THE Wal-Mart-ization of banking may or may not turn out to be what the average checking and savings customer really wants. But those who have been looking to the big banks and their wannabes to manage trust funds and other large investment portfolios are beginning to head for the door.
Trust and investment services used to be loss leaders designed to bring wealthy customers into banks. The banks showered so much personal attention on customers that profitability was virtually out of the question.
That was when banking was a ''relationship business.'' For 60 years the number of banks remained steady at around 14,000. Then in the 1980s the interstate banking barriers started springing leaks. The number of banks now stands at less than 11,000, and experts guess the final number will be anywhere from 8,000 to half that number. The number of branches, however, has grown from 54,000 to 67,000 in just 13 years.
It hasn't been lost on the hungry merger-created giants that in the next 20 years $8 trillion will be inherited by Americans, with more than 15 percent of beneficiaries receiving an average of $470,000. Since most people will not have managed assets of that size before, they will need expert help. Not surprisingly, banks now are viewing trust services as profit centers, and they are making the changes needed to squeeze more black ink from investment management onto the bottom line.
The trouble is, customers are the ones getting squeezed. Trust customers still demand serious service, but high-quality attention in the big banks is being reserved more and more for the largest clients.
When a merger occurs, the local trust officer, familiar to a community, may now find herself unable to control the quality of service offered -- if she stays with her new employer at all. Small trust accounts, which before received individual attention from trust personnel, may now be consolidated with others or put into mutual funds and relocated to the home office, reachable only by an 800 number. Trust officers may be loaded with so many accounts that they have little time for individual care of each. At some banks, accounts as large as half a million dollars have been dropped altogether as too small. As the size of banks rises, so does the importance of committees, which must approve nearly every decision, turning special customer requests into exasperating marathons of unreturned phone calls and delayed plans.
Trust officers who have been forced to take on hundreds of additional accounts and cut back on customer service have started to rebel. Many of them are starting independent trust companies. Their goal: Fill the customer-service void created by the bank mergers.
The rapid growth in the number of independent trust companies is testament to the power of this phenomenon. The Chicago-based Association of Independent Trust Companies started in 1989 with just 16 members. Today it boasts 60. Meanwhile, according to the association's president, Bill Beedle, president of the Manchester Trust Bank in Lakehurst, N.J., the size of the whole industry stands at more than 300 companies, nearly double its size just three years ago.
Mr. Beedle says 20 percent of his business every year comes from people who are tired of the impersonal service of bigger banks and brokerage houses. He cites a large Pennsylvania bank that bought a community bank in New Jersey. Trust accounts smaller than $250,000, formerly handled by a trust officer in the community, are now handled at the bank's headquarters. All 401(k) accounts below $500,000 have been dropped.
Beedle's business is booming. ''We get the money most bigger companies don't care about,'' he says. ''We take accounts of $40,000 and $50,000 because I know they will grow into $500,000.''
In my own case, I thank the egos of bank presidents everyday. Sixty percent of my clients came to me because they were fed up with how they had been treated at big banks. One third of those came specifically because a recent merger had caused the customer service climate at the bank to deteriorate.
In 1990 I left a major bank to start my company because I saw firsthand what was happening. Customers of the bank's trust department were being treated impersonally, subjected to committee decisions that were not reached for weeks, when action could have been taken in hours. Because account loads were so heavy, our officers had no time to treat customers as individuals. What should have been basic services, such as taking tax needs into account or tailoring portfolios to special circumstances, had become rare.
All we could do was ''put out fires.''
If banks want to keep getting bigger in order to be competitive with each other, I really don't mind. If they want to streamline their trust departments until every function is as close to automated as possible, that's fine, too. They are creating a lot of business for me and for my fellow independents.