The Professional Services Division was developed as a bank marketing program in the mid-1970’s to integrate deposit generating employer cash management accounts with the pension accelerator loan program to help customers increase their retirement savings. The Professional Services Division developed additional deposits and loans from existing bank customers and attracted new deposits and loans from new productive business-owner customers. The Bank Professional Services Division concept was successfully implemented by community banks across the country as a deposit and loan generation program. Participating banks increased their deposits, loans and revenues by increasing business with existing customers and by adding productive business owners, including doctors, as customers of their “Professional Services Divisions”. Professional Services Division Consultants introduced the “Professional Services Division” concept to the banks as a revenue enhancement opportunity.
The first bank to adopt the Professional Services Division concept was the Westlands Bank, located in Orange County, CA, in 1975. The Bank of Newport, which was also located in Orange County, CA, adopted the Professional Services Division concept in 1979. A referral from the president of the Bank of Newport led to a third adoption of the program in 1980 at Arizona Trust Bank in Tucson, AZ.
The next installation was for Warren County Bank in McMinnville, TN, a $40 million state bank. The next bank that adopted the Professional Services Division concept was the Bank of Hawaii, which was the first large, multi- branch, regional bank to adopt the program. The deposit and loan generation success of these “Professional Services Divisions” then became a topic of discussion at an American Bankers Association meeting, which led to the next installation at Girard Bank, a large, multi-branch national bank headquartered in Philadelphia.
Success at Girard Bank led to an installation at Lincoln Bank, a community bank in Philadelphia that was interested in developing a small business owner niche market in their area of North Philadelphia. The next installation was for another large, multi-branch regional bank, Central Carolina Bank. Central Carolina Bank used the Professional Services Division concept as a strategy to displace Wachovia Bank as the principal bank in the business owner/ doctor market in North Carolina. The final Professional Services Division installation was completed for Michigan Avenue National Bank, a bank in Chicago desiring to expand its niche in the business owner/ doctor market.
In 1981 the Professional Services Division deposit and loan generation concept was deployed through a unique structure that avoided bank market area geographical restrictions on collecting deposits and making loans, a NE chartered credit union, the Credit Union of the Health Professions. A NE Credit Union was empowered by its charter to collect deposits and make loans to qualified small business owners and doctors domiciled in all the states in the U.S. This unique, state-chartered credit union was a forerunner of what later became money center banks that were granted powers to collect deposits and make loans to customers anywhere in the country.
The application of the Professional Services Division Concept to the credit union resulted in the fastest growing credit union in the history of the credit union industry at that time. In 1985, with the advent of money center banks, the development of the first generation of fixed annuity investments for pension use, and another pending reduction of defined benefit pension plan contribution and accumulation levels, the credit union was no longer needed to increase defined benefit pension contributions for business owners and doctors across the U.S. As part of the 1986 Tax Reform Act, defined benefit pension plan contribution and accumulation levels at normal retirement age were reduced to $865,000, one-third the 1974 level, to support expansion of 401 (k) Plans. The need for pension accelerator loans had been eliminated.
Expansion of the 401 (k) Plan at the expense of pension plans did not have the desired effect of expanding personal, tax-advantaged retirement savings plans to a larger demographic segment of American society in order to reduce dependence on the Social Security System. In 2001 Congress acted through tax legislation to increase the pension 415 retirement savings accumulation level at normal retirement age to its historic, high, 1974 level of $2,400,000 plus annual cost of living increases.
The lack of defined benefit pension planning knowledge and the onset of the Great Recession in 2007 prevented wide-spread use of defined benefit pension plans and, as of 2019 less than 45,000 defined benefit plans exist in the U.S., down from the high of 270,000 employer sponsored defined benefit pension plans in 1987. As part of the implementation of the New Economic Order Planning Program to create 220,000 new defined benefit pension plans from 2020 – 2024, the Pension Accelerator Loan Program of the Bank Professional Services Division is being reintroduced to community banks in the U.S. beginning in 2020.