The inevitable onslaught of disclosures and what banks should be doing about it

In a recent white paper passed around by the administration this week, there are clear signs that more disclosures are on their way. Many believe the new disclosures will be tied to the new consumer protection department that the administration proposes to create. This department will be similar to other governement programs that, for example, protects consumers from faulty appliances. Just like a toaster oven is put through rigorous tests to ensure public safety, so too will the next generation of variable annuities.

What do more disclosures mean for the consumer? It means more jargon that has turned them off over the years from WANTING to learn more about financial products and services. You may even make a case that huge disclosures have indirectly caused the financial literacy problem we see today in the United States, making it easier for consumers to become victims of scams and bad product offerings.

I’m not arguing that this department shouldn’t exist. What I’m arguing is what banks should be doing to help prevent another wave of financially irresponsible Americans. They should be providing their customers with the education and guidance they need.

The problem with most banks that say they already provide education, and many do, is they let it sit on their website or in the brochure racks in the branches. They don’t actively merchandise the benefits of what’s inside the information. Instead, they choose to focus on marketing their products such as rates and checking accounts. While the latter is important to grow a deposit base, if they don’t have an effective approach to help existing customers to understand how they can help solve problems and answer questions to their financial needs, they’re just shooting themselves in the foot.

Providing helpful information does not have to be a one sided situation where only the customer benefits. The bank can also benefit by getting to know more about their client or potential client. To do this, banks must be more focused on merchandising the helpful information that’s found either in their online content or stand alone branch education. When merchandising, don’t focus on the title of the paper or topic, focus on the benefit (“Sending kids to college”, “Investing in your retirement years”, “Buying your first new home and what to consider”). Education alone is boring but education with a purpose can be a real powerful relationship starter.

As soon as the customer is engaged or triggered to request for more information, make sure to first fulfill their request either in real time (in the branch or online) and then capture this request. Remember, this is not a request to get a credit card, apply for overdraft protection or sign up for bill pay. This is a request to “learn more about buying their first home”, “how they can save or invest for their kids college tuition” or “what steps they should take in planning for retirement”. People are looking for this guidance. Who ever is there first to provide it in a easy to read and understand way will be the one who wins their relationship.

This type of merchandising may sound familiar, and it should, because banks do this all the time, only the focus is on their products, which tend to look similar to the bank next door (“Lowest rates in town”, “Free Checking”, “Reward Programs”, etc.).

There are banks who are embracing this concept. Without tooting our horn too much, many of them are our clients. Read more about how banks can use education to boost sales.