Relationship banking can have many positive features, and it’s important to understand how it works so that you can receive every advantage available. Whether you’re an individual seeking a personal loan or a business in need of commercial financing, having an established relationship with a bank can be very beneficial.

You as a potential borrower should be sensitive to the fact that your bank is in the business of providing more services than traditional cash management and currency handling. As a matter of fact, banks are actively seeking to expand their list of products beyond that of checking and savings accounts and CDs.

But what exactly is relationship banking and why is it important, how can you use it to your advantage? All these and many more questions will be answered this article.

• What is Relationship Banking?
• How to Build a Good Relationship with a Bank?
• What is the Role of a Relationship Banker?
• How do Banks Improve Customer Relationships?
• Is a Relationship Banker a Good Job?
• Five Reasons to Build a Relationship With Your Bank

What is Relationship Banking?

Relationship banking is a strategy used by banks to strengthen customer loyalty and provide a single point of service for a range of different products and services. A customer of a bank may start out with a simple checking or savings account, but relationship banking involves a personal or business banker offering products designed to help customers attain financial goals while increasing revenue for the financial institution.

Read Also: How to Earn Money Through Banks

Banks that practice relationship banking take a consultative approach with customers, getting to know their particular situation and needs, and adapting to changes in their financial or business lives. The relationship banking approach is easily observable in a small-town bank, but it is also practiced in the retail branches of the large money center banks.

Whether for an individual or small business, relationship bankers will engage in high-touch service to try to make their banks the ‘one-stop shop’ for their customer’s A-to-Z needs.

Examples of products offered in the banking world include certificates of deposit, safe deposit boxes, insurance plans, investments, credit cards, all types of loans, and business services (e.g., credit card or payroll processing). Relationship bankers may also include specialized financial products designed for specific demographics, such as students, seniors, and high net worth individuals.

Cross-selling is the modus operandi of relationship bankers, but they must be careful. Federal anti-tying laws established by the Bank Holding Company Act Amendments of 1970 prevent banks from making the provision of one product or service contingent on another (with some exceptions).

How to Build a Good Relationship with a Bank?

When it comes to the financial health of your business, who you’re banking with matters just as much as the size of financing you get and the amount of revenue your company earns.

A bank that is a good fit for your company can save your business money in the long run and can save you time, as the bank will have an understanding of your business’ strategic plan and how it operates. A virtual CFO can help you find a bank and develop a strong business relationship with it.

Take the Time to Shop Around

Not every bank will be the right fit for your company. The bank you’re currently using for your accounts or loans may not be ideal, for several reasons. A bank that’s not doing well financially won’t have the funds or ability to give your business the financing it needs, for example.

Size matters when it comes to finding a bank, too. Ideally, the bank you end up working with will have experience dealing with small or mid-size companies. It’s easy to become lost in the shuffle if your company is a mid-size business working with a bank that is used to working with larger clients.

Keep Your Financial Details in Good Order

Your relationship with your bank can only be as strong as your financial details. If you don’t know what is going on with your company’s finances, it will be difficult for your bank to know and to provide you with the services you need. A virtual CFO can prepare your company’s financial statements and explain them to you and the bank, so that everyone is on the same page.

Keep in Touch with the Bank

Communication is key to building and maintaining a solid banking relationship. That means keeping the bank up-to-date on any changes in your company, including any new hires, changes to the products or services you offer, and changes to the vendors your business uses. As your company’s needs change, how you use the bank will change, too, which is why it needs to be kept updated.

If your company is struggling, the bank should know that as well, within reason. When you have to give bad news to the bank, do so in a way that shows you are working on the problem, so that your overall relationship doesn’t suffer. The sooner you let the bank know of any issues, the sooner you can work together to come up with a solution.

You also want to keep up-to-date on what is going on with the bank. Banks can fall on hard times, too. Even if you’ve had a years or decades-long relationship with one financial institution, if it should start struggling or be unable to provide the financing or support you need, it may be time to move on and find another bank to work with.

What is the Role of a Relationship Banker?

A relationship banker, also known as a personal banker, is someone who works in a bank, acting as a financial advisor to bank members. They can be viewed as a finance professional who helps clients make decisions about their bank accounts, while also communicating bank policies.

Here are a number of job responsibilities expected of relationship bankers:

• Meet with prospective clients in an effort to generate new business for their bank
• Advise current bank members on how to manage their accounts with the bank
• Review bank policies and financial trends to provide clients with the most beneficial financial advice
• Listen to a client’s issues they have encountered with the bank or their accounts, and offer positive solutions
• Perform administrative duties such as answering phone calls, making copies or organizing files
• Communicate with bank officials to discuss new policies and voice customer concerns to upper-management

A relationship banker should have a number of diverse skills in areas related to finance, customer service and communication. Here is a list of skills for a relationship banker:

• Interpersonal communication: A relationship banker interacts with multiple different people while they are completing their job duties. They interact with the bank manager and other employees to discuss issues or policy changes and they also interact with current or potential clients. Therefore they must be able to cater to different personalities and adjust their behavior to reflect different interpersonal relationships.
• Customer service: A relationship banker acts as a client’s advisor in financial matters related to bank accounts and membership information. They have to be personable and service-oriented to maintain beneficial customer interactions and create long-lasting partnerships.
• Persuasive language: A key component of a relationship banker’s job duties is persuading potential clients to start a bank membership and enlist in their services. Being able to use personable traits and persuasive language is important to maintain a constant influx of bank memberships.
• Mathematic abilities: Relationship bankers might be expected to help a client outline their finances and divide money among different accounts. This process requires a degree of mathematical capabilities to properly assist the client.
• Financial knowledge: A relationship banker should have an in-depth understanding of financial terminology, trends and processes, as well as financial information about the banking system, the types of services that are offered and how to use those services in a practical way, in order to help their clients find financial solutions.
• Spreadsheet interpretation: Relationship bankers might spend a certain amount of their time, with their clients or during office hours, reviewing a client’s banking information and account data. For this reason, it is beneficial to be able to review spreadsheet documents and interpret their meaning.
• Software proficiency: As filing systems and other important documentation become digitized, a relationship banker is expected to use computer software programs to input client information or search for documents. Being able to use desktop and online programs efficiently can save valuable work time.
• Attention to detail: A relationship banker’s job requires them to be detail-oriented, as they are expected to look over client records, financial statements and account information to identify issues and find more beneficial ways to store their earnings.
• Problem-solving: Relationship bankers might be tasked with handling client complaints and listening to issues they encounter with the bank. They use their problem-solving skills to provide proactive solutions that satisfy the client and save client-bank relationships.
• Organization: Relationship bankers are often responsible for more than one client at a time, and so it is important that they are well-organized and practice good organizational skills in all areas.
• Compassion: A client may enlist the services of a relationship banker during times of financial instability or stress. For this reason, relationship bankers are expected to be personable and understanding of a client’s situation.

How do Banks Improve Customer Relationships?

Customer engagement can not be achieved in a day, week or a month. It is the foundation of a relationship that includes trust, dialogue, a steady growth in service ownership and a growth in share of wallet if done correctly.

The alternative to focusing on building customer engagement is a relationship that does not meet its full potential or customer attrition. Here are the secrets to setting the foundation for strong customer engagement:

1. Communicate Early and Often

It is interesting how banks and credit unions set objectives for expanding a customer relationship and engagement and then establish arbitrary rules around communication frequency and cadence. It is not uncommon for a bank to limit the number of ‘touches’ to one a month or less despite the fact that a new customer has been shown to desire significantly more interaction as part of their new
relationship.

In fact, research from J.D. Power has found that the optimum number of communication messages during the first 90 day period from both a customer satisfaction and relationship growth perspective is seven ‘touches’ across various communication channels.

An example of an onboarding engagement communications plan is shown below. The contacts below don’t include additional media such as online and mobile banking messaging, ATM messaging, digital retargeting, etc. It is important to remember that at the very least, an engagement communications plan should include a ‘thank you’ message within the first 5 days of the account opening (from either as new or existing customer).

	Focus	Messages Sent	Email	Mobile
Day 1	Welcome & Activation	Welcome Kit Preapproved Offer	Email Capture	Mobile Capture
Day 2	Thank You		Welcome Email	Welcome Text
Day 5	Utilization	New Account Follow-Up ‘Go With’ Service Discussion	Alert Notification Sign-Up	Alert Notification Text
Days 7-30	Utilization & Engagement	Branch Phone Check-In Engagement Letter	Engagement Email (Direct Deposit/Online BillPay)	Engagement Text (Direct Deposit)
Days 30-60	Utilization & Engagement	Branch Engagement Call	Day 30 Engagement Email Day 45 Utilization Email	Engagement Text (Mobile Deposit)
Days 60-90	Engagement & Cross-Sell	Call Center Relationship Expansion	Modeled Engagement Service Email	Engagement Text Rewards Offer
Days 90-180	Cross-Sell	Call Center Relationship Expansions	Modeled Service Cross-Sell	Modeled Service Cross-Sell

2. Personalize The Message

Despite the amount of insight that we collect on a new customer and the processing power most financial institutions have at their disposal, recent research studies show that more than 50 percent of engaged customers get mistargeted communication.

This includes communication about a product/service the customer already owns or about a service that is not in alignment with the insight that the customer shared with the institution.

Today’s consumer has come to expect well targeted and personalized communication. Anything less and trust already achieved is lost. This is especially true with financial services, where the customer has provided very personal information and expects this insight to be used for their advantage.

To build engagement, it is best to build an engagement service sales grid that indicates what services should be emphasized in communication given current product ownership. Engagement communication is not a ‘one size fits all’ dialogue. It should reflect the relationship in real-time.

3. Improve Acquisition Targeting

Customer engagement begins before a new customer even opens an account. With today’s depth of data and processing capability, it is possible to find new prospects that are similar to the best customers who already have accounts at a financial institution. By building acquisition models that look at product usage, financial behavior and relationship profitability, opening accounts that have limited potential for engagement or growth is reduced.

Beyond demographic, financial behavior and product use modeling, geographic modeling is also important since the strongest potential trade areas are not always clearly defined by branch radius mapping.

4. Build Trust Before Selling

As in any relationship, it is imperative that a strong foundation of trust is established before moving the relationship forward. In banking, this equates to providing the necessary information required to best use the service opened before trying to sell another product or service.

If a customer opens a new checking account, the services that should be discussed include:

• Direct Deposit
• Online BillPay
• Online Banking
• Mobile Banking
• Privacy Protection/Security Services

Education around additional enhancements to a checking account that can further build an engaging relationship include:

• Mobile Deposit Capture
• Rewards Program
• Account to Account Transfers
• P2P Transfers
• Electronic Statements
• Notification Alerts

During this relationship growth process, additional insight into the customer’s needs should be collected whenever possible with personalized communication reflecting this new insight.

5. Reward Engagement

Unfortunately, the adage “If you build it, they will come” doesn’t usually apply in banking. While we may build great products and provide new, innovative services, customers often require additional encouragement to use a product optimally and for engagement to grow the way we would desire.

As a result, offers are often required to stimulate the desired behavior. In the development of offers, banks and credit unions should keep in mind that the offer should be built on the product(s) already held as opposed to the product or service being sold.

This is because, especially in financial services, a customer doesn’t completely understand the benefits of the new service. Therefore, if the new account is a checking account, the offer should be one that reduces the cost of the checking, provides an added benefit to the checking or reinforces the checking relationship.

Potential offers could include waived fees or optimally enhanced level(s) of rewards for a specific action or limited duration. The benefit of using rewards would be that a reward program is a strong engagement tool itself.

6. Change the Conversation

One of the key elements of building an engaged customer relationship begins with the conversation during the initial account opening process. To build trust, the conversation must focus on making sure the customer believes that you are genuinely interested in getting to know them, are willing to look out for them and that, over time, you will reward them for their business/loyalty.

This early conversation needs to focus more on capturing insight from the customer and discussing the value different products and services will have from the customer perspective as opposed to simply discussing features. The goal is to illustrate to the customer that the products and services being sold will meet their unique financial and non-financial needs.

Some of the insight that should be collected (beyond the basics) includes:

• Financial objectives
• Primary financial decision maker in the household (it is often the wife)
• Communication channel preference(s)
• Accounts held elsewhere (balance details are not as important as knowing the category)

Unfortunately, research studies indicate that the majority of branch personnel have difficulty having in-depth conversations with customers around needs and the value of an organization’s services. In other words, having a firm grasp of product knowledge is no longer enough. The initial focus should also be on sales quality as opposed to sales quantity.

Interestingly, some financial institutions have begun utilizing iPads to collect insight directly from the customer. While seeming less personal, an iPad new account questionnaire standardizes the collection process and usually is able to collect far more personal information than the bank or credit union employee is comfortable collecting.

7. Keep The Dialogue Going

A customer usually doesn’t react to the first message you send. Instead, they may need several alternative forms of encouragement to take action and to expand their relationship. As a result, the use of digital retargeting and sequential communication becomes important.

Digital retargeting could include reaching out to people who visited (and left) your website or did not respond to a landing page message. Retargeting can also be done for people who open emails but don’t respond, click online sales banners or are wandering the web shopping for services you provide.

Some of the most interesting forms of retargeting today include the ability to retarget customers or prospects who you have sent postal mail but want to reach them either on their computer or their phone as well. While only available on about 30-40% of households currently, response rates can be increased significantly by combining both online and offline messaging.

8. Gear To The Mobile Customer

While direct mail and phone are highly effective in building an engaging relationship, the use of email and SMS texting can significantly improve results because of mobile communication consumption patterns. The reading of email on mobile devices recently surpassed desktop consumption indicating that most messages should be geared to a person who is either on the go or multi-tasking (or both).

To communicate with the mobile customer, email and SMS texting should be direct and to the point. The customer does not want to know everything about the account, they want to know what’s in it for them and how do they respond. While links should be used to provide additional product information if needed, a ‘single click’ option should be available to say “yes.”

With regard to links, many financial institutions have found that using short form videos is the best way to generate understanding and response. Excellent videos around online bill pay, mobile deposit capture and A2A/P2P transfers can not only educate, but immediately link to the “yes” button to close the sale.

When using educational sales videos, it is important to remember that the video should be short (under 30 seconds) and built for mobile consumption first. While a video built for mobile will always play well on larger devices, the opposite is usually not true.

9. Test and Learn

Unfortunately, there is no single formula for success for customer engagement in banking. Because of the difference in market areas, competition, product lines and customer profiles, all of the above secrets of engagement can take on different forms for different institutions. The key is to continue to test your engagement process for optimal efficiency and effectiveness.

Some of the primary variables to test as you build your communications plan include:

• Cadence of communication (how much)
• Sequence of communication (when)
• Channel of communication (how)
• Target audiences (to whom)
• Products marketed (what)
• Offers

The most important lesson for an agile test and learn process is that perfect insight usually takes too long in today’s quickly changing environment. As a result, it is sometimes best to make a quick ‘go/no go’ decision as opposed to a highly detailed analysis that may not yield significantly better results given the expense.

In an era of reduced fee income, increasing competition and a more demanding customer, the benefit of selling a standalone checking accounts will only get an organization so far in terms of revenue growth. It is no longer enough for bankers to be knowledgeable about product options; they need to help customers understand how each option will fit into their overall lifestyle.

Banks need to invest in the personnel, support systems and communication process that will allow them to have the continued dialogue they need to build long-term, profitable customer relationships.

Is a Relationship Banker a Good Job?

Becoming a Personal Banker is a good career for many new graduates. You get to work in prestigious banks like DBS, OCBC, Citibank, HSBC Bank. There are 14 retail banks to choose from in Singapore, and not to mention more than 53 Private Banks.

As you start, you get to be called a banker and dressed in a full-corporate style. The most exciting part of the job is to be able to deal with financial investments: equities, bonds, currencies, derivatives, unit trust, structured product, insurance and more.

In addition, you are put through 1 or 2 months of intensive training to learn about banking, regulations, wealth management, investments and products.

With the whole package from learning to grooming, you now look impressive & intelligent. You start reciting investment instruments and the latest news on Bloomberg or CNBC Money.   And not forgeting the good pay and big commission or bonus you will be getting, which will get you your dream car or vacation.

Getting an interview is not too diffficult, as long as you qualify, as Wealth Management, Banking takes on a few hundred new hires every year.

Since there is such a big demand for Personal Banker, it is attractive to be one. But here is a serious question: Why do more than 50% quit in 9 months?

Investment is exciting. Wealth Management is NOT

The latest IPO, how Alibaba becomes a $200 Billion sensation, the new $600 Million bond with 5.75% coupon or how Swiss Franc collapse 28% in 30 minutes. You can talk about these.

But you end up doing financial planning, risk profiling and recommending products such as Unit Trust, Structured Products, Insurance-linked investments or Dual Currencies.   This is Personal Banking.

You are not the investment expert. You don’t get to pick stocks

You are often asked which is a great investment idea. And because your value add as a Personal Banker or Investment Professional comes from knowing investments better, you are coerced into making a choice. Provide an idea and it could lead onto a sale. Unfortunately, your job title is: Personal Banker, not Stock Trader.

Sales Pressure

An important reason why 50% of Personal Bankers quit the job in 9 months.  After going through 1 or 2 months of training, you will be posted to a banking branch and your sales target starts immediately.  

It is all on-the-job training as you are required to deal with all banking matters and finding clients to discuss about wealth management and recommend investment products that would be suitable to them.

The sales target is not just a single product.  It typically  comprises of insurance, structured product and unit trust.  Add the adherence of regulation and administrative procedure, the Personal Banker is now a super being who can juggle between prospecting, interacting, profiling, sales, documentations.

If that isn’t enough, 7 days a week and sometimes roadshows at shopping malls, extended banking hours.  Your social life literally disappears.  And half of you are still 50% behind sales target.  Worst, you deal with the pressure that the investments that the bank had shortlist, in-turn you had recommended, does not collapse.

Struggling with ethics, integrity, trust, peer pressure

You get access to sensitive personal and banking information.  Birthdays, age, how much money the person has, why accounts are not in joint name.  Maybe juicy ones like having a mistress.  You can’t stand it but to start sharing with your colleagues.

And you forget about Banking Secrecy and China Wall.  Once in a while we hear of fraud.

You don’t get to choose your customers

They come from all walks of life. Some wear shorts and slippers – notoriously & mysteriously known for being extremely wealthy.  Is that true?  Some are educated, some are highly educated, some are not.  Some are picky, some pick on every fee, some complaint about their family.

Five Reasons to Build a Relationship With Your Bank

Financial institutions often push away unprofitable customers, which means becoming best friends with just one bank may prove difficult if you don’t have a lot of cash to offer. But those bank customers who actually add to bank revenue — through large deposit and loan balances — can reap numerous rewards from this win-win situation.

1. Fewer fees

Because you’re considered to be a highly valuable customer, things like checking account overdraft fees are easy to have waived. Not to mention, maintaining higher balances means you’re likely to be exempt from common monthly maintenance fees, which are generally only charged when accounts fail to meet a minimum deposit requirement.

2. Added convenience

Benefits of relationship banking go beyond the obvious financial savings. Eve Callahan, Senior VP of Corporate Communications for Umpqua Bank told me that for both individuals and businesses, “long-term relationship banking provides one point of contact and streamlines financial management.”

In essence, because a bank is already familiar with your financial situation, it takes less time to gather your information and vet the accuracy of what you report. This is not only beneficial when it comes to things like combining statements or transferring money, but also when applying for loans when the approval process can be lengthy and complicated if the lending institution doesn’t “know” you from a previous business relationship.

3. Higher level of customer service

Meyer says that many branch managers are judged by their office’s profitability, and losing a big customer could be the difference between showing profit for a branch and not.

Read Also: Risks and Benefits Associated With Advanced Mobile Banking Technology

“As a manager myself not too many years ago, I had always assigned my best bankers to my top clients,” notes Meyer, explaining, “A bank manager should treat his or her best and most profitable clients like royalty.”

It’s not unusual for customers with particularly profitable accounts to be treated with a much higher level of customer service, often having a single person appointed their personal banker to handle any need as it arises.

4. Long-term insight and planning

Belonging to a bank that is familiar with your financial status and history can also be extremely helpful when it comes to planning for the future. For instance, Callahan tells me strong banking relationships with customers allows Umpqua Bank to take a more proactive role in their lives, allowing them to “identify opportunities to enhance their financial position and grow as their lives do.”

The same is true for business customers in which, according to Callahan, a long-term banking relationship is essential. “During the tough economic environment of the past few years, we were able to work as financial advisors and partners with our long-term clients — we understood the complexities of their business and could talk through the fluctuations they experienced as a partner,” she elaborates.

Finally

There are advantages and drawbacks to a relationship banking approach. One benefit has to do with getting information into the hands of customers that is highly likely to result in a better financial outlook for each of those customers.

Since the bank brought this information to the client instead of waiting for the client to ask for it, there is an increased chance that the customer will feel more like an individual and less like a statistic to the bank.

At the same time, some customers resist relationship banking, feeling that this more personalized approach is nothing more than a selling tactic, designed to entice clients to open accounts they don’t need and commit to paying for services they don’t want.

When this is the case, the relationship-driven approach can actually cause a customer to leave, rather than strengthening the relationship.