As banks diversify, some begin to take on planning services

When people think of places to put their money, they often think first of banks. It seems logical, then, that banks would, with all the other diversification they've been diving into, plunge happily into financial planning. After all, if a financial planning department can bring in more deposits -- particularly from high-income depositors -- such a venture should not be overlooked. United States banks have been somewhat timid, however, about offering broad financial planning programs to a wide-income base of customers. One reason may be a resistance to change.

``Traditional banking has been successful,'' observes Charles Nesbitt, senior vice-president and manager of financial planning at NCNB Corporation, parent of NCNB Bank (formerly North Carolina National Bank) in Charlotte. ``But few banks have looked down the road to what changes will take place in banking as deregulation accelerates. As the 1990s unfold, it's really possible we'll have national banking in this country.''

Mr. Nesbitt says this means that banks will have to compete on a national basis with all the financial service companies that got a head start in the 1970s and '80s. Companies like Sears, Roebuck, American Express, and Prudential-Bache have all introduced various financial planning programs aimed at various income levels.

To counter that, NCNB, which is acquiring banks throughout the Southeast, has begun offering broad-based financial planning to customers whose family income starts at about $30,000.

``We feel the banking industry is quite well suited to give broad-based financial planning,'' Nesbitt says.

A few other banks, including Security Pacific and First Interstate in Los Angeles, Bank of America in San Francisco, and Chemical Bank in New York, have begun to reach down to the under-$50,000 crowd.

At most of these, financial planning has evolved in a recognizable progression from the banks' trust departments. The investment, legal, tax, and accounting expertise that has traditionally been standard at many large banks is used extensively to develop the financial planning departments. That is true at NCNB, for instance.

The most radical departure from this method seems to be at Chemical Bank, which has chosen to go the route of computerized financial plans for the masses. For $100, a customer can fill out a questionnaire and have the answers turned into a financial analysis of the family and receive some general recommendations about future action.

The questions are pretty general, too: things like family size (including children's ages), savings, investments, home equity, insurance, and last year's tax bill. There is also a place to rank various goals in order of importance and four ``risk tolerance'' choices.

But buying the plan is not necessarily the last step, says James Shanahan, Chemical's vice-president for new product development. Since it was introduced in October, about 25 percent of the people who have gone this far have come back to talk to one of the bank's financial planners to get more specific advice, he said.

But while some people need the follow-up to give the impetus to put the plan into effect -- opening an IRA, putting money in a mutual fund, or starting a college-savings plan -- for others this follow-up is not necessary. Just seeing some of the options laid out in a way that applies to them personally is enough to get the ball rolling.

Another computer-based system is the basis for the NCNB offering, called Quissett. It is the creation of Justin Heater, a financial planner in Cambridge, Mass., who has been marketing it to several banks around the country. Unlike Chemical Bank's plan, however, this one requires follow-up interviews with one of the five financial planners at NCNB, Nesbitt says.

Another method, which does not rely so heavily on a computer, is a two-tiered approach such as that used at Bank of America. The top tier, known as Executive Financial Consulting, is aimed at ``top executives at Fortune 500-type companies,'' says Nancy Hicks, a vice-president at the bank. She is also administrator of ``Customized Financial Services,'' the second tier of the bank's financial planning effort.

While the executive product has been offered for about eight years, the second-level product first became available in a few branches about three years ago, Ms. Hicks said. It is now available in 126 of the bank's 950 or so branches around California.

Although this plan has been used by a wide range of customers, she says, a rough profile finds the family income to be in excess of $75,000. ``But we do go down as far as $40,000.'' This still leaves a lot of customers who have not found the product useful.

Like financial planning offered by many brokerages and insurance companies that rely on commissions or product sales to justify their costs, Bank of America's Customized Financial Services is free. The hope is that following the plan will include ample long-term deposits or perhaps a loan or two, a practice Ms. Hicks believes is common to financial planning in general.

``From our research, the majority of financial planners make money off the products they sell, rather than a flat fee.'' Other evidence indicates, however, that the number of fee-based planners, who are not beholden to any particular investment product, is growing.

Security Pacific National Bank in Los Angeles plans to come out with a financial planning program aimed at household incomes in the $35,000-to-$50,000 range, said Barbara Stark, first vice-president and manager of executive financial services. Until then, she says, the bank is sticking to its program of offering financial planning to ``high-net-worth individuals with incomes of $100,000 and above.''

One reason more banks have not plunged into financial planning is the liability issues involved. While bankers may suggest nonbank alternatives for investment or savings, they shy away from making specific recommendations. They can say, ``You might consider mutual funds.'' But they probably won't say, ``We recommend the Ajax Mutual Fund.'' Or they might ask whether the customer has considered the stock market, but they will avoid suggesting 100 shares of Hyper Computer Company. These are recommendations more commonly made by a broker, investment adviser, or independent financial planner.

Limitations like these would make it difficult for any financial planner, whether or not the planner is working for a bank, to offer the widest array of choices. If people are most comfortable about having the bulk of their assets in a bank, then a bank's financial planning services may be adequate. If they want more diversification, though, then they might prefer an independent planner or a broker/investment adviser to supplement the bank's plan and recommendations.