Banks are poorly positioned to capture their share of the $3.5 trillion to $7.2 trillion that baby boomers are expected to inherit in coming years. The problem: banks are failing to connect with their customers’ needs, which go beyond mere products, according to a recent study by Oaks, Penn.-based SEI Investments Inc., a provider of outsourced investment business solutions.

Investment management “doesn’t end with the sale of a product,” says Al Chiaradonna, senior vice president of global strategy and innovation for SEI’s private banking and trust division. “The real sale is the experience, and that will continue beyond the sale (of a product).”

Chiaradonna uses the term “discovery” to describe the process by which investment advisors learn about their clients’ lives in detail to provide appropriate financial solutions. His study is called, “Discovery: A Fresh Approach to Building Relationships with Wealthy Boomers.”.

Chiaradonna says banks must move from a transaction-focused service model to a “holistic” one, which empowers investment advisors to probe client concerns such as caring for aging parents and educating their children.

“I think he’s right,” says Rhomes C. Aur, executive vice president for wealth management with, First Horizon National Corp. based in Memphis, Tenn. “I think banks are doing better (on discovery). They have identified that it’s an issue, but still have a ways to go.”

“There are the obvious needs a client has,” says Tom Hurlbrink, national director of sales for the private wealth management group at Pittsburgh-based Mellon Financial Corp. “The-not-so-obvious needs are the challenging parts of the discovery.”

Chiaradonna has three recommendations to banks to improve the process of discovery with their investment clients:

1. Instead of relying on the skills of individual advisors, create a training process where employees follow a set of proven, company-derived guidelines, so the client experience will be consistent from one advisor to the next.
   
2. In the shift away from products to holistic wealth management, focus compensation less on commissions and more on providing service. Pilot the process in a small area of the company before implementing it company-wide.
   
3. Be willing to experiment with methods of discovery and service delivery.

Chiaradonna acknowledges that banks need to sell product to make money. But he says banks can use what’s learned in the discovery process to achieve client goals more flexibly and deepen customer relationships.

“Getting banks to go from the value of the product to the value of the process is what I’m recommending,” Chiaradonna says. “How do you differentiate yourself from the competition? It’s the experience you provide to the customers rather than the products they buy.”

(For more on banks’ wealth management strategies, see “All Things Financial” in the May/June 2004 issue of BAI Banking Strategies.)

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