Are relationships important?

Well, after my summer slumber I thought it may be time to hop back on the horse again. When I think about successful businesses at developing relationships, I think about Publix and Investment Advisors. Neither are low cost providers and both have outstanding customer satisfaction numbers (for the most part, there are exceptions). As an employee at a financial institution, I must ask "are relationships important" to the consumer today for traditional financial services? I am asking if a realtionship matters anymore, what benefit is it to either the consumer or the organization? The relationship might not matter anymore. In the traditional financial service arena of checking, savings, and loans, it is a commoditized business where 0.10% (or the equivalent of $1 per thousand) will cause a consumer or an institution to change their mind. For the consumer, they will change their mind by changing institutions and for institutions they will say "no" because it is outside their policy or practice or they just don't want to do it......for $1 per thousand. Financial service providers spend millions of dollars a year to develop relationships, when at the end of the day they just need to give back $1 per thousand back to the consumer and should win. The consumer is more excited and sharing with their friends while the insitution can run an efficient operation with the same costs as before. Of course lets not forget the volume argument, it will lower operating expense ratio's and performance costs as the denominators are now larger. ING has grown to $68 billion in its internet banking division in a short period of time, this justifies my comments. I cannot blame the consumer for the lost relationship, I manage my money much the same way and banks/credit unions have trained consumers to find rates, not relationships. The old adage of "be careful what you wish for" has come to haunt banks and credit unions who used rates to beat up on their competitors to "develop" relationships. I challenge anyone who reads this blog to argue the other side of this discussion. I agree there are alternatives and relationships make for a more efficient gathering of assets due to reduced marketing expenses etc. but lets be honest, what differentiates one bank/credit union from another? Interesting question for people who can be honest with themselves. At the end of the day, I believe it is people and their human capital that is the only true differentiator. This further supports the commoditized theory as all products are the same, price is only way to gain market share. Next post: the satire of Are Rates Important? Followed by: Innovative Relationships

Signed an excited consumer about the future innovations in the financial service industry!!