Monday, December 24, 2018

Three Gifts for Bankers

The magi, thought to be named Gaspar, Balthasar, and Melchior, followed a bright star to find the Messiah. According to the Gospel of Matthew, they brought him three gifts: gold, frankincense, and myrrh. 

The journey wasn't easy for the magi. At first, they did not know where they were going. And when they arrived in Jerusalem, King Harrod tried to fool them into discovering and reporting the whereabouts of this King of the Jews. 

Although the magi's perils were greater and their journey quite a bit more significant than the modern day banker, I too see headwinds for community financial institutions, and wish for three gifts for them during this holiday season.

My Wish For Bankers in 2019

1.  I wish Artificial Intelligence ("AI") becomes real. The blaring horns about AI in the news and on social media is loud and frequent. I wish it was as loud and frequent within financial institutions. The truth is, we haven't had many wins yet. But it's coming. And my wish is that it comes soon. Because we continue to invest significant resources in operational functions that are the "keep the lights on" variety. Such as balancing accounts between disparate systems, solving for unread items, and trolling through accounts for suspicious activity. These are belt and suspenders type problems that the promise of AI should help solve. And in so doing, perhaps we can re-allocate resources that we tend to over invest in non-value added activities (see the below charts) and re-invest into a bank that delivers a truly superior customer experience, with highly trained and appropriately rewarded employees. 

2.  I wish employee development rises to be the top strategic objective for banks that want to distinguish themselves through their people. I hear some variation of employee development in strategy sessions often. And see progress in employee development much less so. The fear that investing in functional fluency and a career path might lead to employee departure is real. So employee initiatives remain at the forefront of budget cuts. What if you train them and they leave? I believe your biggest threat is to let them languish and they stay. It's a sure sign that the scales will remain tipped toward investments to keep the lights on, as alarmingly demonstrated in the charts above. And don't statistics support that it is less expensive to develop from within than pick up people off of the street?

3.  I wish financial institutions to remain independent because they've earned it! The accompanying chart should be quite alarming for bankers. I know it is for bank consultants! So often, with recent regulatory activism, a severe recession, rising costs and needed technology investments, and fear of the pace of change, financial institutions' are deciding to throw in the towel. But it need not be so! For shareholder owned institutions, determine the desired return of those shareholders and build a strategy to achieve it (long-term), whether through capital appreciation or dividends. And balance the interests of your constituencies: shareholders, customers, employees, and communities. For non-shareholder owned, you still must earn your right to remain independent, achieve acceptable profitability to add to your capital base, grow, and remain relevant to those other three constituencies. Make it part of every planning retreat. Because if you don't know where you want to go, you're already there.  

Those are my wishes for three gifts for bankers in the coming year. Instead of having three fellas from the east come and bestow them on you, make your own gifts. 

I want to thank all of our current and past clients for the gifts you have given me and my firm. We appreciate every one of you. And look forward to serving you and new friends in 2019.

~ Jeff

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