One of the biggest banking stories of 2016 was the scrutiny paid to cross-selling and, in general, incentive-based sales practices. As the industry builds performance objectives and goals for the coming year, a very simple question lingers: Can banks still cross-sell?
To answer this question fully, it should be broken out into three deeper questions: Can we still cross-sell products and services to our clients and prospects; can we hold bankers accountable for cross-selling products and services; and can we offer variable compensation to those who are successful at cross-selling?
The basic answer to all three questions is "Yes, but." Let's expand on each one.
Can we still cross-sell products and services to our clients and prospects?
Yes, but in this day of heightened scrutiny, particular emphasis must be placed on needs assessment. Some bankers are adept at uncovering clients' needs and recommending just the right products and services that help them with their daily money management and planning for the future. These are acquired skills that bankers learn along the way by observing other bankers who have been at it for many years and by actually assisting clients. Our industry needs these professionals to educate and assist consumers, as well as other bankers. Some things still require the human touch. I have been so inspired in my career by bankers who have banked multiple generations of family members. At the very core of this was a level of trust and service that helped lead to a long-term relationship between the banker and client.
A robust training curriculum and needs-assessment platform is a requirement to ensure that bankers are properly equipped to recommend products and that they take the time to understand a client or prospect's financial situation. This investment of time will ensure that product recommendations are appropriate for each individual situation.
Yes, we can cross-sell, but our efforts must be tied to a documented needs-assessment conversation that can be supported with simple tools and technology to assist the banker.
Can we hold bankers accountable for cross-selling products and services?
Yes, but great care must be taken in the approach to setting and tracking goals. I have never been a fan of unit-driven cross-selling. I have encountered phrases like "four out the door," which meant trying to put four products in a client's relationship during one sales session. These may sound great in theory, given that many clients need four products, but they communicate to client-facing team members that the units are more important than the client's needs.
Targeting a unit number does not align with a simple desire to do what is best for the client. During my time at one institution, our approach to cross-selling was built around a core principle of what demonstrated a relationship. Our conclusion was that most customers needed:
- A product to assist them with daily money management, which could be an account that facilitates purchases, bill-paying and deposits. For most individuals, that product is a checking account. The clients who had a checking account with us became "transactors."
- A mechanism to save for the future, be it a major purchase (car or home), college tuition or retirement. This need can be filled by a variety of offerings ranging from savings accounts to brokerage products. Clients who planned for the future with our assistance became "savers."
- A form of credit. Clients need access to credit, and part of that process is establishing credit history. This need can also be met by a variety of products ranging from secured credit cards to home mortgages. Clients with a form of credit became "borrowers" with our bank.
The objective was to increase the percentage of customers with at least one product in all three categories. A "transactor-saver-borrower" was more likely to have needs met than, say, a customer with three or four products in just one category. The numbers of customers who had that full relationship increased slowly but steadily over time, as did the customer satisfaction scores as rated by J.D. Power.
Yes, we can hold bankers accountable to cross-sell, as long as the goals are realistic and align with client interests.
Can we offer variable compensation to those who are successful at cross-selling?
Yes, but great thought needs to go into the approach. Customer-facing bankers need to be trusted advisers first and foremost. This comes with proper training, mentoring and experience. Financial institutions need to reward longevity and customer-service excellence alongside production performance. Clients trust familiar faces, and staff retention should be a priority.
There is a place for variable compensation for our bankers, but the mix of base-to-variable should be carefully considered to ensure the right behaviors. Basics like utilization of needs-assessment tools and a customer relationship management system should be rewarded alongside product sales. Bankers should know that rewards will occur based not only on what they do but also on how they do it. Both aspects matter.
Compensation experts have advised me through the years that incentive plans should be simple, stable and aligned. That is, they should be simple to understand and not so large a percentage of total compensation that they drive undesirable behaviors. They should be stable from year to year to encourage career bankers. Alignment with the institution's objectives is another factor that should be considered.
Yes, we can offer incentives and bonuses for cross-selling, but they should not be at a level that causes good bankers to cross the line.
Years ago, I led a banker named Evelyn. She had no idea how her incentive plan worked, declaring that if she took care of her customers and those they referred to her, then the incentive checks would take care of themselves. Evelyn earned some good incentives, but it was never all about the money for her. A lesson can be learned from her perspective. It sure impressed me as I spent a career looking for others just like her.
B. Scott Fisher is a managing director at Treliant Risk Advisors, a Washington, D.C.-based consultancy serving the financial services industry. He formerly held senior leadership positions with First Niagara Financial Group and Wachovia National Bank.