Capital Markets

Miracle on Wall Street?

Your banker may soon be focusing less on selling products and more on offering advice – even if it means sending you to another bank.
Marie LeoneOctober 28, 2010

In the classic Christmas movie Miracle on 34th Street, the jolly fellow who plays Santa Claus in the toy department of Macy’s sends customers to rival Gimbels to find products not carried in the store. At first Santa’s altruism is met with shock and anger, but soon it’s seen as a stroke of marketing genius, as grateful customers swear their long-term loyalty to Macy’s — or so the Hollywood story goes.

Now, banks are looking for the same kind of happy ending by increasingly shifting their focus from peddling products to becoming “trusted advisers,” said Jean-Yves Fillion, managing director and head of client coverage for BNP Paribas, earlier this week at a conference sponsored by The Economist magazine. Indeed, another conference speaker, Irene Dorner, president and CEO of HSBC Bank US, said she could envision a situation in which a sales manager would send a good customer to another bank if the client sought a product that HSBC did not sell.

But unlike on 34th Street, the spirit of Santa Claus only goes so far on Wall Street, as Dorner noted that her sales team may be forced to “fire” other customers who are not ready to expand their relationship with HSBC into a “partnership” that includes advisory services.

Fillion and Dorner made their observations during a session on the future of banking. Fillion said the key to BNP Paribas’s current transition from product vendor to trusted adviser is a new breed of banker who understands what profitability means in the post-financial-crisis environment: that is, generating and protecting medium- and long-term revenue. He half-jokingly said that a bank’s sales staff will have to learn to “listen” to clients, a skill that may be lacking in bankers who were previously paid only to push products.

Going forward, relationship managers will have to be more flexible when handling corporate accounts, added Dorner. Even the quants who are normally cloistered away developing complicated derivatives will have to become client advisers regarding their products, she said.

Both Dorner and Fillion noted that banks will have to revamp their pay programs to get bankers to stay focused on longer-term client relationships. BNP Paribas has set up a board of managers to figure out how to reward and retain top talent, said Fillion. The bank also moves managers around the company, and the world, to give them a “holistic” view of the operations, he added; with that perspective, a manager is more likely to move up the ranks. Bankers who are part of an international sales network will be increasingly introducing customers to overseas colleagues, in hopes of cross-selling ideas and products.

Fillion noted that the new financial-reform legislation in the United States will put the brakes on proprietary trading by banks, and said that client interest in securitization products will continue to fade. But for global banks, if market or regulatory constraints dampen product sales, “we can still offer global relationships,” said Dorner.