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

Bankers: What should the magi bring you?

The Gospel of Matthew reads (Chapter 2):

"When Jesus was born in Bethlehem of Judea, in the days of King Herod, behold, magi from the east arrived in Jerusalem, saying, 'Where is the newborn king of the Jews?' We saw his star at its rising and have come to do him homage."

King Herod dispatched them to Bethlehem. Matthew's Gospel goes on to say:

"And behold, the star that they had seen at its rising preceded them, until it came and stopped over the place where the child was. They were overjoyed at seeing the star, and on entering the house they saw the child with Mary his mother. They prostrated themselves and did him homage. Then they opened their treasures and offered him gifts of gold, frankincense, and myrrh."

I'm no biblical scholar, so I am not aware of any significance to the three gifts bestowed on Jesus by the magi. Three wise men, men of stature, traveling long distance, with nothing to guide them but a star, to bestow a gift to a child, a child born under the most humble conditions, was symbolic enough.

But the gifts were chosen by the givers. We can all reflect this Christmas on what three gifts we would give to improve the lives of those around us. Not gifts such as the fruitcake, or piece of jewelry. Something more profound.

This got me thinking about what three gifts I would like to give to bankers, if I had such power. Here is what I came up with:

1. The Gift of Leadership

Leadership is not managing the day to day affairs of the bank. Leadership is motivating others to follow you through difficult and uncertain circumstances, keeping firmly focused on a vision. In no other time during my career in banking, has there been a more difficult and uncertain road ahead. Banking needs leaders that form a vision, communicate it so effectively your team lines up behind you, and pursues it with incredible passion.

2. The Gift of Talent

Banking used to be more about efficiently processing transactions and less about helping customers navigate financial complexity. As a result of automation, transactions are handled less and less by human hands. Efficient transaction processing is more likely executed in the IT department than on the teller line. At the branches, and at our customers' offices, there is a need for bankers to make customers' financial lives less complex. We need the talent so we are capable of doing it.

3. The Gift of Prudence

Yes, bankers must be prudent in developing and executing their strategy. But if I could bestow prudence, I would first focus on bank regulators. We long for a regulator that interprets laws for their intention, and implements rules that follows the spirit of the law with a watchful eye towards minimizing unintended consequences. Have you ever sat at a mortgage closing? The volume of documents and disclosures that few borrowers read are the result of imprudent regulation. Did it help us? We are on the precipice of making the same mistakes again. It would be a beautiful gift to have regulators that know this and act accordingly.

So, in the spirit of the magi, I offer three gifts to bankers. I wish I had the power to make it so. What gifts do you want from the magi?

Merry Christmas everyone!

~ Jeff