Brokers at Bremer Bank are trying a new way to attract investment services business from existing bank customers:  they’re teaming up with the bankers, and they're doing so in more than a perfunctory way. 

At the urging of management, brokers and bankers now hold joint annual review meetings with customers in a coordinated quest to better define customers’ financial needs, uncover assets they might hold elsewhere, and ultimately persuade them to develop a financial plan. 

The St. Paul, Minn.-based regional bank launched the business development initiative less than two months ago in a bid to attract mass-affluent customers, a market segment that is estimated to have more than $7.5 trillion in income-producing assets, said Stephen Kruchten, president of Bremer Investment Services. 

Some of these customers may not be on advisors' A lists, but that doesn't make them any less important to business development, Kruchten said. A seemingly modest client with a $17,000 IRA might have "$1 million scattered around town," he said.

Wealth Penetration Ratio

As banks struggle with rising regulatory costs and thinner profit margins, they're increasingly boosting efforts to generate more business from existing clients and diversify their revenue streams, much like Bremer is attempting to do. Indeed, banks' so-called "wealth penetration ratio," the measure of how well banks have penetrated the investment services opportunity, is notoriously low.  Almost half of banks (44%) have penetration ratios ranging from 6% to 8%, meaning that only 6% to 8% of bank customers have an investment product with the bank, according to Wayne Cutler, a managing director with consulting firm Novantas. 

At Bremer Bank, the goal isn't only on boosting investment business. While the initiative is focused on bank customers that have no investment accounts, the aim of the joint meetings is to increase deposits, loans, credit cards and insurance that customers have with the bank, Kruchten said.

Departure From the Past

The joint meetings and coordination between brokers and bankers is a departure from the 80s and 90s when bank executives worried that money taken from bank deposits to buy let's say a mutual fund or annuity from the bank would jeopardize the deposit and lending business.  But that thinking by and large has changed, according to Michael White, president of Michael White Associates. 

When customers buy an investment with money they have at the bank, most will replenish those deposits over a period of 18 months, White explained in an email.  In addition, while initial investment sales are typically funded by bank deposits, "very soon thereafter most monies are sourced from outside funds," he said. 

Kruchten agrees that fears of "disintermediation" are a thing of the past. Back then, he said, "bankers were trying to keep their arms around their own bank products," but today, he added, "they would be naïve to think that customers are not being introduced to alternative products elsewhere."  

Problems Persist

Still, problems persist.  While Bremer and other banks are urging their bankers and advisors to team up, friction between the two often rears its head, said Rick Rummage, owner of the Rummage Group. 

Bankers and brokers may not see eye-to-eye or worse don't like each other, Rummage said. 

To make these relationships work, management needs to push hard. They need to insist on weekly meetings to discuss progress in holding joint client meetings and more importantly implement incentive programs that align the interests of bankers and advisors.  "The bank has to spend a lot of time thinking about the structure of their incentive plans to the bankers and the brokers before they start sending them out on joint calls,” Rummage said. 

If joint meetings aren't part of the incentive program or weekly meetings aren't held, "neither party is going to do it a lot and it kind of goes by the wayside," Rummage said. 

Tracking Joint Meetings

On weekly meetings, Bremer is doing its part. The bank, which uses Raymond James as its third-party broker dealer, has implemented a process to track progress, with advisors turning in spreadsheets every Friday. The spreadsheets document new assets uncovered, financial plans produced and new business referred into the bank as a result of joint meetings with customers.  

While Kruchten said that it was too soon for metrics, advisors are holding at least one joint meeting weekly, with some holding two or three or more. 

The bank, however, hasn't realigned compensation plans, so that brokers and bankers are compensated based on the total client relationship as some banks do. Citibank, for example, has tied compensation for bankers and brokers not to the amount of deposits or the amount of investments but rather on the full amount customers hold at the bank.  

Comp alignment hasn't been necessary at Bremer because the bank already has a strong partnership culture, Kruchten said, noting that the bank had record referrals in 2014, even after having eliminated incentives for referrals two years ago.  In addition, the drive for joint meetings in the pursuit of mass-affluent customer business has full management support, Kruchten said. 

Rules of Engagement

What Bremer has implemented are basic rules of engagement for wooing customers. To initiate the process, brokers and bankers jointly decide who to have meetings with. The bankers then contact the customers and set up the meetings, sending them a meeting agenda and reminding them to bring their all their 401(k), insurance and other financial documents. 

At first, the joint meetings may feel clumsy, with bankers and advisors fumbling over "who is going to say what," but that soon gets sorted out as they schedule "pre-meetings and choreograph a bit how the meeting is going to go, said Kruchten.  

Up to this point, advisors weren't used to "having somebody sitting in these meetings," as advisors ran the meetings entirely on their own, Kruchten said. "They just needed to get used to another voice in the room, asking questions as well," he said. 

The adjustment, however, hasn't discouraged them from participating in joint meetings, according to Kruchten. "It's going to be different before it becomes the norm," he said.

Read More: