Banks should use relationship management to counter economic uncertainty

Of the three directions the economy could go this year — growing, stagnant, or receding — banks should seize any moment to optimize their commercial client operations and sales processes. At the center of those efforts are relationship managers (RMs). 

By streamlining business workflows and empowering RMs to deliver better service, banks can help build strong pipelines regardless of economic headwinds.   

Counterproductivity in commercial banking  

Commercial RMs have a challenging role. They’re accountable for deeply understanding the intricacies of banking and finance while also maintaining an intimate knowledge of their clients’ businesses. An RM is consultive and sales oriented. The tension between these two functions increases as the portfolio of clients grows.   

In the consultive domain, RMs engage with clients regularly, developing new solutions and pricing services to fit the client’s needs. Even with all that attention and intention, Boston Consulting Group found that U.S. banks only capture about 70% of their clients’ potential banking relationship. To add insult to injury, U.S. banks lose close to 10% of their clients to churn, that research also shows. 

What’s at the root of those numbers?  

Individual cases vary, so it’s hard to pinpoint a common thread for all banks and clients. But here’s what we can say: Happy clients don’t leave unless forced to, and RMs who spend as much as 60% of their time on administrative tasks can’t cultivate long-term client satisfaction.  

That’s not to say that you should embrace a relationship management approach that eschews objectives and key results or necessary admin work, but rather eliminate friction and turbo-charge activities that increase wallet penetration and client satisfaction.   

Put good data to good use 

Data wrangling is an essential function of any good RM. The operative question is, where can you use data to enhance the work RMs are already doing?   

There are three domains that banks should focus on:  

• Access to data and analytics  

You have the data, but is it in a format that makes it easy for your RMs to derive insights and build compelling reports? If data lives in a black box or behind gates that RMs can’t pass, it’s as good as gone.  

• Sales enablement  

Access to usable data is the first step. Integrating that data into the routines and practices of your RMs is the next step. Algorithms and data tools won’t replace human intuition and creativity, but when applied to workflows, they can enhance it.   

• Healthy communication  

There’s too much information for any RM to maintain in their head and remember to keep up with the necessary client touchpoints and account history. Remember that every new administrative task you introduce is going to steal energy and time from higher-value tasks.  

When you can make those tasks easier and when possible, integrate them into existing processes, RMs can deliver better service and a stronger ROI.   

The best RMs win with empathy  

Aside from the practical and data-driven aspects of successful relationship management, the foundation of relationship banking is empathy. If your RMs are too distracted, overworked, or focused on sales quotas to care about your clients’ challenges, the results will be predictably poor.   

Ask your team where they experience friction and busy work. Explore ways that RMs can connect better with their clients and learn about the real issues they face from a banking and finance perspective. You may even consider expanding teams or restructuring so that each team member can focus on their area of excellence.  

No amount of white-glove service will win over a client that needs creative solutions built on hard numbers. Your institution must get the intricate side of commercial banking right if any of what we’ve suggested here will work. You must also empower your RMs to build solid, multi-dimensional client relationships.   

While you can’t force satisfaction on anyone, you can equip your relationship managers with the tools, insight and freedom to serve their clients.   

It’s still early in 2024. In a scenario where the Fed reduces interest rates, which they’ve hinted is possible later in the year, loan demand is likely to bump up. If inflation reemerges, we’ll see those rates climb and loan demand shrink again.   

Whatever happens, now is the time to cut through red tape, implement better tools, and position your bank to unlock the growth that’s waiting in your existing client base.  

Bryan Peckinpaugh is Senior Vice President at Baker Hill