Bank Board Letter January 2016 : Page 2
Asset: This information is readily available or can be viewed within one click of landing on your website. Example: Heartland Bank, Gowrie, Iowa, www.heartlandbanks.com Use Across Devices Whether you live in an urban, suburban or rural area, one max-im rings true: More people are accessing the Internet through mobile devices. Desktops and laptops are still a popular option, but tablets and smartphones are being used to access websites with increasing regularity. Liability: Going to your website on a smartphone means you have to pinch and zoom to navigate. Asset: Your website looks and functions properly on most devices, from desktops to smartphones. Example: The Bank of Blue Valley, Overland Park, Kan., www.bankbv.com Liability: Only offering one way to apply for loans, open de-posit accounts, etc. Asset: Offering multiple ways to complete actions Ð submit a secure online form, fillable PDF, printable PDF to be filled out and faxed or brought by and so on. Example: Raccoon Valley Bank, Perry, Iowa, www.raccoonvalleybank.com imAgerY Again, how a customer or prospective customer feels about your institution is vital to building a relationship to them. Since hu-mans process visuals 60,000 times faster than text, having the right imagery within your website can make a huge difference in a visitor’s perception of your bank. Liability: No photos or images, very small or pixelated im-ages, obviously posed stock images. Asset: High-quality photos that are the right size and resolu-tion, original photos of your offices, staff or community. Example: Fairfax State Savings Bank, Fairfax, Iowa, www. thebankhere.com How would you grade your website? Are you deep in the red, breaking even or in the black? Is your website out of date, miss-ing information or designed to meet your needs instead of those of your customers? If so, you have a liability on your hands. But it can be remedied. You just have to approach it like you would any other asset you own: be meticulous about what you want from it, set a plan and ask for help from professionals to ensure it is done correctly. A modern, user-friendly website promotes trust and a posi-tive perception about your bank. In an increasingly online world, those are two assets that are more valuable to have than ever. Matt Cunard is senior digital marketer for VGM Forbin.For more information, visit www.forbin.com. YoUr ProDUcts AnD services Online banking is no longer a novelty but an expectation. The same can be said for mobile banking. And all of these products are essentially the same with a few variations. So how do you stand out? Liability: Simply listing out products in a “we offer” format (“We offer Mobile Banking, Bill Pay”). Asset: Focusing on benefits over features. In simpler terms, how does product X help your customer or make his or her life easier? Example: Putnam Bank, Putnam, Conn., www.putnambank.com APPlicAtions Everyone has their own preferences in regard to interacting with your bank. For example, if they need a loan, they may not feel comfortable applying in person, but rather through an on-line form. Others may only want face-to-face interaction. Offering investment services tO BOOst fee incOme By DaviD Doerflinger t he current financial services landscape, an industry crowded with competitive bank buyouts and consolidation, is leaving community banks at risk. Justifiably, a financial institution’s noninterest income strategy remains an important business model for these locally owned, Main Street institutions. Not surprisingly, an analysis of the top 25 percent (as measured by return on average assets) of U.S. banks between $100 million and $10 billion in total assets shows noninterest income 17 percent higher Next moNth: Niche Focus Yields Big Results Deposit Automation at the Atm than their lesser-performing counterparts (SNL Financial, LC). With regulations handcuffing banks from focusing on noninterest income traditionally derived from service charges on deposit ac-counts, banking executives must search for other income generators. So where do community banks turn? One method to meet and increase noninterest income is by establishing an on-site third-party investment program, which not only generates revenue for the bank, but strengthens cus-tomer relationships and client retention. Thousands of institu-tions have capitalized on their noninterest income potential since the first bank offered financial products and services to its customers through a relationship with a third-party broker-dealer more than three decades ago. Today, investment pro-grams still prove to be one of the easiest to implement and most profitable solutions for a community bank. In case studies conducted with community banks in the Northeast and South Central regions of the United States,
OFFERING INVESTMENT SERVICES TO BOOST FEE INCOME
The current financial services landscape, an industry crowded with competitive bank buyouts and consolidation, is leaving community banks at risk. Justifiably, a financial institution’s noninterest income strategy remains an important business model for these locally owned, Main Street institutions.
Not surprisingly, an analysis of the top 25 percent (as measured by return on average assets) of U.S. banks between $100 million and $10 billion in total assets shows noninterest income 17 percent higher than their lesser-performing counterparts (SNL Financial, LC). With regulations handcuffing banks from focusing on noninterest income traditionally derived from service charges on deposit accounts, banking executives must search for other income generators.
So where do community banks turn?
One method to meet and increase noninterest income is by establishing an on-site third-party investment program, which not only generates revenue for the bank, but strengthens customer relationships and client retention. Thousands of institutions have capitalized on their noninterest income potential since the first bank offered financial products and services to its customers through a relationship with a third-party brokerdealer more than three decades ago. Today, investment programs still prove to be one of the easiest to implement and most profitable solutions for a community bank.
In case studies conducted with community banks in the Northeast and South Central regions of the United States, institutions saw substantial income from their third-party broker-dealer as a result of their retail brokerage program.
As part of the study, a $900 million institution in the Northeast Metropolitan Statistical Area, with 12 branches, converted its existing investment program from one of the industry’s largest brokerage firms, to Investment Professionals Inc., one of the few remaining broker-dealers dedicated to the community bank channel. A transition to IPI resulted in first-year revenues of nearly $600,000 to the bank’s bottom line.
Today, this Northeastern community bank and its investment program are booming. But, prior to IPI, the bank faced a much different scenario.
A long-standing relationship with their broker-dealer had deteriorated, and the investment program had become stagnant. The underperforming program had fallen short of the bank’s noninterest income expectations and goals.
With the help of the firm’s dedicated marketing, compliance and recruiting teams, the bank’s on-site investment program was relaunched in their community. Through turnkey marketing, including private labeling and a well-designed advertising strategy, as well as extensive recruiting efforts that brought on two well-matched, high-performing financial advisers from a candidate pool of nearly 750, IPI created a tailored, successful program that truly fit the bank’s specific needs.
Now, the bank and its financial advisors are armed with a home office dedicated to their program’s success. With the help of the firm’s sales team, which includes a local regional director living in the Northeast region and an operations team exceeding industry standards for processing business, the bank has generated more noninterest income than at any point with its former broker-dealer. Bank-customer relationships are ever-growing, the sales culture within the bank is strong, and the bank’s and advisers’ relationship with IPI is robust.
Similarly, in the South Central region, a community bank with a network of 12 branches and approximately $750 million in total assets that had never before offered investment or brokerage services to its customers partnered with IPI to launch a program.
Though clearly a successful institution, prior to working with IPI the bank struggled in its pursuit of new customers.
It needed a solution that would help capitalize on the bank’s strong market share to attract prospects through new service lines and product offerings. Instituting an on-site retail brokerage program resulted in first-year revenues of more than $350,000 to the bank.
With no previous experience in investment programs or related products and services, the bank naturally had little to no knowledge of how or where to begin, program best practices to maximize results, or compliance and regulation requirements, among other things.
Understandably, banks that lack experience with brokerage are hesitant for many reasons: perceived associated risks and regulatory burdens, as well as supervisory responsibilities, to name a few. However, by partnering with a broker-dealer wellversed in managing successful investment programs, the institution received the guidance necessary to hit the ground running.
The bank relied heavily on IPI to launch its program, ensuring the proper structure was in place to maximize results and minimize risk. The firm’s compliance team led the effort to indemnify the bank and create a secure setup and standard operating procedures. Achieving maximum revenue results, was, in part, supported by IPI’s bank-dedicated recruiting team that assisted the bank in securing two skillful advisors. With the support of IPI’s results-driven sales department, these two top-producing advisors have generated more than $1.5 million in gross revenue to the bank’s bottom line.
Largely, the bank’s decision to partner with a community bank-focused broker-dealer to implement new products and services for customers helped expand its value proposition, which in turn helped meet client-acquisition goals. As an added advantage, these new products and services also have helped secure a higher retention rate for established bank customers. Today, IPI maintains a close relationship with the bank and financial advisors to ensure the program remains profitable and its unique goals are continuously outperforming expectations.
In a particularly competitive industry, community banks are having to utilize non-traditional means to grow their businesses. Case after case proves that increasing noninterest income strategically through an investment program can be impactful to a bank’s bottom line. The concept innovate or die cannot be any more applicable.
David Doerflinger serves as Midwest regional director for Investment Professionals Inc., based in San Antonio, Texas.