Criona Fitzgerald
Every business, no matter the size, needs at least one bank. A large multinational will obviously require a number of banks. A smaller company may be happy with one bank but in reality should have two to three service providers, as no one bank can be the best at every product. As a customer, you don’t want to find yourself in the position that you only deal with one bank and out of the blue they withdraw a service which is central to your business and you are faced with sourcing a new bank. Deal with too many banks and suddenly you are in a position where you are of no importance to any bank.
As a distinctive specialist banking and asset manager group, Investec are driven by commitment to our philosophies and values, our purpose is to create sustained long-term wealth, and to finance and foster entrepreneurs. We seek to be a positive influence in all our business activities, in each of the societies we operate. Business responsibility is an integral part of who we are, our culture and values, and how we go about doing things.
Global footprint
Without a doubt, a bank which has a global footprint is a key consideration when choosing your service provider. Other important factors to be considered are quality of service, pricing and the strength and stability of the bank. Certainly there are benefits associated with having multiple as opposed to a single banking relationship. No bank can promise to be all things to all people, which is where specialist banks can play a key role in your business. A customers’ responsibility is to choose a bank which best fits their business.
Advantages associated with a global bank include economies of scale, diversification benefits, inter-country knowledge transfers and these can all add value. It is important to choose a global bank and a bank that is very familiar with foreign transfers if you transact a lot of business abroad. A global bank will be well positioned to offer customers local knowledge in those foreign markets they operate in.
As a bank with a global footprint, Investec understand the need for relationship banking in a number of different countries. Clients benefit from highly skilled specialists, entrepreneurial activities, and a flexible and adaptable approach to maximise market opportunities.
Customer focus
The onus is on the bank to implement a successful relationship strategy with their customers. Different levels of service are required, depending on a customers’ needs, be it cash management, foreign exchange, investments, credit. Trust and loyalty go hand-in-hand but loyalty can often be mistaken for a customer continuing time after time to leave deals on the table. Repeat business comes from trust and trust is powerful. As with any relationship, banks can become complacent.
Banks need to choose the areas in which they excel at and specialise in these. Your banker needs to be customer focused and responsive to your needs. If you are providing a service such as foreign exchange to a customer, with associated credit limits etc, then it is reasonable to expect to quote for a fair percentage of that business. It really is a balancing act - you can be over-banked but you certainly don’t want to find yourself under-banked. Certainly, your main bank does need to be knowledgeable in a number of areas.
Different people in a business will have varying levels of contact with their bankers. You want to be happy that your staff are being given the best rates from your bank. Never underestimate the importance of giving your staff time to meet your bankers, be it a client event or a lunch. These events will help forge strong relationships and on that rainy day will reap rewards. At the same time you need to be wary of collusion. Customers need to challenge their banks and find the solutions that are right for their company.
Credit aspect
The strength and stability of a bank are crucial. Can the bank provide you with the necessary credit you require to transact business and support your funding requirements? When extending credit to a customer the banks view on the business is crucial. Banks will be concerned with whether the business will be around in a year’s time. To establish this, your banker will look at the business financials, its management team, premises, market position among others. When an economy is booming ahead banks are fighting for a customer's business. However, the converse is also true. But, it is in times of difficulty that a true relationship shines through and this will be remembered long after.
A situation may arise where your relationship bank may be unable to fund a project. Then, the business has no choice but look for finance from a non-relationship bank who do not know you, your business, your project and ultimately may refuse to provide the necessary funds. This is where multiple banking adds value. Credit quality, capacity for timely repayment and financial strength are key. Mutual confidence is important, such as if your business requires a large number of cash transactions, you need to be confident your bank can handle these in a timely manner.
Relationships between borrowers and lenders are important determinants of lending decisions. Many small businesses face difficulty when applying for loans in the current financial climate. The businesses’ previous relationship with their bank will impact hugely on this process. Financial institutions are more likely to grant loans to a customer which has a previous relationship and history. If a customer has a credit line, how secure is it and is the bank committed to it? There is a distinctive problem now getting credit out beyond two years and communication around this is critical.
Continued regular interaction with your banker is crucial. The whole credit process is changing, with more and more banks providing their customers with facility letters detailing their lines of credit. Customers are concerned with the security of deposits and credit lines, with more conservative deposit solutions being the preferred choice. As a bank, Investec have continual regular interaction with investment analysts, rating agencies and the investment community, detailing our financial performance while navigating the financial storm and our clients get great comfort from this.
Competitive pricing
Up-to-the-minute service and competitive pricing are certainly important. The relationship banker must sell the bank’s products, but also judge which products are appropriate in each case and build up the client’s confidence in his or her advice. It is important to talk to customers and listen to them. This will enable the banker to tailor-make solutions which meet specific client requirements in the most cost efficient manner. Relationship bankers must ensure that their clients get the best possible product.
Given the history associated with overcharging, increased transparency of bank charges are certainly appreciated. A lot of competition surrounds bank charges and customers must get the best possible value here. A key consideration when dealing with a bank is whether it offers an after-hours service? For example, have you the capability of leaving fx orders after normal business hours if this is an important part of your business. Also, by having multiple bankers, it is crucial to shop around for the best deposit rates for your surplus cash.
Customer service
A valuable role of a good relationship banker is keeping their customers up to date on new products. Banks may increase the number of clients per relationship manager thus decreasing their effectiveness. Online systems can be a huge advantage to a customer but beware of the potential pitfalls. When you sign on for an online system, does this impact negatively with your interaction with your relationship manager? A happy balance needs to be struck here. For example, don’t let the advantages of dealing fx online outweigh the benefits of discussing currency movements with your banker.
Does your bank educate clients on their various products and is the research up-to-date?
When times get tough who will there for you? Who can provide the level of service you expect and need? There is a very high standard across domestic banks and probably very little difference in the products and service they offer. However, when you get down to specialist areas it is easier to notice the cracks. Here, service and trust are key.
Financial markets are experiencing dramatic change in these uncertain and challenging times. Communication is king but it needs to be two-way in this ever challenging climate. Now, more than any other time, it is crucial to get in front of clients, present customised products as each client has different and individual requirements. Banks need to talk to their customers, be there for their customers, provide information, understand their business and work with them to achieve favourable outcomes.
Every business has to decide how many banks it wants to deal with and this will vary hugely depending on the type of business. Without doubt, most businesses prefer to deal with as few banks as possible and you will probably have a very strong solid relationship with your main banking partner but competition is good and keeps banks honest !! You may be rather taken by the claims from the larger banks that they can be all things to all people but in reality this could not be true. You should have enough banks that you can be confident you are getting the best price, best value and best service and this can only be achieved through banks competing for your business.