Dr. Mark Gjerde has been managing his business and personal finances with Dan Lawrence, the president of Elk Grove Commerce Bank, a Bank of Stockton branch, since 2007

Dr. Mark Gjerde has been managing his business and personal finances with Dan Lawrence, the president of Elk Grove Commerce Bank, a Bank of Stockton branch, since 2007

Elder Appeal

Community banks boost services to retain retirement-bound clients

Back Article Nov 1, 2013 By Esther Shein

Robert Fay likes to tell the story of a client whose father worked with his grandmother long ago. She mentioned her plan to move her money to an investment firm. “I told her, ‘You should talk to me.’ After we had gone through all that [our bank could] do, I said, ‘Dorothy, you know I’m going to do the best I can for you.’ She said, ‘I know you will. And if you don’t, I’ll tell your mother.’”

That, says Fay, was enough impetus to keep him on his toes, and today she’s still his client.

For Fay, a vice president and senior trust officer at Bank of Stockton, and other bankers catering to a growing number of clients nearing retirement, this anecdote illustrates why personal touch remains paramount in an increasingly digital world. Without it, local banks risk losing business to large corporations perceived as more capable of providing wealth management advice and retirement services.

“Customer engagement is becoming more important to drive overall customer profitability,’’ says Marc DeCastro, research director of customer-centric strategies at IDC Financial Insights. As banking institutions determine how to best engage and retain clients, “The challenge is that the correct message and channel for delivery varies from customer to customer. Age is certainly a factor, and the older demographic is more comfortable with the engagement happening either in a branch or online, while younger demographics are more inclined to use a mobile solution.”

And there’s no question that as boomers move toward retirement their financial needs will be shifting. Older clients are changing their focus from asset accumulation to asset protection, and local banks are learning that they need to grow customer relationships and third-party partnerships in order to keep those clients from departing.

Banks need to deliver more actionable advice to their boomer customers in order to help them make the best decisions for their immediate needs, DeCastro says. “The technology is there, allowing banks to properly analyze all the information they have about their customers’ demographics and habits to help them make more informed decisions. Yet only recently have we started to see some real traction from financial institutions around this.”

While banks consider how best to serve retiring boomers, older Americans have been “caught in a gray area of servicing,’’ according to a 2011 report by financial services firm Novantas. “On the one hand, they are underserved by financial advisors, who tend to curtail time with these customers to focus elsewhere on larger accounts. On the other hand, there is an excess of branch service that mainly focuses on individual product sales rather than comprehensive financial planning.”

That focus appears to be changing in the Capital Region as more community banks recognize that, in order to stay competitive, they must offer products that protect principal and generate dependable income. At the same time, banks must provide boomers solid advice on how to handle the transition.

A 2012 community banking study by KPMG found that the three biggest overall growth drivers in the banking industry in the next one to three years will be asset and wealth management (40 percent), cross-selling services (30 percent) and business-model restructuring (23 percent).

First Northern Bank in Dixon has been paying particular attention to that first trend.

About 15 years ago, senior management realized boomers were providing a huge opportunity for the bank to capture investment and trust business. “We saw some of our loyal customers going to bigger banks that offered trust services,’’ says Chris Ann Bachtel, a senior vice president for asset management. Now, First Northern is the only bank in Sacramento with a trust department, she says. In order to meet the bank’s private-client-services criteria, a client must have $250,000 in investable assets.

Baby boomers comprise 33 percent of First Northern’s client portfolio. In addition to the trust department, which opened about 10 years ago, the bank has an affiliation with the firm Raymond James, which provides investment and brokerage services, according to bank President Louise Walker.

“A lot of them really want to travel and focus on relationships, which they couldn’t do while making money. So we’re seeing a shift in the way they’re approaching wealth,’’ Bachtel says. “Previously, older generations didn’t speak about money, and children didn’t know what they’d inherit. Now, we’re finding baby boomers are very inclined to discuss wealth with children. We as a community bank facilitate those discussions. They want advice and want to work with someone they trust and have a relationship with.”

Furthermore, many boomers are small-business owners that can benefit from First Northern’s electronic services. And, since many of these clients are on the go, the bank has also joined a network that allows customers to use surcharge-free ATMs. “These are things we’re doing that make us just as attractive as a large bank,’’ Walker says.

Personalized service is also the hook at Sacramento-based River City Bank, says Stan SooHoo, senior vice president and head of premier banking, which services high-net-worth clients. With assets topping $1 billion, River City is the largest locally owned bank in the region, and SooHoo estimates nearly 60 percent of its boomer clients are premier customers, which means they maintain liquid investable assets of $250,000 or a mortgage of $470,000 or more.

High-net-worth customers of all ages are assigned their own premier banker at River City. And while those bankers don’t have security licenses, SooHoo says they do a lot of inquiring about clients’ goals and objectives. Premier bankers emphasize long-term health insurance and having enough money set aside to cover the mortgage.

“What we’re finding is an imbalance. People in the baby boomer group are still carrying mortgages and were not saving at the same rate,” SooHoo says.

River City has partnered with investment firm Genovese Burford & Brothers in Sacramento to offer quarterly seminars on topics that have included Medicare and Social Security. The partnership has also been helpful since the bank doesn’t have a trust department.

Echoing the other bankers, SooHoo says, “The reason why customers are asking us [for help] is because they trust us. There are many times we’ll sit in on those meetings [with the investment firm] because the trust is with a premier banker. We’ll join the call so our customer knows we’re not abandoning them when we refer them.” The bank also partners with CPAs and attorneys in order to meet various client needs.

Like River City, Bank of Stockton offers plenty of products for retirement-age clients, but service is the prime focus, says Fay. Boomers often don’t realize the availability of services provided by the bank’s trust department or the advantage of accessing them early.

“Most people tend to think they don’t have to go to the trust department until it’s time to set up a trust and wills,” Fay says. “They need to think about not just retirement plans, but estate plans. So if something happens to them when they are young, the plan is in place. So it’s really thinking beyond retirement. There are no fees for talking.”

Most of their customers — some of whom are fourth- or fifth-generation clients — know the bank’s loan officers by name. Fay has worked for two large national banks as well as small banks and says the value of local banking comes in being “able to walk through the lobby and see the president and call him by his first name and he calls me by mine. It’s not something you see very often in the banking world. We provide all the services young people want, and we’re also providing old-world services.”

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