Managing Generational Transfer | By Trent Fleming
I have the pleasure of working with community banks around the country. Many are in farming areas. For those banks, a real concern is an outflow of assets and relationships when the current generation of customers die off. The Des Moines Register recently reported that 50 percent or more of those expected to inherit farm land will sell it right away.
Below is a discussion of addressing and managing what I call “generational transfer.” Proactive efforts here can pay big dividends for your bank.
Generational 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 bank’s plan for resident and non-resident heirs is comprised of three main parts: relationship (a face), services and technology.
Generational Retention: Relationships
The first key is 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 a young person’s life. As kids grow older, work with their parents to make sure the kids feel that the bank is a trusted friend and adviser – 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.
Generational Retention: Technology
Banking has been quick to adopt 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 smartphones 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 website 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 who do business with you.
Generational Retention: Services
Some of this has already been covered under technology, but there’s 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.
Remember, packaging and promotion of services is critical as a part of your bid to serve the heirs to your current customers. Proactively presenting a solution 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.■
Trent Fleming is banking consultant with expertise in the fields of technology, operations and strategy.