3 Myths About Banking and Lending for Financial Advisors

IN THIS ARTICLE

• Bringing Up Banking & Lending
• Day-to-Day Banking Management
• More Work, Less Value
• Making Banking and Lending Part of the Practice
  

“I don’t want to be my client’s banker.”

It’s a common hesitation among advisors considering how banking and lending might fit into their practices. Often, the concern is less about whether these needs matter to clients and more about what getting involved will require of the advisor.

Other common myths include:

• There’s no natural way to broach the topic with clients
• You’ll get pulled into day-to-day banking and lending issues
• It will create more work without enough value

In practice, banking and lending can fit more naturally into the advisory relationship than many advisors expect. Understanding where these misconceptions come from, and what the advisor’s role really needs to be, can make the opportunity much clearer.

Myth 1: There's No Natural Way to Broach the Topic with Clients

Banking and lending needs often surface through conversations you’re already having.

You’re likely already asking clients what they’re saving for, how they’re managing cash and debt, and what they want to accomplish next. Those discussions can reveal opportunities to help through banking and lending opportunities without requiring you to manufacture a separate conversation. For example:

• Saving discussions can lead to lending opportunities
• Balance sheet management discussions can lead to how to handle excess cash
• Debt questions can be tied to both lending and banking offerings

Mike Holtschlag, EVP of Banking & Lending at LPL Financial, sees that happen particularly with advisors who lead with financial planning. For those advisors, he says, “Banking and lending naturally comes up when you’re having conversations about clients’ lives and where they want to go.”

The key is to listen for the need and know where the conversation can go next. At LPL Financial, banking and lending capabilities are designed to support advisors once those needs surface. If you’re looking for a place to start, these five planning conversations can help surface banking and lending needs naturally.

Myth 2: It Will Lead to Day-to-Day Banking Management

For some advisors, the word “banking” immediately brings to mind the transactional side of the relationship, from debit cards and transfers to routine account activity.

But incorporating banking and lending does not require taking ownership of all of that activity. It can simply extend the advisor’s role to decisions involving cash, credit, and borrowing when those choices affect a client’s broader financial goals.

Lending is a good example. When a client needs liquidity, the decision may involve weighing whether to hold cash, sell investments, or borrow. Each option carries different considerations. Selling investments, for instance, can take money out of the market and potentially trigger capital gains, while borrowing introduces interest costs and future cash-flow obligations.

Those trade-offs give you a natural role in helping clients consider how a borrowing decision fits with the rest of the plan. That does not mean you need to become an expert in every banking or lending product.

The value is in understanding what the tools can do, recognizing when they may be useful, and knowing when to bring them into the conversation.

You can also decide how involved you want to be. LPL’s platform is designed to give advisors flexibility in what they offer, how they offer it, and how central they remain to the client experience. Some may want to stay closely involved, while others may prefer clients manage more of the transactional activity themselves.

Myth 3: It Creates Work, Without Value

The workload question is a practical one. Advisors have told LPL that they worry the transactional side of banking could create an administrative burden and pull time away from their core advisory work. That is where the support behind the capabilities becomes crucial.

On the banking side, LPL has a dedicated service desk that answers advisor questions and stays closely connected to the product team. Holtschlag describes the combination as “small company service with giant company scale.”

The goal is to give advisors access to people and resources that can help when a client need moves beyond the initial conversation, rather than expecting the practice to build all of that expertise internally.

For advisors, that can make the calculus much simpler. Expanding the range of financial needs you serve does not have to mean building an entirely new operational function.

In addition to making banking and lending easier to manage, a strong platform can help advisors build stickier client relationships and create additional opportunities for deeper planning. Other financial institutions are also competing for clients’ assets, and banking and lending can be an entry point into a broader wealth relationship. When advisors can support those needs within their own practice, they may be better positioned to retain the relationship while expanding the scope of the advice they provide.

Making Banking and Lending Part of the Practice

Banking and lending do not have to become separate lines of business. They can begin in planning conversations that are already happening, with advisors deciding how involved they want to be and drawing on additional support when they need it.

That leaves you focused on the role you already know well: understanding what the client is trying to accomplish, recognizing where there may be an unmet need, and helping connect that need with the right resources.

You don’t have to become your client’s banker. But you can be better positioned to help when banking or borrowing becomes part of their financial life.

Schedule a consultation to learn how LPL’s Banking & Lending capabilities can help you address more client needs while maintaining the flexibility to run your practice, your way.