Don’t underestimate the importance of relationship building

During an unstable global economy, the banking industry, more than any other industry, needs to really understand clients and their respective needs, says PETER GALLANAGH, Partner.

The last time I wrote for Chartered Banker, I urged you all to consider the relationships you have with your clients and to focus on becoming their trusted advisers. I still believe the relationship the general business community has with its banks remains uneasy, lacking true foundation and trust.

Without question, however, the majority of business relationship managers are doing their best to build relationships and develop “ trusted adviser status” with their clients. However, I believe many obstacles have been put in their way, making tasks almost impossible.

The continued restructuring of banks has resulted in further changes to our clients’ relationship managers. For some of my clients, this has been the fourth or fifth different individual over the past 18 months. Clearly relationships need time to develop and the relationship manager needs time to get to know the client, the business and client needs.

While I acknowledge that banks need to consider their own performance and structures, they need to consider the impact on front-line services. The continuous chopping and changing of personnel causes clients additional time and cost in bringing bank staff up to speed and, in this fragile economy, could endanger the very existence of certain businesses. Let me explain.

In my last column, I gave the example of a certain relationship manager pulling out all the stops to help achieve funding for one of my clients. After obtaining a restructured facility for my client, the relationship manager left the bank after only 12 months.

This person took with them not only a vast knowledge of the client, but a second-to-none knowledge of the niche sector in which my client operated. Despite the client paying down, within 12 months, more than double the debt it was supposed to in the agreed plan, the new relationship manager was unable to secure short-term funding to ease a cash flow issue arising out of increased business. A mix-up between the client and the bank caused cheques to bounce and created serious ramifications for our client within its niche sector. Whilst the client’s finance staff have responsibility for the issuing of the cheques – and ultimately the problem – there is no doubt the relationship manager’s lack of knowledge of the sector and client certainly contributed to the series of events.

Over the past 18 months, we have heard from various banks’ management that “we are open for business”. We all appreciate that the terms under which banks now do business are different, and quite rightly too. What is unclear to the business community are the outline terms of doing business within certain sectors.

Given this uncertainty, many relationship managers cannot say with any confidence whether a credit application will be approved, nor are they always sure of what (additional) information may be required to get an application through credit.

How can banks expect their relationship managers to become trusted advisers if they do not know the rules under which they have to abide?

It is becoming more and more apparent that in certain banks, the success of some applications is driven by a checklist and to a very large extent by the individual reviewing the credit application. It is also becoming more and more apparent that the “we are open for business" slogan commonly used by banks is not filtering through certain banks’ credit teams, and if it is, there is a major disconnect between the front line and credit on the expectations of being able to do business. This needs to be addressed to give those at the front line the opportunity to build meaningful relationships with their customers.

Many banks also perceive that this current banking environment provides an opportunity for growing their market share. To this end, many relationship and development managers have been tasked with double digit portfolio growth. We are currently in the worst recession any of us have experienced yet the pressure on relationship managers to grow portfolios is increasing. The pressure is compounded by the continued perceived issues identified with client credit teams highlighted earlier. Business written by banks tends to be as a result of clients moving and, as such, the economy continues to remain static, thus making the growth difficult.

Uncertainty over employment, working environment and rules of engagement continue to make life difficult. All I can urge you to do is to keep close to your clients, understand their needs, tell them the truth even when it is bad, and be there for them as much as you can.

Campbell Dallas LLP is a leading independent firm of Chartered Accountants in Scotland.  The firm is the Scottish associate of UHY International. For more information or advice please contact Peter Gallanagh on 0141 886 6644 or email peter.gallanagh@campbelldallas.co.uk

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