Going for the gray.

Going for the gray

What would you say to a market for financial services with the following characteristics? . More than 60% of total retail bank deposits are held by it. . Members of this group earn more than half the total discretionary income in the U.S. . It is expected to grow from

How can a bank reach this potentially lucrative market? It doesn't take interstate banking, new product and service powers, or even electronic funds transfer technology. All it takes is reaching out to the people in your own market who are 50 or older.

And you'd better be quick. Other banks and financial institutions are pushing to devise special products and services for the senior citizens' market and, in some cases, have literally gone out of their way to reach it.

Understanding seniors. Bankers surveyed say senior citizens' financial needs and banking habits differ from younger customers'. Mark Cooper of Society National Bank in Cleveland sums up these differences: seniors are financially conservative and avoid risky or long-term investments in favor of liquid accounts --an attitude that can be traced to the Depression. Cooper is senior vice-president and market manager for the bank's Prime Advantage program.

Many seniors, not unlike younger customers, are often unaware of the newest products and investment options. In particular, those approaching retirement face a new financial lifestyle and may not know what strategy to take.

Liberty National Bank and Trust Co. offers seniors a free service called Retirement Analysis.

"The service addresses issues that they may not be aware of," says Fred Paige, vice-president of the Louisville, Ky., bank's retirement services division. Liberty National started the service in the wake of the Tax Reform Act of 1986, when many regulations applicable to seniors became quite complex.

"One of the very difficult areas for this group is going from working to living on a fixed income," says Paige. "Individuals entering the retirement years often must make irrevocable decisions within a short period of time."

One example Paige cites is how to handle distributions from pension funds. "Someone getting ready to retire has about 60 days to decide what to do with that check," says Paige.

Avoid pressure tactics. Paige stresses that Liberty National's planning service is strictly educational.

"We don't say, 'Hey, you should do such and such with your money'," Paige explains. "Instead, we say, These are the issues at hand' and provide guidance on regulatory constraints."

Bankers offering special services for seniors have learned an important lesson: Seniors do not appreciate hard sells.

Taking this to heart, Orlando, Fla.'s SunBank, N.A., doesn't push seniors into a single type of account when they sign up for its SunHorizon 55 program.

"We don't force them to change their banking practices to qualify for the package," explains John J. McGuire, executive vice-president. "So if you're a customer who always had a non-interest bearing checking account, we won't force you into an interest bearing account, or vice-versa."

People who need people. Many senior citizen banking programs stress the personal touch.

For example, when BankFive for Savings in Arlington, Mass., was creating the Presidential Group program for customers age 55 and older (now 50 and older), it discovered that seniors look for companionship and communication. This craving often follows the death of a spouse, the advent of "empty nest" syndrome, or the new-found inactivity of retirement.

"Our program makes them feel that somebody cares about them and brings them back in contact with people of similar interests and age," says Robert F. Collins, Jr., vice-president of marketing. The thrift's program provides members with a myriad of social activities and educational seminars. These can vary from three-week trips to Alaska and Hawaii to evenings at the theatre.

The Presidential Group was launched via direct mail. Potential customers were invited to a cocktail party at the savings bank and were then bused to Boston to see a play. The seniors enjoyed the fact that the thrift cared about them, Collins recalls.

More than money. Non-banking incentives, such as group travel or free seminars, play an important role in many senior citizen programs.

Indeed, the Senior Spirit program at Marquette Bank Minneapolis originated as a travel program for customers age 60 and older. Outings range from an afternoon lunch and matinee to extended domestic and overseas tours.

"It becomes a community group for them," explains Lisa Billingham, communications specialist.

The bank built Senior Spirit by adding such products and services as interest-earning checking with no service fees; 50% discounts on safe deposit box rentals; guaranteed direct deposit of Social Security checks; a quarterly newsletter; and free seminars.

Hot and cold. Bank programs for seniors place a strong emphasis on special interest rates for passbook savings and CDs; the aforementioned seminars and trips, newsletters, and various freebies: free checking, free safe deposit boxes, and free money orders and travelers checks.

Whether credit--particularly bank cards--belongs in that roster is a matter of debate.

"People between 20 to 40 are net borrowers," says Collins at Bank Five. "They're into credit cards, equity lines of credit, and mortgages. The 50-plus segment consists predominantly of savers. It doesn't make much sense to throw credit products into your senior citizen program."

"I disagree," counters Society National's Mark Cooper. "In 1996, the first baby boomers will turn 50 and those coming from the baby boom use credit to a great extent."

SunBank's McGuire points out that seniors may not be interested in credit per se, but may still want the convenience of such credit vehicles as bank cards. "If you want to rent a car or stay at a hotel, you need a credit card," he says, "and seniors use travel services more than the general population."

Banks that include credit cards in their senior programs usually charge no annual fee.

Mobile service. While institutions hope their programs will bring seniors into their branches, some potential customers are physically unable to visit the bank. Atlanta's Southern Federal Savings is bringing its services to seniors.

Southern Federal designed its Southern Gold Club with free banking services, seminars, trips, and newsletters. As fine as the program seemed, one problem prevented many seniors from joining it.

"A number of seniors indicated they'd like to do business with us because of the commitment we made to seniors, but couldn't because the location of our branches wasn't convenient for them," says John Barrickman, president. The thrift decided to bring its services to the customer.

After obtaining regulatory approval, the thrift put three mobile branches on the road to serve 20 nursing homes. "An individual can do anything at the mobile branch that he or she can do in any of our branches," says Barrickman.

A knowledgeable audience? Seniors seemed pleased with institutions' efforts to woo them. But a question that nags at some of the bankers is whether these customers understand the complexities of various banking products. Bankers are divided on this question.

Liberty National's Paige thinks many don't understand finances. "It's a sad situation," he says, "because many blue collar workers who have accumulated large sums of money in pension plans are not used to having so much money. Most of these people are not as aware of the financial and regulatory issues as they should be."

Society National's Cooper agrees, noting that many older women are unskilled at financial planning because their husbands took care of the finances. This is a serious problem when the husband dies first.

However, Marquette's Lisa Bellingham says seniors "read everything and know all there is to know. They are a very well-educated audience." In fact, she adds, Marquette maintains an advisory board of seven members of the Senior Spirit program, who give advice on the program's services. "We don't operate off of assumptions," she says.