Thursday, April 3, 2014

This material originally appeared on my Rural Economic Revitalization Blog at The Des Moines Register recently reported that 50% or more of those expected to inherit farm land will sell it.  This reminded me that Generational Retention remains a key to the continued viability of many community banks. I will expound on each of the three key issues, but I felt it appropriate to include this general post as a reminder:

General Transfer is a key issue for most rural banks. One challenge these banks have is relationship retention. If you've taken the first step (and some are frankly afraid to look) and found that many of the heirs to your current deposits are "somewhere else" then you realize the challenge. Two parallel tracks are necessary. First, address the heirs who are still local. Reach out, through parents if necessary, to form relationships and help these heirs learn that your bank can be a valuable tool for managing the assets that will be left to them, be they a business, land, or simply deposits. Second, put together a plan to reach out to absentee heirs with essentially the same message . . . we are here to help you manage your inheritance. Your plan for resident and non-resident heirs is comprised of three main parts: relationship (a face); services; and technology.

Generational Retention: Relationships
In keeping with the theme of what community banks can do to preserve relationships as older depositors die off, my last post indicated there were three keys. This time, lets look at the first key - the Relationship Factor. If you want to keep banking relationships beyond the current generation, you must - well before a "transfer inducing" event occurs - establish solid relationships with heirs. This starts early in life . . . even during elementary school. Kids savings programs, and financial education, can serve to implant your brand into kids thinking. As kids grow older, work with mom and dad to make sure the kids feel that the bank is a trusted friend and adviser. We'll talk more about technology in a future post, but it is essential in staying connected to these youngsters if they leave home. Hosting events, or webinars, regarding estate planning, generational transfer, and asset management will strengthen your position as that trusted adviser, and make it easy for heirs to look to your bank for money management advice and services. That's the goal . . . when parents retire or pass away, you want to keep your relationships with the family money, the family business, the family farm. Building strong relationships is the key.

Lets look at the second of the three keys to retaining banking relationships across generations: technology. Banking has been quick to adapt many new technologies, and a lot of them are customer facing. From the advent of automated teller machines, through voice response systems, to today's mobile banking platform, customers are demanding, and banks (most of them anyway) are providing a variety of technologies to make access to information and transactions simple and painless. A large part of maintaining and preserving relationships with heirs and potential heirs is ensuring that it's easy for them to do business with you. This includes Internet Banking for individuals, and Internet cash management for businesses, along with remote deposit capture for those customers who still handle checks as a primary payment method for their business dealings. The rising popularity of Smart Phones makes mobile banking - as an extension of your Internet Banking product - a must.

Packaging and promoting these services is important . . . as a part of your overall bid to serve out of town (and of course local) customers. Put together a brochure (print and electronic) and perhaps a web site to promote your ability to assist families in preserving and enhancing wealth across generations . . . include descriptions of all the ways that you can help. Remember that promoting a comprehensive package casts you in a much better light than waiting to react to requests for services. If you are serious about surviving generational transfer, make that evident to all that do business with you.

The final of our three keys to success is services. Some of this has already been covered under technology - but there is more to it than that. Business specific expertise is an important part of helping families realize that there may be more value to keeping the family farm or business than selling it. Land management, timber management, business valuation, estate planning, and general business planning advice are all important, depending on the economic landscape in the communities you serve. These capabilities will set your bank apart with current and future generations. For example: the death of the farmer in the family need not mean selling off the land, if you can aid the surviving spouse in leasing out the land for farming. Doing so can provide comfort to the family, by keeping the land, and generate needed income for years to come. There are many examples across many family oriented businesses.

As I stated previously, packaging and promotion is critical . . . as a part of your overall bid to serve the heirs to your current customers. Remember that promoting a comprehensive package casts you in a much better light than waiting to react to requests for services. Again, if you are serious about surviving generational transfer, make it evident to all that do business with you.

About the Author
Trent Fleming serves as a trusted adviser to financial institutions. For more than three decades, he has worked with banks on matters as diverse as strategic planning, business continuity, employee education, and operational efficiency. Fleming's presentations on technology, management, and strategy consistently get the highest marks from his audiences. He serves on the faculty of the Graduate School of Banking at the University of Wisconsin, and regularly contributes articles to industry publications. He also publishes the very popular banking newsletter “Trent's Comments.” Trent holds a Bachelor of Science in Economics and Finance from Christian Brothers University. More information at or on twitter @techadvisor

Wednesday, December 4, 2013

Preparing Your Business for Severe Winter Weather

Here in the Mid-South we are now officially under a Winter Storm watch.  NWS feels strongly that an ice storm is imminent.  Forecasting winter weather in our part of the country is difficult. A few degrees one way or another makes a big difference.  Regardless of the outcome of this situation, I thought some contingency planning advice would be in order.

Ice Storms present a worst case scenario, as they offer a look into what a prolonged utility outage, and prolonged transportation disruption would look like.  If you are a bank, hospital, or electric utility, you likely have planned for such a scenario.  If so, it’s time to dust off those plans and remind employees how you will respond.

If you are the typical business, however, you probably haven’t spent much time thinking about terms like contingency planning and disaster recovery.  The impact on you is no less real, though.  The statistics are frightening . . . a business that is unable to resume normal operations within three days after a disaster has a 50/50 chance of failure in the next 12 months.  While this potential event is pretty close, there are still things you can do to better prepare.

First, assess the impact on your business and your employees if you experience a prolonged power outage.  HVAC, lighting, refrigeration, and life support systems are some of the things you should consider.

Second, develop plans for maintaining at least a limited level of service during such an outage.  Generators and kerosene heaters may help.  They are usually in short supply once the worst happens.

Third, speak to your employees about their own preparedness.  Employees who are occupied with their own problems won’t be as available to help with the business.  Laying in supplies of non-perishable food and water, along with making plans for alternate heating sources, are always appropriate measures.

My intent here is to get you thinking about managing such a situation, beyond the “winter-armageddon” dash for milk and bread.  You can find great information about preparedness at, and I’m always available to discuss your business contingency and disaster recovery issues.

Stay warm.

Monday, December 2, 2013

Continuing Pressure on Earnings Forces Banks to Look for More Fee Income

Simple Fee Income Solutions

The best new source of fee income for most banks is to simply collect fees that are already contractually agreed upon.  Whether late fees, NSF charges, or charges for special services like research, it is likely you have published fees for many services (if not, we have to have another discussion) The key is to identify the potential, by assessing your waive/charge ratio on current fees, and begin enforcing the collection of fees across the board.  

Employee education is a key here.  Realize that banks have given so much away for so long, that your employees, who have to face customers and deliver what is sometimes bad news, will feel they are in a bad spot.  It's important to talk to them first, and provide some training as to how to handle and resolve customers concerns.  Role playing is often useful in this situations.

I wanted to address a couple of specific areas, to encourage you to work on fee income strategies for the coming year:

NSF and OD Fees

Recent legislation has somewhat impacted this area, but customers have responded in such a way that indicates they are still more than willing to pay fees for NSF situations.  The value, in terms of having the check paid, and avoiding the hassle and embarrassment of a returned check (not to mention fees on that end) are apparently worth the effort.  So, stop waiving fees when customers protest.  Instead, prepare employees to speak to the value of the service rendered.

Loan Late Fees 
Loan officers, especially on commercial accounts, will often waive fees in the name of “the relationship” and only when held accountable will this stop.  Unless the bank has made a mistake, these fees are contractually allowed and should be charged.  A common method of addressing the waive issue is to force commercial lenders to disclose and defend any waived fees publicly, perhaps in your loan or management meetings.

On consumer loans, collecting late fees should be a matter of course, unless (again) the bank has made a mistake.

Special Services
Even with today's sophisticated imaging systems, research can be a time consuming task, when all aspects, including packaging and delivery, are included.  It is thus important to charge a fair price for this service.  I suggest the fee per hour include the employee's hourly rate, doubled, to account for the opportunity cost of the employee engaged elsewhere, plus a reasonable markup to cover costs and provide revenue.  Fees for services that the bank also incurs a hard fee for, such as wire transfers, ACH processing, even expedited bill pay services, should reflect the bank's cost, plus a markup for overhead and handling.  These are fair and easily explained charges, and employees should be counseled to sell the value rather than commiserate with customers who complain.

These are just a few ideas to get you going. It is important to communicate the significance of non-interest income to your staff,  put policies in place to enforce the collection of fees, and provide training and support to employees as they strive to enforce these policies.  Let me know if you need help.  Email me:

Friday, September 6, 2013


In conjunction with your state banking association, I am offering a two-part webinar on mobile banking that you will not want to miss!

Part I
September 13, 2013, 1:30-3:30 CT

Regulatory & Compliance Issues:
Managing the Risks
Mobile banking and related technologies including mobile capture and bill pay present extensions of existing technologies for regulatory and compliance purposes. When new delivery channels are introduced for existing capabilities, it is critical that internal controls, regulatory compliance, and bank polices and procedures are developed to manage any incremental risk that is introduced. This session will look at the underlying products and services, and discuss the additional controls and policies that are required to ensure that risk is effectively mitigated and managed. Participants will gain:

Perspective on new delivery channels

Insight into appropriate control structures

Ideas for managing and mitigating risk across both employee and
customer channels

Part II
September 20, 2013, 1:30-3:30 CT

Developing a Mobile Strategy for Community Banks
Mobile Banking has quickly become an expected service offering for
bank customers. Consumer's desire to do more on the mobile device, combined with extensive advertising at a national level, have driven awareness and rapid adoption.
In spite of this, there are banks who are yet to invest in this technology. Many who have deployed Mobile Banking have done little beyond offering the basic product.  What is needed? A strategy.  One that encompasses five pillars: technology
, operations, compliance, promotion, and innovation.  This session will provide banks with the information and techniques necessary to select, implement, promote, and manage a broad Mobile Banking delivery channel, both now and in the future.

 Key take-aways include:

Available delivery options

Compliance and security considerations

Promotion to build loyal users

Business banking opportunities

Managing a remote delivery channel well

Sign up here:

Monday, August 26, 2013

Three Reasons Your Bank Needs a Call Center Now

In my conversations with community banks, I'm surprised at how many still feel they are "too small" for a call center. On the contrary, smaller banks should be the first to move toward a centralized telephone point of contact for customers. Here are three reasons why.

1) Optimize Staffing

2) Improve Service Quality

3) Support Your Virtual Branch

Optimize Staffing
Old habits die hard. Many community banks are clinging to the idea of a dedicated receptionist at each location, whose job it is to greet customers, answer the phone, and distribute the calls. As branch volume drops, it is likely that most of the people your receptionist greets are salespeople or other visitors. And those all important phone calls? Most businesses, including banks, have moved to phone systems that feature DID - each extension can be dialed directly from outside the bank. Thus, bank employees can provide customers with a number that rings on their desk, or even a cell phone number.  The concept of a receptionist prevents you from providing excellent service (customers want to talk to someone with solutions, not a traffic cop), and artificially inflates salary costs. In an upcoming issue, we will discuss branches and branch staffing in detail, but here's a glimpse: your branches will be staffed with associates who are cross trained on all products and services, and they will meet each customer or prospect at the door - not wait behind a desk or teller line.

Service Quality
The key to better service is addressing and resolving the customer's issue, not passing them around the bank trying to find someone who can. Call center employees can be trained to handle a wide variety of customer inquiries, which improves service and reduces costs. Over time, you will gain a better understanding of why customers are calling, and be able to proactively address at least some of these issues. Much like the new branch associate mentioned earlier, these call center staff will be "super bankers" and will go a long way toward increasing customer satisfaction. They will also build credibility with customers, allowing them to influence customers toward self-service delivery channels.

Support Your Virtual Branch
National advertising has set the stage for 24 hour customer service. "Jake from State Farm" nattily dressed in khakis and red polo, is awake and ready to help at 3 a.m. Eventually, your customer base is going to expect that too. For now, expanding service hours to meet your customers' expectations is important. Don't panic - I didn't say you needed 24x7 coverage yet, just that you need to think about it. The modern call center will support customer contact via phone, email, on-line chat, Twitter, and Facebook, to name a few. This is a far cry from simply deciding who answers the phone at the branch. It is important to start planning for this. In fact, recent studies indicate that chat from mobile devices will be a huge component of customer service and interaction in coming months.

Here's the reality: you are promoting and encouraging the use of delivery channels that customers have access to at all hours. In order to ensure that customers embrace these technologies, you have to ensure that you can support them. Experience teaches us that a successful first use of any new technology is critical. The best "plan B" for a poor support experience is quick, responsive follow up when the customer reaches out for support. Expanded support hours is not just about supporting technology. It is about making your bank more accessible to busy customers at hours that are convenient to them. In the past, you may have opened your drive in early, or kept it open late - its the same idea. Convenience. If you are ever in doubt, remember that customers will opt for convenience every time.

Here are five things you can do now:

  1. Track the nature and volume of calls received, by location.

  2. Determine if your current phone system supports call center features including identification of the number being called, the number of the caller, and the ability to selectively route calls, and roll calls over if certain lines aren't answered. The goal here is to get to an inbound caller to the right person the first time, and get their issue resolved quickly.

  3. Determine if your core vendor offers a “call center” inquiry screen. Such screens feature shortcuts to allow staff to quickly find information that is commonly requested by callers. It will serve as a precursor to more formal call center technology.

  4. Start the discussion in your bank about how you can improve service to those customers who choose to use voice communications to reach you.

  5. Consider supporting non-voice contacts, including email, chat, and Twitter
Your branch network can remain a strength for your organization, if you leverage it properly. When supported in conjunction with the electronic delivery channels your customers are demanding, it gives you a tremendous advantage over the "Internet Only" banks. If you don't leverage your branch network, it becomes a liability that increases your costs and diminishes your value in the eyes of the customer. A well staffed call center is an important step toward providing the levels of support customers demand. If you've already taken this step, I commend you. If not, please do give it some consideration.

If you'd like to continue this conversation, visit my Facebook page at, or tweet me @techadvisor, and share your comments, success stories, or opposing viewpoints. I look forward to hearing from you!

Friday, August 16, 2013

Business Continuity Planning Thoughts

It has been a while since I talked about business continuity planning.  Remember that effective contingency planning involves three components: prevention, mitigation, and recovery. Prevention, including preparedness, is critically important.  While there are events that you have no control over, there are many that you can prevent (such as investing in redundant computer hardware) or minimize (by anticipating and preparing for obvious scenarios)

We're approaching the peak of the hurricane season, and winter - with its ice storms and blizzards - is not far behind.  Severe weather can impact utilities, transportation and other services.  Now is the time to assess preparedness at four levels . . . your organization, your employees, your suppliers, and your customers.

Prolonged utility outages can quickly create urgent situations.  Your business has to address continuation of services at some minimal level.  An important part of that continuation is ensuring that staff is available.  When your employees are prepared, and thus less concerned about the basic needs of their families, they are more likely to be available for work.  Depending on the extent to which your business may be affected, you may choose to invest in generators to be able to operate at least some of your facilities "off the grid."  Other key areas include identifying the minimal level of service you expect to offer, as well as which locations might be the most important to reopen.

Preparation for retail customers and employees is similar.  Basic needs, including plenty of non-perishable foods, lots of drinking water, and other key supplies should be stockpiled before a disaster, as they will be hard to find once something has happened.  I'm a firm believer that your business can shine in the eyes of customers and employees by encouraging and facilitating this level of preparation through education and cooperation with local emergency preparedness agencies. remains a great source of information. 

When customers of your business are also businesses, you must consider, in your continuation and recovery efforts, how to help them continue.  Again, education and preparation are key.  Many non-regulated businesses have no plans at all for recovery from a disaster.  Anything you can do to improve their chances of survival will pay dividends later.

Suppliers, much like commercial customers, employees, and retail customers, must factor into your planning and preparation.  Depending on the nature of your business, access to raw materials, outsourced processing services, or other resources may be critical.

Remember that the goal of all business continuity planning is to quickly recover your ability to serve your customers when something happens.

Clearly, I've just scratched the surface, but my main goal is to get you thinking about being prepared - instead of waiting for something to happen.  I'll have more updates in the coming days. If you'd like to discuss your particular situation, please contact me.

Tuesday, June 18, 2013

Managing Deposit Account Liabilities

In this issue, I want to point out some potential liabilities if your staff fails to properly handle routine tasks.  I recently learned about a case involving employee theft from a business. This was a classic case, whereby a "trusted employee" leveraged his autonomy in the bookkeeping arena to steal, and cover his tracks.  Discovery was delayed by well over a year, and then, as is often the case, only by accident did the owner realize what was done.  The business, of course, claims that the bank should have found the fraud, and stopped it.  The bank, in like fashion, feels, and frankly has the strength of the UCC (article 4-406) behind it, that discovery should have come more quickly, that the business owner was effectively complicit by not providing proper oversight.  It will be interesting to watch. It is noteworthy that the employee actually went to the trouble (and thus had ample opportunity) to alter the images of checks written to himself once the statements arrived.  Also noteworthy: the bank was unable to provide proper signature cards, corporate resolutions, and in some cases, images of the backs of checks (instrumental in clearly understanding what the checks were actually used for).   At issue here is whether the courts will find that the bank's failure to maintain good records creates any liability for them in what is otherwise a pretty clear case.

 Also in recent days, a court has rendered a verdict in favor of a financial institution in a case regarding loss over a wire transfer transaction.  Here, the business had actually "refused" the bank's offer of dual control technology, requiring that one person submit a wire, and another approve it.  To the bank's credit, all of this was documented, including a letter from the customer declining the dual control methods.  When the business experienced a loss, via an unauthorized wire transfer, they still looked to the bank for restitution.  The court denied it.

Here's the link to the article:

This led me consider how diligent your staff might be in ensuring that account records and documents, such as signature cards, corporate resolutions, faxed requests for wire transfers, etc, are complete and properly maintained.  It would be a good time to re-evaluate your bank's policies and procedures - and your training - around this area.  We all know that attention to detail suffers over time, unless the important of those details are re-iterated.  

Here are some key issues to consider

> Retention of Paid Checks.  Refer to your state's guidelines for record retention, but generally there is a requirement that you retain the source document, or a legible copy, for seven years after posting.  This includes legible copies of the front and back of each item.  In addition to the retention period, note the term legible.  Be sure that your check imaging system is identifying, and thus allowing you to return, any items that are not sufficiently readable to meet the IQA (Image Quality) standard. 

> Complete Signature Cards.  Often, the practice of opening a new account involves obtaining signatures over a period of time.  While this might seem understandable, especially for a larger organization that may have multiple authorized signers, it is not good banking practice.  In general, you should not begin servicing the account for which these signature cards are intended, without completely and properly filled out signature cards.  Make a trip to the business, and have management present to you each individual that will be a signatory.  Obtain and document proper ID for each.  Even on consumer accounts, resist the urge to let one spouse sign, and take the card home for the other to sign.  If you begin servicing the account without the necessary documentation, you take away your leverage for getting that documentation.

> Complete, Detailed Corporate Resolutions.  For any business concern, you should, in addition to signature cards, prepare and have signed a corporate resolution.  This should set forth the terms and conditions of the agreement, including services to be rendered, references to fee schedules, and expectations of performance for both parties.  In today's world, references to once unheard of issues like Internet Security and Virus protection, enforced dual control of access and access codes, and the like, should be in your corporate resolution.  

When adding new products and services like cash management, ACH Origination, or remote deposit capture, prepare and execute addenda that detail the terms and conditions of using those services.

> Electronic Solutions.  As referenced above, these must be appropriately deployed . . . and properly utilized by customers.  Dual control, separation of duties, proper Internet security are all matters that must be agreed to.  Rather than dictating operating practices too closely, be sure that you give broad guidance, and then assess compliance.  Banks must be careful not to exert "management control" particularly if there is a lending relationship, but can certainly give good guidance.  You can also (this is difficult to think about, but becoming a reality) turn off access to all or part of your electronic solutions if you feel a customer is a risk.  This would include customers without proper Internet Security and Virus Protection on their own networks, or those who refuse to utilize the security measures your system provides. 

>  Bank Controls Over Internet Activity.  The software that drives your commercial banking solutions includes parameters by which you can monitor and manage the risk associated with such systems.  Examples include, but are not limited to, the number of ACH origination transactions, average daily deposit limits, and wire transfer dollar amounts and frequency.  Leveraging data you have from processing your customer's accounts, and working with customers to understand their legitimate business practices, you can build in these controls in such a way that you protect both your customer's and your bank's interests.

 I hope you will share this article with your staff, and in so doing, begin a process of inspecting current practices to realign them with your polices, and reduce your risks. Remember that the most successful organizations are those who identify best practices, and strive, through training and education, to execute on them well.  Should you need help in these areas, I am always available.

Remember that I am not an attorney, and the above should be construed as operational, not legal, advice.  Please involve your counsel in any decisions involving proper interpretation of rules, regulations, and laws.