Bank of tomorrow may offer one-stop financial shopping to customers


CHICAGO -- Imagine a bank that offers cut-rate income tax preparation if you buy your car insurance there.

Imagine a bank that counts the balance of your stock brokerage account toward the minimum on your free checking account.

Imagine a bank that acts as your travel agent, your personal financial counselor or even your entree to discount shopping. It sounds far-fetched, but all those things seem possible now that Congress is poised to rewrite the laws that have governed the staid world of commercial banking since the Great Depression.

In an industry where for decades "change" seemed to mean only quarters, dimes and nickels, banks are not only rethinking what they sell, but also how they look. The model is no longer the Roman temple, housing dour priests who function as the guardians of money, but the department store, where salesmen size up customers and guide them through an array of products.

At many banks, they won't simply be after your checking or direct-deposit business. They'll want all your money -- investments, insurance policies, tax preparation and possibly airline ticketing, real estate listings and even basic legal services.

The reform package proposed recently by Treasury Secretary Nicholas F. Brady would open the way for banks to issue insurance and underwrite mutual funds and securities. It also would remove the last barriers to nationwide banking, allowing banks to branch across state lines. Just as important in the long run, the Treasury plan would open bank ownership to non-financial companies such as Procter & Gamble Co. and Chrysler Corp., which have been prohibited from owning banks.

If Mr. Brady has his way, those restrictions, contained in the Glass-Steagall, McFadden and Bank Holding Company acts, would be drastically changed or repealed.

Passage of the Treasury proposals is far from certain because of differences of opinion over their implications for the economy and bank safety. But whatever form the changes take, they are sure to accelerate an expansion in bank services being forced by economic pressures.

Falling profit margins on banks' basic business -- accepting deposits and lending money -- have increased the lure of other financial services and the fees they could generate. Technology has allowed banks to hedge on some of the legal and natural limitations on their activities. Some use brokers and toll-free numbers to solicit certificates of deposit from across the nation, for example. Other financial companies such as brokerages have set a precedent for broader relationships with customers by adding bank-like services to their traditional products.

Last month, Banc One Corp., one of the nation's largest bank groups, completed the remodeling of the lobby at its Columbus, Ohio, headquarters. The new lobby is a veritable bazaar of financial boutiques ranging from an insurance office to a real estate agency to a travel agency and a brokerage.

The half-dozen similar branches "have worked very well," says John Russell, a Banc One spokesman. He says his bank is "now in line with the rest of the stylized retail shops, like dress shops."

Banc One is an example of how banks are adding services though the regulatory lid has not officially come off. Ohio banks cannot sell insurance or real estate, so Banc One affiliates rent lobby space to outside insurance and real estate agencies.

Banc One's lobby-as-mall vision is one of two prototypes popular among bankers. The other is that of the personal consultant: bankers who build relationships with individ

ual customers, offering them advice and signing them up for services right at their desks.

"You walk in and you have your banker, Joe, and tell him, 'I have this extra money, what should I do with it?' He might tell you to pay off your Visa bill or put it in a certificate of deposit or something else," says John Anderson, chief executive of Unidex Reports, an Atlanta financial services marketing research firm.

John Rau, outgoing president of LaSalle National Bank, says the latter model plays into an advantage bankers have in selling investments. Consumer surveys, he says, indicate bankers are perceived as offering more balanced advice than other financial professionals. Even if a bank offers a full range of investments, that credibility should stick.

"Financial services aren't an impulse purchase," Mr. Rau says. "Very few people wander in to make a deposit and then say, 'Oh, I feel like a mutual fund today.' "

The evolution of banks as investment centers presents at least one serious potential for misunderstandings, even abuse. With consumers used to federally insured bank deposits, no matter what the written warnings on investments sold at banks, some are likely to believe they are insured. Others may be misled.

The Treasury proposals also would allow banks, in effect, to become insurance companies and to underwrite securities. However, though many large banks might leap at the chance to manage mutual funds (some have investment expertise through trust and private banking operations), only a few very large banks are likely to insure people or underwrite bonds.

But selling the investment vehicles and insurance policies of other companies may prove attractive for many banks. Even the smallest of banks might profit by offering "name brand" mutual funds or insurance coverage, even if their payback came only from the rental of lobby space.

"If a person is using a bank for three services right now and can use it for eight services, they're likely to. It's convenience . . . that's why they bank where they do now," says William Weber, senior vice president of Furash & Co., a bank consulting firm based in Washington.

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