Financial Marketing and Cross Selling Blog
The future of financial advise and why banks are well positioned to be the leaders
In a recent American Banker article, “New Rules of Retirement Advice Get Mixed Reviews”, Lydell Bridgeford discusses the Department of Labor’s new regulation plans on how financial services firms that act as plan fiduciaries can provide investment advice to their plans participants.
The new regulations allow participants to receive investment advice through a computer model certified as unbiased. The idea is to create a regulatory environment where financial services firms could provide advice to plan participants in a way that doesn’t conflict with their own interests.
These new regulations were introduced back on January 21st but put on hold by the Obama administration to allow further review. The original launch date was set for March 23rd but it’s now set for May 23rd. Many suspect that senior Obama officials and Democratic senators are going to try and reverse some of the Bush-era regulations in the Pension Plan Act of 2006.
But according to Alan Vorchheimer, principal at Buck Consultants in New York, he’s not so sure these new regulations will help plan participants to have access to investment advice. He believes many fiduciary advisers will see the annual audits and compliance ensuring the advice being provide is unbiased as burdensome and won’t choose to provide such a computer system to participants.
How does this go in favor of banks? Simple, unlike plan providers, banks don’t care which product their customers eventually choose. There is no conflict of interest what so ever leaving the investment advice and education window wide open for banks to provide. And studies show that many consumers are more open to receiving messages from their bank then any other type of financial institution. According to a study conducted by the BAI and Mercatus LLC in 2007, “mass affluent consumers who are generally less confident about retirement, and who are worried they lack sufficient assets to retire, are the most receptive to bank messages”. And with recent scandals such as the highly publicized Madoff scheme, I can only imagine that the number of consumers more receptive to their banks messages has gone up.
The article ends with Cara Welch, director of public policy at WorldatWork, saying, “there is also a concern that you can overwhelm an employee with too much information, so you have to make sure that the education or advice that is provided is clear and makes sense to the employee”. Cara brings up what might be the single biggest challenge facing those looking to provide education and advice to customers. Having education is one thing, but having education that is easy to read and understand is a whole other ball of wax. If you don’t get this right, then all your efforts will most likely fall upon deaf ears.
The future of financial advice and why banks are well positioned to be the leaders
In a recent American Banker article, “New Rules of Retirement Advice Get Mixed Reviews”, Lydell Bridgeford discusses the Department of Labor’s new regulation plans on how financial services firms that act as plan fiduciaries can provide investment advice to their plans participants.
The new regulations allow participants to receive investment advice through a computer model certified as unbiased. The idea is to create a regulatory environment where financial services firms could provide advice to plan participants in a way that doesn’t conflict with their own interests.
These new regulations were introduced back on January 21st but put on hold by the Obama administration to allow further review. The original launch date was set for March 23rd but it’s now set for May 23rd. Many suspect that senior Obama officials and Democratic senators are going to try and reverse some of the Bush-era regulations in the Pension Plan Act of 2006.
But according to Alan Vorchheimer, principal at Buck Consultants in New York, he’s not so sure these new regulations will help plan participants to have access to investment advice. He believes many fiduciary advisers will see the annual audits and compliance ensuring the advice being provide is unbiased as burdensome and won’t choose to provide such a computer system to participants.
How does this go in favor of banks? Simple, unlike plan providers, banks don’t care which product their customers eventually choose. There is no conflict of interest what so ever leaving the investment advice and education window wide open for banks to provide. And studies show that many consumers are more open to receiving messages from their bank then any other type of financial institution. According to a study conducted by the BAI and Mercatus LLC in 2007, “mass affluent consumers who are generally less confident about retirement, and who are worried they lack sufficient assets to retire, are the most receptive to bank messages”. And with recent scandals such as the highly publicized Madoff scheme, I can only imagine that the number of consumers more receptive to their banks messages has gone up.
The article ends with Cara Welch, director of public policy at WorldatWork, saying, “there is also a concern that you can overwhelm an employee with too much information, so you have to make sure that the education or advice that is provided is clear and makes sense to the employee”. Cara brings up what might be the single biggest challenge facing those looking to provide education and advice to customers. Having education is one thing, but having education that is easy to read and understand is a whole other ball of wax. If you don’t get this right, then all your efforts will most likely fall upon deaf ears.
America’s financial literacy problem similar to cooking problem
Last Sunday I was awash with a bit of irony as I watched 60 minutes. As you know, the Fed Chairman held a rare interview with the press. Mr. Bernake said the Fed is aiming to be more transparent and this interview was a way of showing the public they’re serious.
But what sparked me to write this post today was not the interview with Mr. Bernake. It was the following segment on Alice Waters. Alice is a celebrity of sorts in the food industry. She is a pioneer of the “California Cuisine” which promotes locally grown food and organic ingredients. In this segment they highlight her goal to install local produce gardens and cooking classes into our schooling system. She’s even pushing for the White House to build the first ever vegetable garden on the lawn. The irony behind these two segments being back to back is the striking similarities between the financial literacy crisis we face today and the food movement struggle that we’ve been faced with for ages.
Watch beginning of this segment:
Brand Finance’s “Global Banking 500″
Thanks to The Financial Brand, I found my way to the home page of Brand Finance, a leader in independent brand valuation consultancy. They have a report called the “Global Banking 500″ that showcases the top 500 bank brands based on their value.
How does this group determine the value of an institutions brand? Here are some key points taken from their site:
- We value intangible assets as components of Enterprise Value, and carry our rigorous market and comparable analysis to support assumptions
- We match the basis and methods for each valuation to its purpose and the reporting jurisdiction
- Our robust valuation approach is enhanced by an integrated knowledge of marketing, licensing and brand transactions
- We work closely with client’s auditors, tax advisers and lawyers
Collectively among the top 500, brand value fell by $218.1 billion and 198 brands from 2007 were completely knocked off because they either disappeared (Lehman Brothers) or taken over by government (Fannie and Freddie).
The report is free once you provide a bit of information about yourself. Download your copy today: Download.
We don’t hear enough about how banks are perceived, especially in this country. Everyone is too focused on gathering deposits and building new products and adding perks to attract those customers who are jumping ship left and right. All the while the overall perception of banks has not changed and the value proposition continues to fall short of expectations.
The question is, who will take the reigns and stand out from the pack? Better yet, how do banks go about changing their image in the eyes of customers today? If you haven’t read our one page brief, Using Customer Education to Boost Image and Sales, take a minute to do so and let us know what you think.
Succeeding in a down market…Texas style
A big focus for us at Truebridge is filtering out the bad news and focusing on the positives. In doing so, we recognize that there’s a lot we can learn from the mistakes that have been made by the larger financial firms, but when you brush all those aside, you expose a whole universe of individuals and institutions that have remained strong by sticking to their tried and true business practices.
Recently we highlighted a few stories that the media has covered over the past couple months about banks. Here’s a story about an individual working inside a community bank in Texas.
Today the American Banker highlighted a Texas rep whose production grew 300% in the past two years, which is triple the industry average.
Brian Surovik is a financial advisor at Lone Star Bank in College Station, TX. The tag line for this bank reads, “Financial services… Texas Style”. When I think of the Texas culture, I think of cowboys, BBQ’s and line dancing. However, I’m also reminded of the southern hospitality that asks you to slow down, take a break and chat with your neighbor. This style fits perfectly with financial services and Brian is one who takes it to heart.
Over the past few years he’s bounced around. He moved from a brokerage, Edward D. Jones & Co. LP, to a bank in 2004 and hasn’t looked back since. Over the years he’s gone through mergers, acquisitions and most recently, government takeovers. This has given Brian a degree in client hand-holding and with the current environment, the lessons he’s learned are paying off.
So what is it that makes Brian so successful? According to the American Banker article, one technique is asking clients for referrals. This is sales 101. But just asking won’t work unless you’ve taken the steps to ensure clients will agree to provide the names of their friends and family. The article goes on to state his client appreciation dinners and constant financial planning reviews. In other words, he focuses on existing clients. By doing so, Brian receives more client referrals and increases his retention rate.
He also conducts several educational seminars. Education today is a key driver for success. Those who are there to help the consumer understand their options in a clear, concise, and honest manner will win in this environment.
Financial advisors are not the only ones who can learn a few things from Brian, so can banks. We’ve heard it time and time again. According to Gartner Research, it’s five times more expensive to acquire a new customer then it is to retain. By focusing on your existing customers you’ll increase retention, referrals and get more out of your marketing dollars.
Live blogging from BISA Conference
Today at the BISA conference starts the peer sessions and speaker series. The first guest speaker today is Dr. Richard Marston from Wharton School of Business. Dr. Marston is a professor of finance and director of the Weiss Center for International Research.
He discussed the economy and gave a good overview of what’s to come and what in his opinion folks should do to weather the storm. Here is my overview.
The crisis
8:50 am: Here we are in Florida and what a better place to be talking about where this all began as this is ground zero. Miami real estate market down 41%. California, Phoenix and Nevada are even worse.
8:52 am: Lowering the interest rates doesn’t work this time.
8:57 am: Depression in 29 was caused by allowing banks to fail so Bernanke and his team are doing the right thing by doing what they can to prevent the system from collapsing.
9:00 am: Fed’s balance sheet near 2.5 trillion. Was around 900 billion. Needed to do this to get commercial paper flowing again. It’s working and the balance sheet is starting to go down but must keep this trend otherwise we’ll have inflation.
Geitner and the Treasury
9:03 am: Geitner is basically alone. Needs a team assembled but hard to do when every appointee must take two months to review their income tax reports.
9:05 am: Thinks TARF program is a key ingredient. Not to be mistaken with TARP, TARF suports the securities for credit card debt, student loans and auto loans.
9:08 am: Must build a convincing plan for getting rid of the bad mortgage assets on the bank books.
Economic climate
9:10 am: Believes the recession really began in September. This is different then the NBER’s report that it began in December 2007.
9:13 am: Consumers began to ramp up saving around this time because of the failures and dramatic drops in stocks.
9:14 am: Lehman was not a cause but a symptom.
9:16 am: He likes the economic team in Washington. Thinks they will do a good job eventually.
9:20 am: The stimulus package is a big failure. Congress had an opportunity to pump up the economy by instead they ramped up their pet projects. Thinks we should start over with a new congress. Got a big applause from the crowd.
9:22 am: Exports are way down all over the world.
9:25 am: Businesses are not expanding (would you?).
9:26 am: It will be the American public who pulls us out of this recession. But right now they’re saving, which they should be.
9:27 am: There is some “pump primer” in the stimulus package that will help the American consumer to start spending again. But this is far down the road. Maybe late in the summer.
Future
9: 28 am: Ugly year ahead.
9:30 am: Next winter could be the beginning of the turn around but environment will still appear dark. Jobs will continue to be low even while economy makes a turn around. Typical of a recovery.
9:31 am: The age of pension plans are over. Some still out there in the public sector.
9:32 am: Last recession, real estate helped us escape but not this time.
9:31 am: No place to hide, not even in the bond market.
What should an investor do?
9:32 am: Be reminded of the upswing.
9:33 am: Past recession data - first 12 months of upswing markets soared by 30%.
9:35 am: But nobody can predict when this upswing will occur. The NBER won’t even officially report when it started until 12 months after it began. So you must prep for the eventual upswing.
9:37 am: Retirees must cut spending over a three year period.
- 1st year – 8%
- 2nd year – 16%
- 3rd year – 24%
9:38 am: Bonds won’t last through retirement because of the inflation rates. Especially if you become ill as health care inflation is very high.
9:39 am: Must rebalance portfolios by drawing down bonds, not stocks. Don’t lock in losses.
Closing
9:41 am: Investment bankers and gunslingers will be put in their place and will not return. The strong will survive. The financial sector will rebound as the majority of those involved are smart and looking out for their clients, not just their wallets.
9:42 am: Country will survive due to inner strength of America. Is hoping he’ll be invited back in two years to report on our turn around.
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