Boomers are taking control of their finances – unless banks demonstrate how their products help, they will become a casualty of newly engaged boomers looking for change.

For most boomers, the recession has not had a major impact on their retirement hopes – because their retirement hopes were always modest. The recession and stock market losses may have forced a few baby boomers, particularly moderately wealthy boomers, to adjust their image of retirement. However, almost three-quarters of baby boomers have less than $100,000 in investable assets. For these “mass market” boomers, the stereotypical pre-recession image of retirement was always far outside of their financial means. Mass market boomers have modest retirement expectations: they will reduce their living expenses, continue to work part-time, and travel very little. Read More »

I sleep better when the world makes sense. 

Despite its Lean techniques, Toyota, a customer-driven business icon, is struggling.  It makes no sense.  In my attempt to understand their sudden woes, I somehow found my way back to consumer banking and was struck by what I found when I connected seemingly disparate parts of the business environment together—the massive Toyota manufacturing defect and the bank crisis, starting with subprime.   What role does a passion for the customer play in defects of the risk, profit, and accelerator pedal varieties?

How Customer Centricity Killed the Economy, will be the title of the book that I someday write but for now, I am satisfied just to understand the role that a relentless pursuit of serving customer needs played in getting us to where we are today in consumer banking.   Customers hated the onerous process of getting a mortgage and data suggested that risks were low enough to accept fewer, if any, pieces of paper so enter low-doc mortgage.  Customers wanted to buy better homes or get into their first home faster and home values were climbing so enter pay-option arm.  We were all happy until the floor fell out from under us.

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A byproduct of changes to Regulation E is the future of the checking account.  Will the industry abandon free checking and return to the more traditional banking practices of charging account maintenance fees?  While the full impact remains to be seen, customers are sharing their views on a fee-based world.

According to a survey administered by MoneyRates.com, 49% of respondents said “avoiding monthly maintenance fees” was the most important factor in choosing a checking account.  Responding to a recent New York Times article, “Would You Pay for  a Checking Account?,” customers state “No, I won’t pay for a checking account” and “should [my bank] try charging me I’ll shop around until I find the last bank offering free checking.” Banks therefore find themselves in a delicate situation with huge implications. So… what now? Read More »

I was speaking with a friend the other day about the proposed financial regulations here in the U.S., including the creation of a Consumer Financial Protection Agency.  Industry opposition to the CFPA brought to mind an incident in high school.

A monitor was hired to patrol the student parking lot before first period and again during lunch hour.  Her job?  To make sure the kids who gathered there didn’t smoke.  The plan caused the kind of uproar you might expect from rebellious teenagers, with the president of the student council likening the monitor to Orwell’s Big Brother.  When council representatives met with the principal to complain (assuring him that of course they didn’t smoke), he asked them, “So what are you worried about, if you’re not doing anything wrong?”  The controversy was quickly forgotten and the monitor became a regular fixture, winning everyone over (the non-smokers, anyway) by handing out free candy on Halloween and Saint Valentine’s Day.

The moral of the story?  Forward-thinking banks and credit unions already cast their relationships with customers and members as a fair and transparent exchange of value; they’re not worried about the creation of an agency meant to clamp down on practices they’ve shunned anyway.  As Bloomberg’s Susan Antilla wrote in her column on January 25, “Among [the CFPA’s] goals, which in some sections read like a treatise against loan-sharking, are to truthfully explain costs, benefits and risks of financial products to consumers and to do it all in plain English.”  In short: that is nothing earth-shattering, nothing that will change the way reputable institutions already do business.

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Most recently, I’ve been exploring the Future of Retail Banking (upcoming posts will preview the Council’s predictions). Through my work, I learned that it is important to have a firm understanding of today’s realities in order to gain a window into the future.  One reality that has become increasingly clear to me is that banking is becoming a social right rather than a privilege. Just see a few examples of “banks” that are bringing a social purpose to financial services: Read More »

My favorite topic, after banking that is, is relationships. This secret (or now not-so-secret) interest of mine is probably driven by the fact that I have become the “go-to” girl for relationship advice among my friends.

After years of counseling friends on their romantic relationships, I’m now turning to banks. Yesterday, I asked myself, “If close to half of serious relationships end in divorce, do banks stand a chance of growing lifetime relationships with customers?” How many millions has your bank spent on CRM, technology, or consulting to achieve lifetime relationship profitability?

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I’ve spent the last few weeks reviewing retail banking products launched within the past 12 months, working to identify the key product trends that have emerged.  I’ve selected seven trends to focus on – from educational web sites to transparency to credit– and noted what the best examples look like (more on this later).  Yet, there is one trend I left on the cutting room floor: mobile banking.  Instead, I’m exploring it here in the blogosphere in hopes that someone will let me know if I should create trend number 8.

Sure, everyone keeps saying that mobile banking is going to be huge.  In fact, just this week American Banker told us that 2009 marked a turning point for mobile banking and that 2010 will be the year when mobile banking gains real acceptance.  However, many of the executives I speak with still aren’t sure how much to invest in mobile banking, and neither am I. So, when I finally upgraded my ancient cell phone to a smart phone, I decided to see what all the hubbub was about:

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Our practice manager, Sharon Chinn, referred to me in her recent post as resident doctor of consumer banking.  I’m flattered!  I only wish that the challenges faced by today’s bankers were amenable to that old-fashioned prescription, “Take two aspirin and call me in the morning.”

I’ve had the chance during the last several years to interact with hundreds of executives at banks, credit unions, cooperatives, and cajas.  It’s been interesting to track the patterns of what’s been cooking on their proverbial front burners.

Challenges have typically been similar across geographies, as well as distinctly cyclical.  It really didn’t matter where you went: with a few exceptions, the same issues tended to resonate across our membership at roughly the same time.  At the turn of the century, it was all about getting on “the Net” (funny how that term sounds dated now!).  Next came CRM, the customer experience, and (by 2006) strategies for continued growth in an environment about to turn.

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The Council on Financial Competition just completed a survey of 1,250 US ”baby boomers” about their attitudes to saving, spending and investments.  With all that has gone on over the past two years we know one thing for sure — whatever financial institutions thought they knew about consumer attitudes and behaviors probably isn’t true now. 

So we asked. 

An early piece of uncomfortable but not surprising news.  42% of mass market baby boomers who in the last year went to the firm that managed the largest share of their savings and investments looking for guidance reduced their share of wallet with the firm.  Only 16% increased their share of wallet.  In contrast, high net worth customers (investable assets greater than $1 million) who updated or created a plan with their advisor were 47% more likely to increase their share of wallet and 43% more likely to increase their investments as a proportion of income.  Why the disparity?

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Last Friday the House passed its version of financial regulation reform. What struck me most about the debate was how the final package differed from the original proposals put forth by the House Financial Services Committee. On December 3, I attended a briefing with Congressmen and Financial Services Committee members Brad Miller (D-NC) and Ed Perlmutter (D-CO), who spoke briefly on the status of the bills and their expectations for the full House debate.

Here’s what I see as the key differences between Committee expectations – as expressed by Congressmen Miller and Perlmutter – and the final package, as well as what the House experience bodes for the Senate process:

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