Michael Malone is taking a different approach to growing Comerica Securities, the retail brokerage unit of Dallas-based Comerica Bank. Rather that expanding the business through bank referrals from within, hes pushing his advisors to source new business externally.
We dont want our financial consultants to come in and work only in the bank channel. The expectation is they bring in assets from the outside too, Malone, the head of the unit, said.
Like many bank investment programs, Comericas brokerage business shrunk dramatically in the wake of the financial crisis and lost many advisors who either left or were fired. The program never fully recovered from the fall. In fact, since 2010, income from the brokerage business dropped 29%, falling from $24.3 million in 2010 to $17.3 million last year, according to an analysis by Michael White, president of Michael White Associates, a consulting firm based in Radnor, Pa.
Malone, who joined Comerica in February from JP Morgan Securities to lead both Comerica Securities and Comerica Insurance Services, is determined to put the unit on a path to growth by developing outwardly focused advisors. He expects 75% of new business to come from outside the bank, with the remaining 25% coming from referrals.
If you get to that ratio . . . we are contributing on net basis significantly to the bank, he said. The idea, he went on, is to refer business back to our banking partners and get referrals going the other way.
We are appreciative of the opportunities and the referrals we get but at the same time we are very focused on bringing in external assets too. This is the thing that leverages the financial consultants and takes the production to a higher level, Malone said.
According to Malone, investment programs that rely heavily on branch referrals wont be able to grow average production because consultants become complacent as they sit and wait for referrals. I do know there are some banks that will say that 75% to 100% of your business will come from referrals, but my personal view is thats a mistake. You wont get large producers if you take that approach, Malone said.
Not everyone agrees. Rick Rummage, founder of the consultancy Rummage Group, says that only 3% to 5% of bank customers have a brokerage account with their banks. Even if 10% of customers had that relationship, which is rare, why in the world, he asked, would you ask your financial advisors to go outside the bank cold to find a new customer when 9 out of 10 warm, hot leads dont have a brokerage relationship? It makes no sense.
Still, Malone claims that the Comericas financial consultants are more productive on an average basis than those at most brokerage firms, although he declined to disclose their average production.
Malones goal is to build a true brokerage firm within the bank one with the sales-oriented focus of a wirehouse. Malone noted that Comericas financial consultants sit in offices, not in branches, and have sales goals and the opportunity to build their business as they would in a traditional brokerage firm.
The expectation to source business externally hasnt impeded his ability to attract advisors, Malone claimed. Hes recruiting advisors from channels across the board, including wirehouses and regional firms.
As much as Malone wants business to come from outside sources, the bank still offers advisors a referral stream, whereas at a traditional brokerage firm, advisors have no referrals at all, he noted. If somebody can bring you in and add 25% of your business in referrals thats a pretty attractive alternative, he said.
The firm also offers a competitive comp plan, Malone said. He declined to say how much he offers advisors, but industry sources said the payout grid is standard, starting at 20% to 25% and going up to 40%.
Malone is planning to grow both the number of advisors and overall production but declined to provide details. He also declined to say how many advisors the unit employed, but industry sources put the number of advisors at roughly 100.
Malone did say that he plans to hire both experienced advisors as well as newcomers to the industry. He is looking for advisors who have demonstrated an ability to grow business outside of the bank and want to collaborate and work with their bank partners. Were not looking for someone who wants to be a lone wolf, he said.
Advisors are encouraged to build their business in a broad way, said Malone. If advisors were to receive most of their referrals from banking partners, it would be difficult to refer business back to them, making the business very one-dimensional, Malone explained. An advisor sourcing external business along with the referrals from the bank is going to be more successful, Malone said.
To stoke referrals, Comerica implemented a program to foster greater collaboration between the wealth management business and the banks retail banking and small business banking units. The effort resulted in 3,795 qualified referrals and $546 million in opening balances in 2013, which more than exceeded expectations, said Julia Wellborn, head of Comericas wealth management business.
Theres a huge opportunity for financial consultants in a bank but you have to break down some of the silos and you have to learn how to work together and collaborate, said Malone. The fact is a lot of that heavy lifting has already been done here.