Thomas J. Stanley has been studying the ways of the wealthy for more than 20 years.
An author and onetime marketing professor at Georgia State University, Dr. Stanley is chairman of Affluent Market Institute, an Atlanta-based research firm that designs surveys and advises corporations, including banks, about marketing products to affluent consumers.
Dr. Stanley recently took time out of his writing schedule - he is at work on his fifth book - to talk to the American Banker about where he thinks banks are headed in trust and private banking.
Q.: What do banks need to do in order to better develop their prospects for private banking and trust services?
STANLEY: They need more aggressive sales professionals, but they also need to develop affinity with affluent groups. Traditionally, banks have looked at the affluent as individual prospects for trust services. The wave of the future is to look at the market in terms of segments of affluent people or affinity groups.
The issue for new business development (trust) officers should be to attend as many important trade association and professional society meetings as possible. For example, there are over 20,000 car dealers in the United States, plus thousands of affluent suppliers to that industry.
One of the featured speakers at the international meeting of car dealers I recently attended was an executive from an insurance company who talked about transfer of assets, liquidation of assets, intergenerational gift planning. The insurance company is looking at this as a major affinity group and not just focusing on only one prospect but thousands of prospects.
Q.: What are some of the things banks have done right so far?
STANLEY: Banks may not be the greatest in terms of generating the highest return, but in terms of doing what they're supposed to do - being in a fiduciary relationship - they do it very well.
But they have to balance maintaining that credibility and integrity with selling. The affinity marketing that I'm talking about has very high credibility. How come there is someone from an insurance company talking to 20,000 wealthy people about what essentially are core trust products traditionally offered by banks? In looking at hundreds of speaker programs in the United States of affluent affinity groups, trade association meetings, (I found) with one or two exceptions there has never been a banker.
Q.: Do you think that's a marketing problem?
STANLEY: I think it is. It's a matter of orientation. Bankers speak at bankers' conventions. But it's not enough to sit in a booth and say, "We offer trust services." They have to get up and take a pro-active role.
They have to go to conventions of affluent affinity groups - ventilation contractors, franchise owners, new car dealers. I once interviewed an excellent insurance agent who insures high-risk athletes -Formula One race drivers, for example. I asked him if I could meet him at a meeting of insurance executives. He said he never goes to meetings with insurance agents because he never sells anything at those meetings.
Q.: Should bankers, then, look at areas less obvious than the well known ones for their prospects?
STANLEY: I have told bankers before that they look at wealth as big hotels and people playing golf. They should be looking more closely at farmers, for one. If you took a look at the top 5% income earners of the farmers in Florida -there are about 1,500 of them - their average income is $1.4 million, and that's just net income.
That means there are over 1,500 farmers who outpace doctors in Florida. But you tell me how many bankers have gone to these farmers' meetings? Banks traditionally have looked at wealth as high status. But most of the wealth in this country comes from simple, middle-class, often blue-collar family business owners, (at) which bankers have often turned their noses up because bankers view wealth as something that has to look wealthy.
Q.: How would prospecting work for a bank in Florida?
STANLEY: Say the banker's task was to prospect with five defined affinity groups in Florida. The banker would look at wealthy farmers - those who produce high-quality vegetables for restaurants - dairy farmers, the suppliers to that industry, the automobile dealerships, suppliers to that industry, and the people who own convalescent and retirement homes and long-term care facilities.
Q.: What is the market potential out there?
STANLEY: If you look at the number of affluent people created by this country and what's going to happen in the next 20 years, even people who aren't very aggressive are going to do relatively well, because the market is so big.
There are about 3.4 million households with net worths of $1 million or more, accounting for about 46% of all the wealth in this country - and that number is increasing by about 7% a year. And executive fees - fees charged by executors of wills, not including legal or administrative fees - will reach $22 billion between now and the year 2005. That's enough to get a lot of people excited.