Now that banks can meet virtually all customer financial needs, the race for investment and insurance clients is on.

A study by American Brokerage Consultants showed that two-thirds of U.S. banks and thrifts plan to offer retail investment services, up from 15% currently. Banks are expanding their insurance offerings as well, according to a recent study released by the ABA Insurance Association. Up to 75% of banks are estimated to become sellers of both products within five years.

The booming U.S. investment market, in which mutual fund assets have reached $1.5 trillion, offers a stunning opportunity for banks. As the number of investors grows, so does the pool of potential insurance customers. Virtually every bank customer requires life and casualty coverage. Most U.S. households are underinsured, but only 1% of U.S. life insurance is sold through banks.

Banks' reputation for trust and personal connections in customer relationships gives them an edge over nonbank providers.

Bank branches are a highly effective delivery channel for insurance and investment products. The American Brokerage Consultants study found that among banks planning to offer investment services soon, half would use their branch networks exclusively. To do so, a bank must have well-trained, credible financial consultants serving customers.

A bank needs more than a solid reputation. It must analyze its potential investment and insurance markets - with a focus on demographics.

Also, banks need to help salespeople conduct incisive conversations that address the full range of customers' financial needs. That means credibility, product knowledge, and knowing when to refer a customer to a specialist.

Competition from insurance and investment providers will surely intensify. Nevertheless, the potential for success is staggering. To succeed, banks must develop product solutions that fit customers' financial planning, investing, and asset protection needs. They need tools to help customers develop long-term wealth management strategies and equip salespeople to give the counsel that most customer relationships lack.

Even with the best market analysis and "spot on" solutions, banks will not succeed in these new arenas unless they invest in their real delivery vehicle - their people. Most customer relationships exist at the product level, not the financial partnership level. So how can banks improve financial partnerships with clients?

Building relationships will require focusing on a customer's complete financial situation. But even banks with effective sales cultures will find difficulty in carrying out this new type of sales conversation. Salespeople must be trained to fulfill financial needs, not just sell a product or service, and they must know products and services better than ever before. Employees will also need to recognize when to bring in other specialists.

Employees' ability to execute a product sale is no longer enough. Rather, team leaders must coach them in how to hold conversations that probe for customer needs. Bankers must know retirement planning, estate planning, and health-care management and planning. Such an objective requires a thoughtful and constructive conversation to pinpoint what a customer needs. This requires time, banks must realize.

Banks also need to start compensating employees based on the value of relationships rather than on the number of sales. Having established full-service relationships, banks must nurture them for the long term.

Wilmington Trust Co. in Delaware has been highly successful at selling mutual funds and annuities. Jerry Mullins, its vice president of retail branch sales, said that follow-up is a key. "We've been in the relationship management business for almost a century," he said, "and that means having a higher level of involvement with customers than traditional bankers. We want customers to think of us as financial advisers, not transaction processors."

At this watershed moment in the banking industry, speed is crucial. Leading investment and brokerage companies are gaining market share, and insurance companies threaten banks' customer base.

Banks face an urgent challenge to arm employees with the skills not only to hold off nonbank competition but also to reverse the tide. The survivors will be those with the vision to understand each customer's potential and the commitment to transform employees into true financial partners. Mr. Falwell is executive vice president of major U.S. account sales for Omega Performance Corp., a Charlotte, N.C. firm that specializes in improving the performance of financial institution employees.

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