Given the current spotlight the Royal Commission is shining on poor behaviours and toxic cultures in the financial services industry here in Australia, we would be justified in thinking that banks and purpose are mutually exclusive. So we started to look further afield to see if we could find an example of a bank that did actually have purpose, and could demonstrate it.
Our search uncovered this great post from purpose pioneer Aaron Hurst following his interview with Roger Ferguson, President and CEO of leading US bank TIAA. The great news is a bank can be purpose-driven and I hope this post gives you hope. Fingers crossed that the leaders of Westpac, CBA, NAB and ANZ are reading!
Last fall, TIAA, the largest manager of retirement accounts for educational, religious, and charitable organizations, decided to purchase EverBank, an online bank, for $2.5 billion. CEO Roger Ferguson admits that the move, which came eight years into his tenure as CEO, was an unconventional one for the then-99-year-old insurance company, “Many insurance companies that owned banks were exiting at that point. It seems counter-intuitive, to put it mildly, and the banking industry overall was sort of suspect. It took a certain amount of insight, maybe foresight, maybe even a little bit of bravery, to decide to do this at that time.”
It turns out that not just his timing but Ferguson’s reasons for acquiring a bank were strikingly original, and it wasn’t just about TIAA getting bigger. “Being an insurance company was limiting because it did not allow us to fully serve the teachers, doctors, researchers, government employees, and nonprofit workers whose retirement accounts we manage. For us it was a recognition that you can't have a safe and secure retirement unless the 20, 30, 40 years leading up to retirement are also financially safe and secure,” says Ferguson.
Research shows that a little over half of Americans have less than $10,000 saved for retirement. Ferguson says the EverBank acquisition has allowed TIAA to start thinking about the “many different ways in which we can help individuals and their families, from the start of their careers leading up to retirement, so they can have better financial outcomes.”
As the two companies merge their product offerings as well as their cultures, it spells a clear change in how TIAA now operates. "Now, we are really trying to become a broader financial services firm," Ferguson says. "Banks are all about lending, saving, investing – and by implication, they're about budgeting. And you can teach all of those tools, and those capabilities, through a banking kind of package.”
Engaging More Fully with Customers
Ferguson remains focused on developing financial products and services for TIAA’s diverse customer base, "Who doesn't have, in the back of his or her mind, that favorite college professor, or that favorite librarian, or that person who worked in the dining hall...So, all of those who work at TIAA have the sense, ‘I'm serving the needs of somebody who, frankly, is really busy doing something that's incredibly important, and they may not have either the time, or the sophistication, or both, to look after their financial needs. And they've entrusted us with doing that.”
Having more financial tools at its disposal than just retirement accounts will enable TIAA to help people make good financial decisions in all phases of their lives. Ferguson points to an example: “Think about a doctor who wants to go and teach at a medical school. These folks have a really hard time, believe it or not, getting a mortgage because they come out of medical school with hundreds of thousands of dollars of debt.”
Given the large number of medical school teachers among TIAA’s clients, the company understands that while on paper these folks may have high debts, they need support and are actually “really very creditworthy,” Ferguson says. “They simply need a lender to understand the context of their situation instead of seeing them as numbers.”
Again, by listening closely to its customers’ unique needs, TIAA found that sharply rising healthcare costs during retirement were coming in the way of financial security, as their customers live longer and deal with chronic illnesses, and sometimes even delay retiring so they don't lose out on the healthcare benefits their employers provide. So the company created its Retirement Healthcare Savings Program, which is a plan funded by employers through which contributions are made tax-free, earnings grow tax-free, and distributions are tax-free – “a powerful triple-tax advantage that could potentially stretch benefit dollars up to 50 percent”, Ferguson points out.
In line with the goal of providing financial security throughout customers' lifespans, TIAA manages tuition-financing programs that offer 529 college savings plans to thousands of college savers across the country (529 plans are financial vehicles that allow parents to set aside funds to cover their child’s future college costs). With 9 low-cost 529 plans in operation throughout the country (none of which have sales charges, start-up or maintenance fees), TIAA is one of the leading providers of such plans.
Acquiring EverBank has boosted TIAA’s online presence, which will enable the company to better serve its clients, including those who live in rural areas from which other banks have been pulling out. In recent years, TIAA has opened 40 new local offices, a number in remote, underserved locations across the U.S. offering its full range of services, from free retirement planning advice to brokerage services. Ferguson says the move goes to the heart of TIAA’s mission: “It doesn’t matter if you are grounds staff at a university, if you are a faculty member, or if you have $500 or $500,000 in your account, you get the same advice from us for free.”
Finally, seeing that its customers increasingly want to make a social impact with their investments, TIAA has expanded its socially responsible investing options. The company – which is one of the largest managers of socially responsible assets in the U.S. – launched a Social Choice Bond Fund five years ago that invests with an environmental, social and governance (ESG) focus. Ferguson points out that the fund’s investments “have financed solar plants, taking the equivalent of 6.7 million cars off the road, and built affordable housing that guarantees over 2 million low-income mortgages.” TIAA is “one of the largest investors in green bonds in the world according to Bloomberg,” adds Ferguson.
More recently, TIAA launched a donor-advised fund giving customers a simpler, potentially more impactful way to make donations to their favorite charities. The initial contribution of $5000 (which can be made in cash, stocks, or other types of assets and may be tax deductible) is invested, and all growth in the fund is tax-free, which makes it possible for donors to increase their contributions into a more substantial gift over time. For Ferguson, these funds are about “enabling our customers to express their support of the causes they believe in, give even more to the charities they love, and simplify their giving at the same time.”
Instilling Values in the Next Generation
When I spoke with Ferguson, he was hosting TIAA’s “Bring Your Kids to Work Day.” He answered questions for 45 minutes from a group of mostly middle school students. I wondered how he explains TIAA to kids. Ferguson says what really helps them understand the mission of TIAA is relating it to something very core to their lives: “They all have teachers. So, the fact that we're there helping their teachers to keep teaching and not having to worry about their futures, all the kids nod to that and often say, ‘That's really great. So, Mr./Ms. [my favorite teacher] can come in every day, and you guys are helping that person to get through life.’ That seems to resonate with them.”
Ferguson concludes by adding, “A lot of jobs allow you to increase the size of your checking account. The magic is to do that in the context of actually trying to help society solve one of its major problems. So, I'm just one of the luckiest people in the world to have gotten into a position where I'm both helping individuals – at a micro, person-to-person level – and also helping institutions, and through those two things, hopefully helping to make society better.”
Three Stages of Leadership Development - eBook
In our research at Imperative, we have identified three stages in the development of purpose-driven leaders. They serve as a framework to design leadership development programs and to measure purpose within an organization. Imperative has just released a guide to developing purpose-driven leaders that includes step-by-step advice on how to invest in purpose in your organization.
Download the eBook: Purpose-Driven Leaders - The Three Phases of Development.
About The Author
Aaron Hurst is an Ashoka Fellow, award-winning entrepreneur and globally recognized leader in fields of purpose at work and social innovation. He is the CEO of Imperative and founder of the Taproot Foundation which he led for a dozen years. Aaron is the author of the Purpose Economy and has written for or been featured in The New York Times, The Wall Street Journal, Bloomberg TV and is the author of the Fast Company Purposeful CEO series.