United States / Commercial Banking
Relationship Managers Should Practice Industry-Focused Banking
by Administrator
Aug 22 2018

As seen in American Bankers Association's Commercial Insights 

High-performing relationship managers (RMs) always seek to attract and retain businesses that match their bank’s risk appetite. These RMs also consider the growth potential of both current and prospective clients and match the client’s potential growth with the appropriate bank products and services. In order to do this, RMs need to understand the intricacies of the industries in which their clients operate. That is why these RMs use industry research to help them build and maintain profitable client relationships throughout the business life cycle.

Prospecting the Best Businesses

At the prospecting stage, high-performing RMs use industry research to separate risky industries from safe ones. These RMs use the most granular industry research available (at the 5- or 6-digit level of the North American Industry Classification System – NAICS) because it helps them identify rewarding niches in poor sectors and laggards in strong sectors. By understanding industry headwinds, tailwinds and future trends at the prospecting phase, these RMs save time preparing their credit memos’ risk-mitigation sections and avoid wasting time on businesses with little chance of getting a thumbs-up from their institution’s increasingly stringent credit department.

Because the best credit teams are also using industry research to help determine whether a deal makes sense, it is wise for RMs to utilize the same industry research in their business development process. Using a consistent industry research structure within a bank helps ensure that the bank’s various departments are aware of the same risk issues.

Becoming a Trusted Adviser

Both clients and prospects like to talk about what is going on in their world. Industry research reports provide RMs with in depth conversation starters that facilitate the discussion of key industry trends and issues. Building a rapport with the client is the first step to being identified as a “trusted adviser” and not just another vendor.

In addition to building rapport, RMs who seek “trusted adviser” status must also be able to answer their customers’ “what’s in it for me” questions. Industry research can help the RM do this by helping them understand the challenges that their customers and prospects face in their industry. RMs are then in a better position to recommend products and services that allow the client to achieve their firm’s strategic goals.

Escalating the Level of Your Relationship

Once the relationship has developed with the client, the RM can use more in-depth information, such as an industry’s five year growth forecasts, to indentify the relationship’s potential success during the medium term. High-performing RMs use the industry’s performance analysis to help them identify external influences that will affect their clients, such as demographic changes, commodity prices, exchange rates and government policies. An awareness of such variables helps the RM develop risk-mitigation plans when writing comprehensive credit memos about firms in selected industries of concentration.

IBISWorld research indicates that 44 percent of an RM’s industry-information focus comes from reading industry summaries. High-performing RMs always use industry summaries to freshen up their industry knowledge, prior to calling on either existing or potential clients.

Some third-party research firms include sample questions and typical answers in their industry research that the RM can use to their advantage. RMs who are calling on dentists, for example, would be interested in the following issues, as well as the client’s response to them.

In addition to helping the RM bond with the client, the answers to these questions would also be of help to the RM as he or she does their “due diligence” in the credit underwriting process.

High-performing RMs also explore how market leaders within specific industries operate. They then are in a position to share this information with their clients and prospects. Customers and prospects will welcome any information regarding how they can better follow the industries’ market leaders, discover new growth niches or remain competitive in their chosen industry. RMs can also use these reports to help their clients uncover new international markets, understand upcoming technological developments, spot changing labor costs as well as trends in fixed expenses that may require additional capital investments by the client. The best RMs also scout out an industry’s future capital needs and they relay this information to both their clients and their bank’s credit department.

Creating Value Touches

The sale should be only the beginning of the client-RM relationship. High-performing RMs stay in touch with their clients post-sale in order to share valuable information with them. Often, the client is too busy dealing with the micro problems of business ownership to recognize potential macro threats or opportunities waiting just around the corner. By staying abreast of industry developments, RMs can avoid routine “checking-in” calls and add value to their role as a “trusted adviser.”

RMs should not limit their research to just understanding their customers’ specific industries. Industries do not operate in isolation, since they are linked by shared buyers, sellers and external variables. Information on supplier and customer industries provides ammunition for continued engagement with the client or prospect. If a client, for example, is a manufacturer of a product that is used by a high-risk industry, the RM can add value to the client relationship by suggesting that the client consider taking one or more of the following actions to minimize or diversify the client’s industry exposure: review their payment terms to firms within that industry, diversify their portfolio of clients or offer other products or services to firms outside their industry. By adding “value touches” to the call, RMs not only get an opportunity for an update on the customer’s financials, but also a potential cross-sell opportunity for other financial products and services that can help the client achieve their objectives.