What Is Relationship Banking?

Q: What is a relationship banker and what do they do?

A relationship banker is your liaison with a financial institution. They oversee the various banking products you use at that institution and advise you on additional products, discounts, and enhanced services that may fit your banking and financial needs.

Q: What is the difference between a relationship banker and teller?

A teller is a bank professional you encounter when going in person to receive specific banking services, such as depositing a check or making a cash withdrawal. A relationship banker is someone who helps connect and manage your various banking products.

Q: Are there downsides to a banking relationship?

Yes. Sometimes when you have many accounts or products at one bank, you may have more trouble changing banks and you may be less inclined to shop for better interest rates or terms elsewhere.

What Is Relationship Banking? Advantages & Disadvantages

Walecia KonradUpdated July 23, 2023

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Editor’s note: Lantern by SoFi seeks to provide content that is objective, independent and accurate. Writers are separate from our business operation and do not receive direct compensation from advertisers or partners. Read more about our Editorial Guidelines and How We Make Money.

Relationship banking is when banks offer multiple different products and services to better serve their customers. Both community banks and large national banks use relationship banking to attract customers and build customer loyalty. The idea is to help you meet many or even all of your banking needs while boosting revenues for the bank.

How Does Relationship Banking Work?

Relationship banking may start when you do something routine like open a checking account or savings account. From there, your bank may help you identify other banking and financial needs you may have, including insurance and investments.Relationship bankers consult with customers often to get to know their specific needs and goals and to identify changes in their financial or business lives.

Examples of Relationship Banking

There are many ways banks build relationships with customers. Personalized service is one way, as is linking many products and services together. Clients begin to feel their bank is their one-stop shop for their financial needs.While cross-selling is part of relationship banking, there are federal laws in place that limit the amount of cross-selling that can go on, especially if one product is contingent upon another.Recommended: Checking vs Savings Account DifferencesLet’s look at some examples of relationship banking.

Linked Accounts

One of the most common ways banks establish solid relationships with their customers is by selling them more than one account type. By linking these accounts, customers can reduce fees and boost convenience. Banks get the extra business that comes with one customer owning two or more different types of accounts.Linked accounts can be especially helpful in avoiding expensive overdraft charges. If your checking account is linked to your savings account, your bank may automatically count your savings deposit toward any overdraft activity. That way, you avoid the expensive overdraft fees associated with a negative checking balance.In addition, linked accounts may help you avoid minimum account fees. If your checking account dips below the minimum required balance but it is linked to your savings account, you’ll likely avoid that fee.Recommended: How Many Bank Accounts Can and Should You Have?

Financial Products Beyond Banking

Banks often offer relationship customers products beyond accounts, such as safe deposit boxes, personal loans, mortgages, auto loans, credit cards, certain types of insurance, and some investments in an effort to become a one-stop financial shop.Often, a favored customer doing significant amounts of business at the bank may receive favorable rates and fees on these additional products.

Relationship Perks

When you establish a relationship with a bank, you will likely be eligible for “perks” such as higher interest rates, loan discounts, lower fees on accounts, no minimum requirements, and overdraft protections.Clients who carry high balances may also qualify for elite perks, such as an advisor who helps with financial planning.

Financial Apps

Most banks now have apps that help you track your expenditures and balance on a 24/7 basis so you can avoid any overdrafts or bounced checks.In addition, relationship customers may also qualify for intuitive apps and platforms that integrate all of your account information in one place so you can have an instant picture of your finances across all accounts.These platforms can also make transferring from one account to another easy and instantaneous, including investing and retirement accounts held at the bank.

Business Services

Some relationship banking stems from entrepreneurs who combine their personal and business banking. In those cases, banks can offer business services, including business credit lines, credit cards, and payroll processing. Relationship customers often get favorable rates and fees on these products and customized support aligned with their business goals.

Specialized Products

Relationship banking can also entail offering special products for clients’ unique demographic needs, such as accounts designed for minors, students, seniors, and high-net-worth individuals.

Advantages of Relationship Banking

As you can see from the descriptions above, there are many advantages to establishing a relationship with your bank. Some of those pluses include:

Relationship Perks

Relationship banking comes with many perks. It’s not unusual for existing customers with multiple accounts to find themselves eligible for higher interest rates, lower or waived fees, and special discounts on a variety of banking products.On the business side, a business account owner with a revolving line of credit may find they can negotiate lower merchant processing fees from their relationship bank.

Personalized Customer Service

Relationship banking means your bank knows more about you because you hold several accounts with them. That can translate into better communication with your banker, who may be able to better anticipate your needs.

Help with Long-Term Financial Planning

Your relationship with your banker may help you with products for your long-term goals, such as car loans or mortgages with favorable rates. In addition, your banker liaison may be able to offer you strategic financial planning advice.

Disadvantages of Relationship Banking

There can be some downsides to relationship banking, as well. Being tied to one bank isn’t always the best scenario for everyone. Reasons why include:

Missed Opportunities

When you’re tied to one bank, you may miss out on higher savings account interest rates or better terms and rewards on credit cards elsewhere.What’s more, you may be less inclined to regularly research what’s available from the competition.

Harder to Change Banks

When you have multiple accounts, loans, and other products tied to one financial institution, it makes it harder to untangle yourself and move even one account to a different place. It’s not impossible to switch banks, but with a relationship situation, inertia may set in.

Exposure to Predatory Practices

Sometimes, relationship bankers are pressured to meet aggressive sales goals. They may even engage in fraudulent or unethical activity. The Wells Fargo scandal, which resulted in a $3 billion settlement in 2020, is a recent example. Under pressure, bankers routinely opened new accounts without clients’ permission.Be sure you trust your relationship banker. You should never feel pressured to open an account or purchase a product they are recommending.

How to Open a Relationship Banking Account

If you’re a good customer, chances are your bank will approach you about relationship banking and the additional accounts, loans, and products they have to offer you.If that hasn’t happened to you and you’re interested in relationship banking, ask your current bank what they offer to loyal customers and whether you qualify for those perks. Or, open a savings account or checking account with an institution you trust and ask what additional products and services they may offer.

The Takeaway

Relationship banking can be a win-win for you and your bank. You can take advantage of waived fees, lower interest rates, and special products designed for loyal customers. Meanwhile, banks may be able to boost revenue and customer stability.But there can be drawbacks to relationship banking. Becoming entrenched with one institution may mean missing out on better rates and discounts elsewhere and difficulty moving from one bank to another.Interest rates on savings accounts vary widely. Lantern by SoFi can help you find the top rates for high-yield savings accounts, taking into consideration fees and minimums.Explore high-yield savings accounts with Lantern by SoFi today!

Frequently Asked Questions

What is a relationship banker and what do they do?

What is the difference between a relationship banker and teller?

Are there downsides to a banking relationship?

Photo credit: iStock/Erdark

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About the Author

Walecia Konrad

Walecia Konrad is an award-winning financial journalist with 25 years of experience in print and digital media. She is a graduate of Syracuse University and specializes in the topics of health care, personal finance, and employer-sponsored benefits. Konrad's work has been seen on CBS MoneyWatch, The New York Times, Money, SmartMoney, BusinessWeek, and Forbes. She has been the recipient of both a Pearl Award for Best Web Publication of the Year and a National Magazine Award for Personal Service.

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