmingham, Ala.; Bank of America Corp. in Charlotte; Eastern Bank Corp. in Boston; and Banknorth Group Inc. in Portland, Maine.)
In four of the six banks visited, representatives pushed checking accounts or fixed annuities. Developing a customer relationship was the focus at two of the six - Fleet and Sterling.
Though FleetBoston Financial Corp. is a superregional banking company, it and Sterling Bancorp, which is based in New York, are the two smallest among the six in terms of local deposit share. As of June 30, 2002, according to Sheshunoff Information Services, Fleet had 0.6% of the city's deposit market, and Sterling had 0.11%. They were dwarfed by Citigroup Inc.'s 37.26% and J.P. Morgan Chase's 34.77%. Bank of New York Co. had a 6.94% share, and Washington Mutual Inc., through its purchase of Dime Bancorp last year, had 0.41%.
"Creating a relationship begins with that first impression, that first person you speak with at a bank," said Ms. Stern, who has done more than 5,000 mystery shopping visits.
She portrayed a wealthy woman with $1 million of investable assets who was planning to move to New York from San Francisco and bring all her accounts with her. The reporter who accompanied her was introduced as a friend of Ms. Stern's family.
In some branches, platform representatives seemed intent on pushing the product of the month, highlighting attractive rates and customer discount plans.
At the Chase branch, a representative offered three times to sell a fixed annuity product, despite Ms. Stern's saying she was not interested. The annuity was the branch's "featured product of the month," and a promotional card on the representative's desk encouraged customers to ask about it.
Even after Ms. Stern repeatedly declined information about the product, the representative included a pamphlet on it in Ms. Stern's packet of materials, "just in case."
Rick Jones, a senior vice president at J.P. Morgan Chase, said bankers are not supposed to recommend products but to profile customers.
"We are not looking to product-push at any new banking clients," Mr. Jones said. "We are trying to understand who they are, what they are doing in the branch that day, and in what fashion we can serve them best."
Barbara Goodstein, a senior vice president in the Chase Personal Financial Services division, said bankers are not offered larger incentives for selling one product over another. Since the division was launched late last year, she said, customers with more than $250,000 of investable assets have been "overwhelmingly happy and enthusiastic" about the new service.
The mystery shopping "experience with Chase Personal Financial Services was really an anomaly compared to what we are seeing and hearing from the field," Ms. Goodstein said.
In the Washington Mutual branch a personal financial assistant did not ask about balances or assets held before reciting the options, features, and benefits of the thrift's checking accounts. The employee then pointed to a large poster in the window that identified checking as July's product of the month. Wamu, which is based in Seattle and recently entered the New York market through its purchase of Dime, has been emphasizing checking accounts.
Platform representatives went into long recitations about checking accounts and mortgage rates in the Wamu office, a Bank of New York branch, and a Citibank branch. Each representative cited rates as among the reasons to bank there - something Ms. Stern said was a mistake. "Rates are never a reason for a private banking client to choose a bank."
However, John Benevento, a senior vice president at Wamu, said that its Platinum Checking Account has had one of the best rates for the past year and that this has helped Wamu attract a lot of new money.
"I don't know who says customers don't shop for rates," Mr. Benevento said. "Oftentimes a customer may be shopping for rates but may trade off basis points if they are satisfied with service. But rate is usually a very critical part of their decision."
"The more products and services a customer uses, the better chance we have of developing a relationship," he said. "We are looking for long-term customers."
After explaining the various checking accounts available, a banker at Bank of New York brought up the subject of investment products. But Ms. Stern noted that he seemed to have difficulty asking the kinds of probing questions that might lead to a deeper relationship.
Bank of New York launched its ClientFirst initiative last year in an effort to recognize outstanding customer service and as an incentive to employees. The program solicits customer and employee suggestions on ways to improve sales and service.
Jeep Bryant, a spokesman for the company, said that its personal bankers are trained "extensively" to meet the needs of clients. "We expect the highest level of service from them."
A visit to a Citibank branch was among the more disappointing in terms of service. After waiting on a roped line for 10 minutes, Ms. Stern sought an employee who tried to sell her a checking account, Citigold, that the bank offers to affluent customers with a balance of $100,000 or $5 million of investable assets.
Ms. Stern asked about mortgages and investment products, and the employee got up to get information from each of those things, leaving Ms. Stern to wait a total of six minutes. When he returned, he suggested that it would take "multiple days" to get everything she wanted from Citibank.
"You are in a large bank," he said. "It is just hard to get these things done."
Mark Rodgers, a Citi spokes-man, said platform representatives try to determine which banking package is most appropriate for a customer. Then, he said, they focus on opening that account as a "first and important step." Representatives follow up with phone calls and offer a complimentary, detailed financial checkup to help pinpoint needs and solutions, he said.
Alexander Samuelson, a spokesman for Citibank Private Bank, said the typical private banking customer does not walk in off the street. And $1 million of investable assets would not have qualified Ms. Stern as a private client at Citi in any event, said Mr. Rodgers.
"It is highly unlikely that the private bank would be introduced to a client through a branch," Mr. Samuelson said. "We get our client from client referrals, marketing, and professional services."
There are numbers to back up Mr. Samuelson's assertion. An annual wealth and advice survey released last week by Fidelity Investments said 75% of affluent investors and 88% of advisers say a referral is the preferred method for locating an adviser. About 68% of affluent investors have referred a friend, family member, or colleague to an adviser, the survey said, and 56% of those who made a referral did so because they were asked for one.
There were cases where service at the branch was exceptional and was clearly a focus. At Sterling National, a customer representative spent 25 minutes initiating the relationship by going through the high and low points of working with a smaller bank.
He asked about balances and explored cross-selling opportunities, then explained that his bank, which specializes in serving professionals and small-business owners, offers only limited investment products. At the end of the meeting, he asked for Ms. Stern's phone number and for permission to call her in a couple of weeks.
Ms. Stern said that, of all her mystery shopping encounters, this customer service representative was among -she counted them off on her fingers - nine that had really "wowed" her.
"This is clearly not a siloed bank." The representative "created an impression," she said. "He is the type of individual who could create a relationship in a two-by-four closet. Here is a bank with intellectual capital on the floor."
Louis J. Cappelli, the chairman of Sterling National Bank, said that relationship development begins when a potential customer enters the branch. Sterling exposes employees to all areas of the bank, he said, by teaching them about every product offering on both the retail and business sides.
"We train them, we coach them, and we offer incentives so that we are nurturing a relationship from the moment a customer walks in the door," Mr. Cappelli said.
Employees have an incentive plan that gives them a "credit" for whatever business develops from a relationship they initiate, he said. Business that an employee develops for another department is added to the initiator's scorecard, and employees are given quarterly cross-selling pay awards.
"We want our reps to work hard to sell any product in the organization because then a customer never feels like you are pushing one product at them," Mr. Cappelli said.
Relationship-building was evident at one of the big banks, too - Fleet.
In the Fleet branch, Ms. Stern was taken to a side office. Before even finding out about her balance, the customer representative told her that he wanted to "develop a relationship." Then, rather than going into checking account and mortgage rates, he explained the variety of services available in the branch, which included mortgages and asset management services.
After finding out Ms. Stern's balance, he asked to introduce her to a Quick & Reilly financial consultant who was in the branch.
The consultant came into the small office and, rather than pushing certain products, worked to find out about Ms. Stern and the types of products she was already invested in.
He was the only person during the series of visits to whom Ms. Stern gave her last name.
"In New York, customers have an awareness of Citi and Chase - these are New York banks. Fleet is still developing a brand here," Ms. Stern said. "It is willing to work for my business. Building a brand is all about the people you put on the front line."
Brad Warner, a vice president at Fleet, said its service used to be "quite bad." In the past two and a half years, though, Fleet has been reworking its customer service. "Our goal is to produce an effective relationship across a breadth of products," he said.
Branch employees are trained and given incentives to work around customer needs, Mr. Warner said, and each employee was given three to five days of training in the past year to learn this new approach.
"We want our employees to ask probing questions that trigger a response," he said. "We are not just pushing products. We understand that customers have needs and want solutions. But we want to begin by making them comfortable with us. We want them to have the confidence that we can meet their goals. We want them to know we can make smart decisions."
Mr. Warner said that each branch's investment team includes a store leader, the platform staff, and investment consultants. The teams look for ways to deepen customer relationships, he said, and to get branch employees to work harder, incentives have been retooled in recent years.
"We know that each banker knows what they have to do to reach specific incentives," he said. "They get 'proxy points' for selling a product, but we don't run 'blue light' specials to sell a fixed annuity this month or a mutual fund next month. We want to figure out what is best for the customer and sell to that."
Mr. Warner said this new approach has created organic growth. Fleet serves 5.1 million households in the Northeast. In the past 18 months, since changing its customer service model, it has increased its products sold per customer from 2.7 to 3.74. Home equity loans are up 60% to 70%, he said, and deposits up 12%.
Ms. Stern said banks must realize that if they are serious about becoming full-service financial providers, they must do more on the platform than push products, rates, and fees.
"Working on the platform is all about how you deal with a stranger that has potential," she said. "You have to think relationship over product. It is one thing to say you want to develop a relationship. It is another thing to deliver the relationship first, before you think about what this person can mean to your wallet."
