The Daily Dividend: Industry News

News, notes and insights from around the industry

OCTOBER 17, 2018
The New Risks
By Hilary Collins, Specialist, Publications and Research, Financial Managers Society

Over one-third of the U.S. workforce is Millennials, and their preferences and behaviors are changing the way organizations approach compliance and risk – or at least they should be. 

Three out of four Millennials and Gen Zers would rather text than talk, and can’t stand long, time-consuming processes. But in the race to accommodate the speed and convenience these younger generations prize, some financial firms can open themselves up to new risks on new channels.

Regardless of how close to the cutting edge an institution is (or thinks it is), every bank or credit union should have a formal policy telling employees exactly how they can communicate with customers and what channels they should avoid. A documented policy not only helps to protect the institution, it also clarifies expectations with customers and employees.

Regulations demand that financial institutions retain and supervise all electronic communications their employees are using to conduct business, leading some organizations to all but forgo quick, convenient communications like texting in order to comply and manage potential data breach risks. One option to combat these concerns is to build a platform specifically designed to communicate digitally with customers and employees. While not necessarily a solution that is feasible for every company, it’s worth considering as a smart response in a world where texting is how many people talk.

OCTOBER 12, 2018
The Risks Ahead
By Mark Loehrke, Editor, Financial Managers Society

The Risks AheadWhile the Fed’s most recent interest rate hike may not seem like much of a big deal in the near term, at least one industry observer believes the more significant impact of the overall trend in interest rates for financial institutions may be coming soon. 

Christopher Whalen says the real concern among banks and credit unions as interest rate spreads tighten is that plenty of non-bank financial companies – such as mortgage lenders – may soon be facing a serious liquidity squeeze. With the cost of funds rising as a result of the pressures bearing down on these highly leveraged players, net interest income for financial institutions is bound to take a hit. 

When it comes to opinions on how the Fed manages monetary policy, of course, everyone has their two cents to pitch in. But whether or not his dire predictions for how the rest of the dominoes may fall actually come to pass, Whalen’s observations on how the Fed is moving forward are certainly worth considering – especially as many banks and credit unions are seeing first-hand evidence of the liquidity issues that may be bubbling beneath this seemingly healthy economy.

OCTOBER 10, 2018
The Power of Kindness
By Hilary Collins, Specialist, Publications and Research, Financial Managers Society

The Power of KindnessIf you enjoyed our story on “The Power of the Mind” in the September-October issue of FMS forward, here’s a follow-up on how values like compassion and selflessness make better leaders. Research continues to prove that kindness is an important factor for organizational success.

Kindness boosts performance
Studies show that when work culture is pleasant instead of fearful, employees provide better customer service without prompting or incentives, and develop better work relationships. Better relationships with customers and coworkers unsurprisingly increase productivity levels. Another study showed that empathy and kindness boost innovation and learning to levels that aren’t possible in negative, fearful workplaces.

Kindness reduces turnover
Research shows that fairness, supervisor supportiveness and favorable job conditions reduce turnover and increase retention. When employees feel that they are supported and valued by their organization and their supervisor, they are more committed and satisfied. 

Kindness improves culture
This goes without saying. In a kind culture, employees feel connected to each other, supported by their leaders, and willing to help their customers. This improves communication, builds stronger relationships, and keeps people around longer. Kindness shouldn’t be taken as a sign of weakness or poor leadership, but rather embraced and encouraged at all levels—research shows that it’s worth it.

OCTOBER 5, 2018
Fee v. Free
By Hilary Collins, Specialist, Publications and Research, Financial Managers Society

Fee v. FreeIf you’ve watched IZALE’s recent FMStv episode, “The Case to Convert to Fee-Based Checking Accounts”, you probably know there’s a strong argument to be made for moving away from free accounts. New research and a case study now back up that argument.

A recent study found that almost half of Millennials in their 30s said they would pay a monthly fee for an Amazon checking account that included cell phone protection, identity theft protection and travel insurance, among other benefits. Further, roughly 60% of all respondents said they would consider switching accounts if their current financial institution offered this kind of checking account with bundled services.

Heritage Bank, an institution that recently migrated to fee-based checking accounts, found its retention remained strong and the reaction from customers was largely positive. In the past, the bank offered 17 different checking accounts and strongly pushed its free account. But since those free accounts weren’t helping to differentiate the bank from its competitors, Heritage decided to begin offering three fee-based checking accounts as well. Two of these offered benefits like cell phone protection and roadside assistance at no additional charge to the customer. While some customers did choose to leave, 93% of balances remained, and the bank saw a rise in average balances and an increase in fee income.

The takeaway? With so many customers happy to shell out a monthly fee for subscription services like Netflix and memberships like Amazon Prime, they’re more likely than ever to also see the upside of a fee-based checking account that gives them a greater value.

OCTOBER 4, 2018
Thinking Small
By Mark Loehrke, Editor, Financial Managers Society

Thinking SmallSmall business lending is no small matter to community institutions. After all, despite holding only 13% of banking industry assets, community banks hold 42% of small business loans. 

One reason for their outsized share of this market, of course, is the importance of building and maintaining relationships in the world of small business – an area in which community banks see themselves as particularly qualified. In fact, a focus on relationships is one of several key practices that banks rely upon to service this market according to the FDIC’s recent Small Business Lending Survey. Other highlights from the survey include these interesting nuggets:

The value of high-touch and staff-intensive practices 
Small business borrowers want convenience and technological support, of course, but they value personalized service above all. A commitment to community involvement and the value of personal referrals often play a big role in the success of smaller banks in this market.

Lending and competing locally
Not surprisingly, most applicants for small business loans tend to come from a bank’s immediate local area, and most tend to visit a branch to get the process underway. For their part, community banks see other local institutions of a similar asset size as their biggest competitors for those small business borrowers.

Service v. savings
While large banks are generally believed to offer better pricing and convenience to small business borrowers, smaller banks tend to shine in the area of customer service, and are seen as relational, attentive and fast. While large banks more often rely on standardized transactional practices to evaluate loan applicants, smaller banks are seen as more willing to consider qualitative factors and additional off-balance-sheet attributes when making their determinations.

OCTOBER 3, 2018
Increasing Your Organization's Lifespan
By Hilary Collins, Specialist, Publications and Research, Financial Managers Society

Since 1938, the average lifespan of an S&P 500 company has fallen from 67 years to just 15. So what are the keys to longevity for those that have managed to thrive over the long term? Harvard Business Review interviewed seven organizations with more than a hundred years on their odometers to see what they’re doing right. Here are a few things they have in common:

The long game
Organizations that have managed to stick it out for long life spans haven’t gotten there by accident – they are serious about long-term strategy, with 20- to 30-year strategic plans in place. But strategy isn’t the only way they plan ahead. All of the organizations interviewed found different ways to work with children, thus helping to nurture the employees and customers of tomorrow.

Relationships that last
Long-lasting organizations don’t have retention problems. While the average organization changes leaders every five years, the more successful ones aim for ten or more years from not only the C-suite, but two or three levels down as well. Not only do these firms want their leaders to stick around, they want a smooth and deliberate transition process in place for when key leaders inevitably do move on.

Staying fresh

One of the biggest challenges for organizations with long lives is staying fresh and relevant over the decades. Finding employees that have new ideas and different experiences can help organizations not only stay current, but ahead of the curve. Like football players taking ballet lessons to become more agile, institutions should look for experts from other fields to bring fresh insights and new ways of thinking to the table.

Honor the process
While organizations with long life spans don’t generally value growth for growth’s sake, this doesn’t mean they’re resistant to change. Constantly analyzing and tweaking processes should be a part of the normal routine for successful organizations.

SEPTEMBER 28, 2018
Rates on the Rise
By Mark Loehrke, Editor, Financial Managers Society

As institutions try to get a better handle on where rates are headed in the coming quarters, this week’s decision by the FOMC to raise the Federal Funds rate from 2% to 2.25% (a level last seen in 2008), and its accompanying statement on potential future rate hikes, lays things out pretty clearly.

Citing a strengthening labor market, increased household spending and an active environment for business investment, the Committee noted that risks to the economic outlook appear fairly balanced on the whole, and that expected inflation appears to be stable over the medium term. Based on this forecast, further rate hikes can be expected, with one more this year and up to three in 2019.


Mark Loehrke

Danielle Holland

Hilary Collins
Specialist, Publications and Research