Banks, Investment Firms, And Insurance Agencies: It's The Culture!

by Michael Manes

James Carville, the 'Ragin' Cajun' of political consultants, achieved fame by observing,'It's the economy, stupid!' Leaders in the financial services industry must discover something similar before their campaigns to innovate delivery of their products and services succeed.

As the financial services industry (offering banking, insurance, and investment services) emerges into the 21^st century, expect more attempts to merge, consolidate, or align different organizations-including banks, insurance agencies, and broker-dealers-into the financial service centers of the future. These new organizations will provide consumers with the opportunity to acquire any and all financial tools, products, and services from a single, more cost-efficient source. This seems to be an easy and logical consolidation because of the similarities between the consumer needs, information base, and products. Unfortunately, many early attempts to merge or align banks, agencies, and broker dealers are floundering or, in some cases, failing. Some entities are enjoying limited success, but few are realizing their full potential.

The problem in these early efforts doesn't originate from products, technologies, or processes. It stems from the fact that these organizations and their leaders differ in their styles, expectations, and motivations.

To consolidate yesterday's organizations into tomorrow's systems successfully, one must understand that it's not about products, process or technology. It's the culture, stupid!

Culture includes the organizational personality, history, personnel behavior styles, values, compensations systems, attitudes, etc. Simply put: Traditional bankers, traditional investment advisors, and traditional agents are all dinosaurs. Mating dinosaurs doesn't result in a dynamic hybrid. To achieve success and the tremendous potential created by the consolidation of the financial services industry, these dinosaurs must be genetically engineered-not cloned-before spawning the next generation.

To succeed, this consolidation of industries must build on the strengths of the past and engineer out any weaknesses. Participants must understand the histories of investment services, insurance, and banking before they can make any plans or take any actions.

Banks have been regulated since the Great Depression. Government regulation has fostered sameness in bank products and services. True competition between banks has been limited-at the expense of customer service. The regulator has become more important than the customer. The customer doesn't expect and cannot obtain vastly different services from individual banks.

Result: Banks have operated in a seller's market. If a bank rejects a customer's loan application, the customer often apologizes.

Insurance and investment sales are highly competitive industries. Competition develops market focus, innovation, and sales incentives. The buyer is king. In such systems, organizations must light a 'fire in their belly'-a marketing focus-to survive and prosper.

Result: Insurance agents and investment advisers have grown up in a buyer's world. They share the plea: 'Please, please, please, buy my product!' If rejected, they won't depart without saying something to retain the potential for a future relationship, such as, 'I'll call

you back. Someday we'll do business.'

Because of their history, banks focus first on products, second on process, and finally on people. Conversely, insurance agents and investment advisers are driven by people first and foremost, and then by products, and finally by process.

Banks are institutions. Bankers have matured in a system that's risk averse and structured, and which bases compensation on attendance. Agents and brokers are innovators and risk takers who are driven by opportunity, not structure, and are compensated for their performance.

Tomorrow's markets will be driven by the buyer and served more by entrepreneurs than institutions. The new global economy will feature intense competition, a much more sophisticated customer, and technology that allows anybody to sell in the marketplace at a

low entry cost and operation.

Banks bring many relationships, trust, and traffic to their marriage with insurance and investment firms. They also bring an intimate knowledge of their customers' financial

circumstances and confidence when discussing financial needs and conditions. This is an essential benefit because clients are often reluctant to disclose everything at the beginning of a business relationship with an agent or investment broker. Banks offer a marketplace for customers to buy financial, investment, and insurance services. They will also offer

the technology and electronic marketplace that's soon to come.

Agents and investment advisors are equipped with the most important element:

fire in the belly. Their careers have thrived on making things happen. They understand people and how to identify needs, match products to needs, and get the client's name on the dotted line.

At the crossroads, the organization shouldn't take the easy route of just delivering traditional products and services to the agency's, bank's, and investment firm's customers. The winning organizations will use engineering to combine the strengths of the three cultures and build on them in a way that capitalizes on emerging market opportunities. Solve the cultural mysteries before focusing the united organization's energy on employees, marketing plan, product redesign, delivery systems, customer profiling, relationship nurturing, and so forth.

When a bank, insurance agency, and investment firm merge, its owners should take these steps to form an enterprise that benefits from each other's differences:

1. Assess existing cultures.
2. Design the strategic plans needed to implement the new venture.
3. Establish a congruent culture and plan.
4. Have the leaders commit to the plan.
5. Create a marketing plan for the system as well as for each branch.
6. Establish champions for the bank-insurance program within each branch.
7. Make all employees experts in meeting customers' needs.
8. Create communication systems that match special-needs customers with their providers.
9. Keep commissions or performance pay outside of the bank payroll systems.
10. Keep it simple, stupid (KISS).