As interest rates rise, it is increasingly important to understand the economic factors involved with funding financial institutions. In a recent podcast called, "Enhancing Deposit Pricing in Today's Turbulent Financial Waters," Neil Stanley, CEO & Founder of The CorePoint (and presenter of BSG Financial Group's educational webinar, "Rethinking CD Sales in a Rising Fee Environment") shares his views on the future of deposit gathering as financial institutions feel more pressure to find funding.
According to Stanley, running a rate promotion is the thing that every banker thinks they have in their hip pocket, pulling it out if they need to grow funding. Stanley points out, that the problem with this strategy is that rate-induced growth often poisons the net interest margin of the bank.
Stanley’s company promotes strategies that allow bankers to gain advantage without over emphasizing interest rate. "You can't compensate, very often, for an inferior rate offering," he says, "but a modest interest rate can be used alongside other good strategies for pricing and sales."
For instance, Stanley offers five strategies for offering CDs that are not rate focused:
- Develop a structured, guided sales process that focuses on the value proposition for the depositor
- Display your offer in dollars so you don’t commoditize the offering
- Show potential customers clearly how your bank stacks up against the competition to build trust
- Be flexible and customize maturities
- Offer a limited edition savings options, especially for those customers who demand your bank to match the competition or lose their funds
Details about the strategies listed above (and more) are available in the podcast. In addition, Neil Stanley also shares his background in economics and the development of The CorePoint, as well as the framework surrounding the strategies his company follows.
Neil is quoted as saying, "...since the Great Recession, the Fed immersed themselves in this pursuit of stimulative economic policy by forcing interest rates to the lowest levels in modern financial history for an extended period of time. We moved beyond the boundaries of historic reference points."