Americans are becoming more responsible for their financial well being now and into retirement. According to a 2012 Boston College Center for Retirement Research study, 63% of American males (why only males I do not know) participated exclusively in defined contribution (DC) retirement plans in 2007, up from 47% in 1992. Those that participated in defined benefit (DB) pension plans was 16% in 2007, down from 31% in 1992. We are increasingly bearing the burden of managing our money.
Yet money management is a discipline done well by only a very few. My firm, full of banking industry consultants, just held an education session regarding our 401k plan. I would say, for me, it was interesting and educational. I will probably select the auto re balancing feature because I don't want to take the time to actively manage it. Will I take the time to do a good job researching my fund choices. Probably not.
So, if those involved in banking don't have the time or inclination to do it, how about the engineer, retail store manager, or forklift operator? I think, as a nation, we will need lots of help managing our money. Not just in retirement, because day to day money management is becoming more complex too. Gone are the days of keeping money in an envelope in the nightstand to save for a new refrigerator, or to pay the annual insurance premium.
Could this need for personal financial management prove to be a viable niche for community financial institutions? I think so. One reason is the amount of fraudsters that will emerge with messages of help and hope on an unsuspecting population, only to turn the helping hand into a backhoe to rake their customers cash into their own bank account. Don't believe me, check out a few episodes of CNBC's American Greed, a favorite show of my wife and I.
Although fraudsters don't typically use a community bank or credit union as home base for their antics, some do, such as Aubrey Lee Price who defrauded a community bank in Georgia for $21 million. Most fraudsters establish their own small financial services firm to do their work. Others use very large financial institutions that can only loosely be called banks. My point is that bad actors are not typically associated with the local bank or company credit union.
With this in mind, can the local community financial institution be viewed as the "go to" resource for those of us that are dazed and confused on how to manage our financial lives? Can we brand ourselves as the trusted advisor in our communities?
If so, we have to ask ourselves if we have the personnel, processes, and systems to execute on such a strategy. Because if we position ourselves as our customers' trusted advisor, and can't deliver, it will be difficult to overcome the negative brand perception.
Can we specialize as the trusted source for personal financial management?