When a company is looking to transition from its current bank to a new one, competing banks will all pitch the potential client on relationships. Often, however, they’re pitching a relationship with the bank and its services, not with the person responsible for the account.
“A true banking relationship is about knowing who you’re dealing with, understanding them as people, and dealing with the people at the bank who actually make the decisions, not a computer,” says Kurt Kappa, senior vice president and market leader at Westfield Bank.
“It’s important that your banker gets to know your business, what keeps you up at night, what could help you generate more revenue. A great banker gets to know your entire circle as people. That’s relationship banking — knowing customers as people, not just saying the words.”
Smart Business spoke with Kappa to understand what true relationship banking entails.
How might banking customers be misled by the concept of relationship banking?
To some banks, relationship banking means personal accounts, car loans or private banking services. Those might be great solutions, but banks all have the same products, for the most part. Real relationship banking is about building an understanding with your banker. It’s real people doing business with real people who care about each other as more than just customers.
Relationship banking is more than just talking. There are tangible benefits. For instance, true relationship banking gives you an adviser on your side who can help you grow and help you when times are tough. By understanding your business, your banker can look out for your financial interests while you concentrate on your business. In this arrangement, your banker knows what you need, which means you don’t have to tell the same story over and over.
What is a true relationship banking arrangement?
Business owners need someone who is an advocate for them, not for the bank or the line of banking they manage. For instance, at many banks you’ll deal with one person who handles equipment loans and another person for a line of credit. In each of those instances, whoever you’re dealing with will be pushing only the products for which they’re responsible, regardless of how they might fit your need.
In true relationship banking, one point of contact manages all of your deals. That person understands you, your business and your cash flow cycle. He or she is in a position at the bank to make decisions and is making recommendations based on conversations with you about your business, your risk tolerance, your plans.
Let’s say a company thinks it needs a term loan. That may not be right. If that request were processed, it can mean that business is locked into a product it didn’t need and ends up costing more than it helps. That doesn’t happen when a company has a good working relationship with its bank because the banker knows the right questions to ask to find the right product for the situation and the business.
What might banking customers miss out on if they’re engaged in a non-relationship banking arrangement?
In any banking arrangement that’s not relationship-driven you become not much more than a number. You get a debit card and a monthly statement, but you may not know who to turn to when an issue or opportunity arises. Instead, you’ll stand in the teller line with everybody else, tell them what you need, tell your story and hope they give you money.
Relationship banking brings flexibility on the structuring and price of common products. You can tell your personal representative about your difficulties and get individualized solutions rather than apply a strict definition of the rules.
A true relationship-driven banker will come visit your business to understand how you operate and understand your processes. The banker will work to learn your strategy and put a financing package together based on your specific needs. He or she will be there for more than just quarterly office visits. That personal level of service can reveal a person’s true banking needs, rather than uncover opportunities for an up-sell.
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