Feb. 10 – The Electronic Transactions Association (ETA), the global trade association of the payments technology industry, has announced the next step in its continued expansion of government relations activities with the hiring of seasoned financial industry and government affairs professional Scott Talbott as the association’s new Senior Vice President of Government Affairs. In this position, Talbott will be responsible for developing and executing ETA’s federal and state legislative and regulatory strategies on behalf of ETA’s more than 500 member companies.
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April 8 – Gold Canyon Bank, Gold Canyon, Ariz., has been closed by the Arizona Department of Financial Institutions, which appointed the FDIC as receiver. To protect the depositors, the FDIC entered into a purchase and assumption agreement with First Scottsdale Bank, National Association, Scottsdale, Ariz., to assume all of the deposits of Gold Canyon Bank.
July 21 – Bank of Scottsdale, an independent community bank with a hometown style, is now being formed to serve local Scottsdale businesses and residents from its Hilton Village Office Park location on McDonald and Scottsdale roads. The bank’s management team of proven executives with more than 70 years combined banking knowledge will bring local focus and banking experience to a market that is receiving continually deteriorating customer service from larger, impersonal financial institutions.
By Toni Lapp, Senior Editor
The United States reached another technological advancement this year: Smartphone penetration exceeded 50 percent of Americans — a majority of the U.S. population. Consequently, digital efforts are top of mind for most financial institutions. The bigger question for community banks is how to stand out in this evolving landscape. The answer is personal interaction, delivered at the branch level. Yes, foot traffic into branches is down, but bank customers say they still want the option of visiting their local branch. That’s the message of a report issued last month at the BAI Conference in Chicago. According to the BAI/FMCG Channel Optimization Study, even those who described themselves as “self-service oriented” when asked to value banking attributes viewed further drive time from a branch and lack of human assistance with transactions as negative factors in rating a bank.
Could Congress do monetary policy and bank regulation better?
By Bill Poquette, Editor-in-Chief
A year ago this month, on Dec. 16, a ceremony at the Federal Reserve marked the centennial of the signing of the Federal Reserve Act. At that point a year-long observance was launched, with frequent references to the centennial and special portals devoted to it on the websites of the Board of Governors and the regional banks.
By Scott Carpenter
Government limits and restrictions on the amount that employees and employers may contribute toward qualified retirement plans, such as an IRA, 401(k) or 403(b), leave many highly compensated executives – usually key executives – without enough retirement income to sustain their current standard of living.
A supplemental executive retirement plan is a great way to solve both the issue of governmental limits and the ability to attract, retain and reward key talent. SERPs are typically designed to make up for the retirement income shortfall caused by limits and restrictions in qualified retirement plans.
I say typically because there are more ways to use SERPs than just for retirement income. The executive benefit planning industry has long focused solely on retirement income because that is how most consultants were trained and introduced to SERPs. Executives at most companies tend to be in their late 40s and 50s, which is where the focus on retirement income originated.
When consultants design SERPs solely for retirement income because the decision makers are concerned about retirement, they often make the mistake of designing a plan that fails its primary goal — attracting, retaining and rewarding key talent.
Consider the following: Executive A is 57. He is married with adult children that live on their own. He is maxing out his deferrals into the company 401(k) plan but still has not saved enough for retirement. His employer wants to reward him for his 15 years of service and keep him around another 10 years until he plans on retiring. Putting a SERP in place that promises to pay him 40 percent of his final pay for life will accomplish the employer’s goal, because 10 years and retirement is first and foremost on the executive’s mind.
Now let’s take a look at his successor in training. Executive B is 40. He is married with three children ages 4, 6 and 8. His wife stays at home to care for the children and does not have formal employment. He is contributing to his 401(k) but is nowhere near maxing out contributions. His employer wants to retain him long term to succeed Executive A. The employer offers him the same SERP that will pay him 40 percent of final pay at retirement. Three years go by, and Executive B leaves the company for a higher-paying job. The plan did not achieve the employer’s goal. Why did it fail?
To most 40-year-olds in his situation, short-term incentives are king. To promise a benefit 27 years down the road does little to retain an executive, as retirement is not on the radar.
That is where many consultants and employers make mistakes in the design process of plans. They don’t put themselves in the shoes of their executives and ask themselves if they were in a similar stage in life what would matter most to them. They fail to ask each executive being considered if the plan would be valuable to them. Many employers may feel awkward asking their executives, and some executives may be reluctant to answer honestly. That’s where a consultant can be invaluable during the planning process. Ask questions about what stage in life they are at, their family dynamics and short- and long-term goals.
Once a consultant and employer have a good understanding of what is important to their top talent, a plan can be designed to accomplish the goals. SERPs can be designed to pay out benefits at certain pre-set dates or life events while still employed. Benefits can be paid to accomplish goals other than retirement. Here are a few examples:
- Lump sum in five years for mission work.
- Four annual payments starting in 10 years to pay for a child’s college tuition.
- At age 50 to buy a boat.
Consider the following alternative benefit design for Executive B and its value to him. Would this plan have been better for retaining him in both the short and long term?
Executive B is 40. Again, he is married with three children ages 4, 6 and 8. After being interviewed, paying for college is a concern of his. His employer wants to retain him long term to succeed Executive A. The employer offers him the same SERP that will pay him 40 percent of pay. However, this plan allows for half of that amount (20 percent of pay) to be paid out over a six-year period, starting in 10 years. This will be beneficial as a source of additional income to help pay for his children’s college tuition. He vests in that benefit over a 10-year period. The remaining 20 percent of pay will be paid out at age 67 when he plans on retiring. Will this accomplish the employer’s goal? It definitely has a better chance. There is now a benefit that serves to retain him short to midterm. Once he receives those payments and his children are out of the house, retirement becomes a real concern, and is only nine years away.
Over the past several years, we have seen an increase in older executives retiring as the baby boomers age. Younger executives taking over have different needs than their predecessors.
Taking an alternative approach to the traditional design of simply focusing on retirement is needed now more than ever. This approach has been well received by our clients over the past several years, and nontraditional designs are becoming more common.
Employer goals of retaining, recruiting and rewarding executives can be accomplished utilizing a SERP as long as we remember that “one size does not always fit all.”
Todd Carpenter is senior vice president of business development for NFP Executive Benefits, Nashville.
He can be contacted at 615-376-0213 or email@example.com.
November 3 – Direct Insite, provider of the PAYBOX working capital management platform, has announced the results of a study showing that receivables automation is a top priority of corporations, and that banks are well-positioned to help their clients automate payments and remittance reconciliation and posting. Direct Insite released the results of the study, conducted by Blue Hill Research, at the AFP Annual Conference.
October 31 – FMSI, a leading workforce optimization solution provider for banks and credit unions, has released its Low Transaction Volume Branch Study. The FMSI Study is based on a compilation of labor and front-line transaction data, built from financial institutions all across North America. This year’s study indicates a continuing trend towards costly inefficiencies in lower volume branches, or branches processing fewer than 3,000 front-line transactions per month.