NU Online News Service, May 24, 10:58 a.m. – Financial institutions are finding new respect for small businesses, a market they generally ignored during the prosperity of the late 1990s, according to Meridien Research, Newton, Mass.
But banks still have to do better at customizing their financial products to the needs of small business, by slicing through internal boundaries and delivering services across several channels, including the Internet, Meridien concludes in a new study that looks at bank sales of insurance and other financial services.
“The market for small-business banking services is dynamic and growing quickly,” says Karen Prest, an analyst at Meridien Research and author of the report.
One opportunity that smaller banks often miss is the possibility that owners of small businesses will buy wealth-management services as the businesses mature, Prest says.
“A lot [of smaller banks] don’t do a good job of seeing that this small-business person is also a wealthy person,” Prest says. “It’s only recently that they have taken advantage of this and started prospecting for wealth-management business from small-business customers. The past behavior of small-business owners has been to go to Merrill Lynch or some other investment company for such services.”
When owners near retirement and want to sell their firm or pass it on to heirs, they will need help in managing the transition, Prest notes in her report. A bank that has taken pains to build a trusted relationship with the small-business client is likely to be called on to provide that help.
“The earlier the bank strikes the relationship, the easier it is to retain the relationship through the succession,” Prest says.