How Community Banks Are Offering Financial Advice to Their Clients at Scale with Evan Siegel

Intro: Helping community bankers grow themselves, their team, and their profits. This is The Community Bank Podcast.

Caleb Stevens: Well, hey everybody, and welcome to the Community Bank Podcast. I’m Caleb Stevens, and I hope our time together helps you grow yourself, your team, and your profits. Today’s discussion is with Evan Siegel. He is with a FinTech called E-gain and they help community banks offer financial advice to their customers via technology and AI. It’s a fascinating discussion around how community banks can leverage both their relationships and technology to create value for their customers and offer financial advice that helps them achieve their goals. A lot of banks have in their mission statement that we want to help you achieve your financial goals, but very few are actually acting on it and executing on it with excellence. And so, this discussion I think you’ll benefit from, and you’ll enjoy if you haven’t gotten our loan pricing series, and now we’ve mentioned it just about every episode for the past month or two, but click the link in the show notes. We’ve got a loan pricing video series that you’re not want to miss. It’s all about inflation, the fed, and how to set your bank and your loan pricing up for success here in 2022, and with that, here’s my discussion with Evan Siegel.

Well, Evan, thanks for joining us today on the community bank podcast. It’s great to be speaking with you. How are you doing out in San Francisco?

Evan Siegel: I’m doing great and thanks for having me, Caleb.

Caleb Stevens: Well, we don’t have many Stanford MBA grads on the podcast, and I don’t know if we’ve ever had a Wells Fargo, former VP on the podcast as well. So, give us a quick flyover of your banking career.

Evan Siegel: Yeah, I’d be happy to. So, I had an enjoyable 16-year career at Wells Fargo, and there’s two things that I think will be relevant to your listeners and to our upcoming conversation. I did two things there. One was the most rewarding in my whole professional career, not just my banking career and the second is a really interesting problem. I know community banks are struggling with, and I dug into that. So, the first one, I stood up a team of financial health consultants at Wells Fargo, just a bit of background. I was in the call center in the management team, the senior management team and I used to listen to a lot of calls and I heard the struggles that customers had payings or bills overdraft charges, etcetera, and I’d always been sort of, really interested in finance and believed you could help people with a few simple rules.

So at the time, I had a cool boss, I approached him with an idea to create a team of financial health coaches and he said, go for it. Let’s make it as skunkworks. So, we did that. It grew to 200 bankers in the contact center. We helped in my time there 75,000 customers and by many measures, it was a great success. We had the highest customers among the highest customer sat scores in the bank. The team members who were doing it, loved it because they felt like they were really able to help customers, the bank publicized it a lot. It was brand building, it was in the annual report. They actually had some of those bankers talk about their experience in snippets on the brand commercials for the brand, for the bank, they even had the team on good morning America to talk about their experience.

So, great publicity. Unfortunately, ultimately it was closed down for two main reasons. One was compliance, as we all know in the banking world is powerful and they’re nervous and they were nervous. These bankers would go off script and possibly get the bank in trouble. Secondly, the finance guys were constantly asking, is this making money, doing it with humans is expensive. We were spending anywhere from 20 to 30 minutes with on average with the customers, I could prove it was profitable for the bank, but it was deep analytics, difficult to prove. So, on that front, on the financial wellness, I actually think that’s the future of banking, and I’ll tell you sort of how that connects to what I’m doing in a second. Though the interesting problem that I worked on very connected I had strategy and sales roles. I worked on setting up a book of business models where the call center and the branch bankers would have a set of affluent customers.

They’d work with overtime, do financial checkups on a quarterly basis. I think it’s a great model. I think helping your most affluent customers to grow the business as a way to go. It’s just really hard bankers struggle to feel comfortable giving a range of advice. So, I think that’s a really interesting problem for community banks to solve in the future. So, because financial wellness is important work because the sort of the book of business financial checkup is important work. I really thought that these need to be solved with technology. So, I left Wells Fargo and joined one of the leading AI, knowledge management companies, a company called EGA to sort of pursue those two specific topics in banking.

Caleb Stevens: Well, I’ve heard you say before that a lot of bankers or banks I should say, and their vision statements, their mission statements will really tout the fact that we really believe in helping you achieve your financial goals be on the path, the financial wellness, but you make the case that oftentimes we as bankers, don’t do a great job of actually executing on that. We make these lofty statements and promises, but then when you look at our actions and what we’re actually executing on, it’s often no more than just offering the best rate or a loan, and certainly, that meets a need, and that’s very important. But you believe that to really connect the dots and really make an impact in customers’ lives. It’s got to be more than that and it sounds like that’s what you’re really passionate about. And I mean, I would say, certainly community banks, because they’re so relationship-oriented are well-positioned to be that resource. What does that look like though? Because I’ve heard you right before in an article, or I’ve seen it a blog you’ve written before where you basically say that that can be hard to measure because financial wellness often means different things to different clients. Talk about what are some of those common areas that you guys would help clients think through as they’re on their path to financial wellness.

Evan Siegel: Yeah. So, let me start with the first part of just benchmarking what I see as the common experience today. Because I think the contrast is important and nothing tells it better than I do a lot of mystery shopping, and one experience is very typical that really summarizes the experience today. So, I walked into a local bank and I said, hey, I’ve got $13,000 in high-interest credit card debt. What should I do without missing a beat that banker said, well, hey, we have a zero rate balance transfer on a credit card. You pay six months, no rate. And then it that’s what he said, and that’s what I recommend for you. Did not ask me a single question about what was my situation, what was my goal? If he bothered to ask, he would’ve learned that in that persona for that mystery shop, I had equity in my home in here in California, a lot of people have a lot of equity in their home and a home equity loan, or some sort of home loan product.

Would’ve been a much better financial move for me. So, that’s sort of what you have. Bankers are either sort of org takers or product pushers. Most of them that’s my experience in the industry. And so, that’s the baseline that you’re coming from. And so, the model that I recommend that community bankers do is you go with sort of, you really try to do advice and guidance at scale. You can work with your customers. If you think about it the banking industry is a beautiful thing. Banks do well when their customers do well, as customers do are better in better financial situations. They grow balances. That’s how banks, one way banks make money and as customers sort of continue on their financial journey, they have the capacity for more products until you’re in sort of a good financial state, that’s when you can buy a house and then when you’re in a good financial state with your retirement, you have a lot of money to invest.

So, how do banks, how do community banks execute on that? I’ll oversimplify a bit, but there’s really sort of two key components. You need to three key components, you need to have a smart channel strategy, you need to have a combine it with your customer strategy and you really need to leverage technology. In other words, if you’re going to try to do advice and guidance for everyone, that’s really hard. So, what I recommend people do is you take your either most affluent customers, excuse me, your most affluent customers, or your most strategically important customers. Let’s say emerging affluent people that you think in five years will be really valuable for those. You put them into a model where they’re interacting with your branch bankers on a frequent basis.

Community banks have that tradition of a branch strong branch network relationship maybe longer-tenured bankers. So, you do that model. And then for everyone else, there’s a lot of great technologies out there. You can do advice and guidance digitally, if they want some extra help and they walk into a branch you can support ’em in a transactional model. You’re not necessarily going to try to sell solidify a relationship because that’s your mass-market customer, and if your affluent customers go digitally and work with your digital tools, you should have your relationship bankers follow up with them. So, channel strategy, your, your most affluent customers get them a relationship with your branch mass market, steer them to the digital-first. Then what the third piece of that is the technology nowadays, the AI and the knowledge management technologies are sophisticated enough to do help your bankers with a flaw.

Let take that example. The branch banker with a flawless needs assessment can understand the information from the CRM system, guide the banker through understanding what’s the customer goals. What are all the other questions they need to ask to then give guidance? And by the way, in this model, not every time is the solution a product. Sometimes the recommendation, the banker is going to be take this action because it’s a long-term relationship. You’re working with that customer overtime to get them in a position. So, eventually, they’re in a better strength than they have the capacity for more products. So, that’s sort of my recommendation. I think it really ties well to community banks, their roots, and it’s a strategy that I think they could win against the megabanks then.

Caleb Stevens: One of the pushbacks I could often hear people saying is, well, Evan, that sounds interesting, but that’s got to take so much time to get my bankers up to speed on not just loans and the products that we offer, but holistic financial advice, even if I narrow it down to just a handful of customers that’s still potentially a lot of time. How do we know we’re delivering the right advice? Talk about that a little bit, because I think it could be easy for us to say, well, let’s just refer them to our wealth management division. If we have one and get them set up with one of our financial planners, how does technology, my mobile app? How does all of that really come into play? So, I’m not having to spend all this time equipping my team, but then also my team spending time with customers when time is a scarce resource today.

Evan Siegel: Yeah. So, what we saw, what I’ve seen in the banking industry is you don’t need to boil the, with advice and guidance. I’ve seen data where 80% of what customers are really working on are foundational things. Like how do I save more? How do I reduce spending and how do I build my credit? Because that sort of 80 20 rule or a little bit of advice will really help a majority of your customers. That’s where these AI knowledge management technologies like what E-gain creates can really get to well, what’s the particular goal of a customer and what’s that next best financial action. The technology can actually guide people. We’re not talking about comprehensive plans, what people need to make to move the needle on financial wellness is simple bite-size action plans. Give me three steps so I can go start my journey.

And again, because most people are in these sort of foundational steps, the technology can guide the people to those, those bite-size action plans and move them on. And by the way, it’s better with a banker because a banker can form the relationship could be empathetic, can sort of be that face to face interaction, but the technology works extremely well in the digital channel. We’ve actually created. We’ve partnered with a company called green path.

They’re a nonprofit, financial wellness company, and we have a something we call a virtual financial coach that goes into those foundational areas of building credit and increasing savings. Just to give you one snippet of how these bots have become so powerful. Now, we survey people at the beginning of the journey and say, tell us how stressed you are about your credit situation. We then give them those bite-size action plans and at the end, we survey, them again on a scale of one to five, and we see a 35% reduction in their stress related to their credit. So, you can see that giving foundational advice, uh, can be scaled, can be done with technology, and can be bite-sized so that the bankers can really do this.

Caleb Stevens: Well, Evan bots are giving me financial advice? Break this down for me. This sounds like a gen Z digital native kind of thing. What about us? You know, boomers or gen X bots giving me financial advice really kind of walk me through the plumbing of how that works can is that something that I can really take seriously and trust?

Evan Siegel: Yeah, well, no, again, let’s, let’s keep in mind what we’re talking about. We’re not talking about investment portfolio optimization. We’re talking about those foundational steps of let’s look at your credit. Let’s analyze your credit report, let’s figure out we actually, that’s another feature that our coach does, and let’s figure out what are the number one thing based in the data in your credit report that it’s hindering your credit, let’s say that you don’t pay your bills on time, let’s dig into why you don’t pay your bills on time. Again, this is just a conversation with our bot. There’s actually 1200 journeys advice, rich journeys in our virtual financial coach. So, we could figure out not paying their bills on time through a conversation with the coach, why you’re not paying your bills on time. Let’s say, it’s you you’re disorganized a lot of people.

That way they lose track of where their bills are. The coach will actually recommend that that customer use the bill pay service. So, they pay the bill the minute they get it an organization’s platform. So, again, I think it’s, you need to think about what the type of advice we’re talking about here. It’s about found a, primarily foundational elements of how do I pay my bills on time? How do I build my credit? How do I, if my credit utilization’s high and that’s, what’s pretty my credits for how do I reduce it? How do I reduce some of my, my spending and what we’ve worked with behavioral scientists as have other financial wellness companies., and we know what makes people tick and what drives their decisions, and we tap into that.

And so, because it’s a conversation, we tap into a behavioral science concept called Active Choice because people are making, choose their own journey. As we coach them on how to reduce their spending. We ask them which area of your spending do you think, do you feel like you can tackle? Is it dining out? Is it your fixed costs around cable, whatever it might be. And then we give them specific one to three-step actions that they can go do again, foundational stuff, not optimizing your portfolio, but the feedback we’re getting is that it’s very helpful and it works, and yes, to those skeptics out there. This is the future of banking.

Caleb Stevens: Well, talk to the CEO, who’s listening, and he, or she, they’re trying to think through their long-term digital roadmap, their community bank. They’d like to stay independent for as long as they can talk to them about how to think through FinTech partnerships because I think this is something community bankers wrestle with is I know I’ve got a partner with FinTech. I know I’m not going to win the arms race, and JP Morgan’s investing like 12 billion or something like that, into digital. They can’t win that, they’ve got to have strategic partnerships, but they want to maintain their own sense of identity. They want to make sure relationship banking is still the heart of what they do, they want relationships and technology to work together and that goes for all different kinds of FinTech partnerships. Any advice that you could give to those CEOs as they’re having discussions with other FinTech partners, about how to think about the relationship and the process.

Evan Siegel: Yeah. So, a couple of thoughts. So, one is it should be grounded and aligned with your strategy. So, I recommend to all community banks, because you mean the points you hit on, you’re competing against megabanks who can throw near infinite dollars at technology innovations around service. I think the harder place that, where they’re going to struggle is advice and guidance because they just can’t replicate that branch delivery that the community bank can. So, ground your FinTech strategy, your FinTech approach in your strategy, what’s your bank strategy, and what’s your customer strategy, then pick your partners, and I think you need multiple. I see a lot of banks who sort of have a one-and-done approach, oh, we’ve got this cool FinTech technology, check the box. We’re helping our customers with advice and guidance, and that one technology might be educational.

It might be giving sort of isolated tips, one off tips of what to do. Well, that’s not sufficient. You need a portfolio of action because getting people to improve their financial situation requires behavior change and that requires sort of a slew of actions and interventions. So, you want to have a portfolio of partners, and then the third thing I would say is it doesn’t just stop in creating those partnerships and getting those technologies and capabilities on board. It also really depends on you need to market that. I’ve been stunned at how we know Americans are struggling financially and it’s not just those living paycheck to paycheck. It’s according to the financial health network, it’s 67% of Americans are not achieving their financial goals, but people don’t act on it. You need to catch them at the moment where they’re willing to take on their financial issue.

Let’s face it. It’s much more fun now, a sunny Saturday to go out and play golf. So, you need to really market your capabilities, and the last thing I’ll add is you need to have something that ties it all together. So, because you have this portfolio of capabilities you build with the FinTech, that’s where it comes back to something like your banker sort of understanding what the customer’s able to do, and then recommending all the solution set of fintech or something like a coach front, a digital coach, that’ll say, hey, I know you’re trying to achieve, you’re trying to buy a home. Here’s what you need to do and here’s a FinTech capability. Obviously, wouldn’t use those words, but here’s a capability that our community bank has that will help you on that particular step in your journey to buy your home.

Caleb Stevens: And I would just add if all the bank has at this moment in time is the ability to compete on rate, and that’s the only unique selling proposition they have. That’s a red flag going forward because that’s not going to be enough in the future. Folks are looking for solutions beyond what the best rate is, and if that’s all you have it kind of can become what Seth golden calls are race to the bottom, and the problem with the race to the bottom is you might win. And so, folks be thinking through whether it’s offering advice or anything that you have that can set your bank apart, that’s extremely important. Evan, any thoughts for the small business owner out there more on the commercial lending side, we’ve got a lot of commercial lenders that listen to this podcast and commercial lending by and large is the main profitability driver for a lot of community banks. Any thoughts or advice on how to help small business owners make better decisions in their as they grow their business?

Evan Siegel: Yeah, no, I think that the templates, the same, the topics are different. So, all your small businesses are, it’s hard. It’s hard to run a small business. As we know, they will bank with a partner. Who’s going to give them the guidance that they need. It’s that’s your value add differentiation. So, the topics, and again, technology can support you in this. Can have your bankers guide them on topics, such as cashflow, what are tips and tactics and strategies you can do to optimize your cash flow, and by the way, in that are a lot of the bank tools and offerings to help optimize that. So, arm your bankers with technology that allow them to understand what’s that small business’ goal. And then the advice can flow from it and you will win in the marketplace with that capability.

Caleb Stevens: Well, if folks want to dip their toe in the water and hear a little more about what you do specifically to help community banks offer financial device through E-gain. How can they get in touch with you, learn more about what you guys do and maybe test the waters?

Evan Siegel: Yeah, so there’s multiple ways, and it’s not just to learn more about what we do. If people want to converse more on these various topics, I’ve spent the last five years of my career thinking about them and making progress on them. So, the ways to contact me are, I’ll give you my email address. So, it’s E Siegel, S I E G E L @egain E G A I N.com. So, esiegel@egain.com, I’m also on LinkedIn. So, Evan Siegel, and again, please do reach out to me. We have position papers on strategies that community banks can take, we have technologies to help sort of on this journey of advice and guidance, and I love to talk about this topic.

Caleb Stevens: And I’d just like to close, maybe kind of going back to what you said at the very beginning of the show about profitability. Certainly, we want to create as much value as we can for our customers in any way we can, but if we’re not profitable, we’re not making money, then we’re not going to be able to sustain helping our customers over the long haul because we won’t have the fuel to get there. Talk about at the end of the day, how this helps a bank become more profitable by offering advice that meets each customer in their moment of need through technology.

Evan Siegel: Yeah. So, I mean, I think the best story that proves that is what Wells Fargo put in its annual report of what financial wellness did. So, they profiled a customer that called the bank and asked for a secured card. Secured card is one of the easiest to get. Unfortunately, that person was turned down. They were referred to the team of financial health coaches, that team worked with that customer over nine months, and in that period, not only did that customer get an unsecured card, but they also got a home and did the mortgage with Wells Fargo. So, you can see here’s something where you took an example where the customer would’ve been turned away and probably not spoken well of the bank, and instead, they got two pro products, mortgage being one of the most profitable that a bank offers on the retail side.

And you know, that customer is likely a customer for life because they really turned around that situation, multiply that by thousands in different situations, and you see the power of this model. Now, again, the one trick of it is if you do it only with humans, it’s really expensive. So, you need the sort of dual strategy of in your branch channel, take your most valuable customers. It’s worth the investment. Everyone else do it digitally, by the way, exactly what we did with that customer. Our technology could certainly give that advice and actually, I would argue better because it’s more efficient and it never goes off-script. So, hopefully, that explains it to your listeners of how this model works and scales, and really contributes to the profitability of a community bank.

Caleb Stevens: That’s great, and relationships and technology. That’s two things we really believe in on this podcast and I know our listeners do as well. So, we appreciate you kind of giving us a window into another way that they might be able to create value for their customers through both of those things. So, we appreciate your time.

Evan Siegel: Yeah, thanks for having me. I enjoyed the conversation.