When the management at FirstBank & Trust in Lubbock, Texas, approached Mitch Watson eight years ago in the hope he would join the bank and build its first wealth management program, the Lubbock native had one demand some financial institutions would likely balk at.
I told the CEO [Barry Orr], My kids are getting to the age where I want to spend time coaching them in sports and doing those sorts of things. I dont want that to be an issue, says Watson, 46, who serves as the financial advisor for the banks seven branches in the region. He told me, The only thing that would get you in trouble here is if you dont do those things. And theyve held true to that. They want you out there, coaching those teams and being involved in the community.
Sometimes that has meant leaving work at 4:30 in the afternoon, Watson says, but the company treats its employees like grown-ups, and the work gets done. Of course, this in no way represents pure altruism on the banks partthese policies are good for business. Watson now manages $46 million worth of accounts, with a minimum account size of $100,000. He reckons hes picked up about 20% to 30% of his business by showing up for his community and his kids, everywhere from chamber of commerce meetings to Little League games to school plays.
These activities would have been tough to manage at Watsons former job running the southwest regions licensed banker program for Wells Fargo, a position that involved significant travel. For Watson, the opportunity to leave airports and hotels behind and spend more time with his family came at just the right moment. (LPL is the third-party marketer for FirstBank.)
Lifestyle issuesextensive travel, long commutes and a lack of work-life balance, for exampleassociated with working for large banks represent only part of the picture when comparing life as a community bank financial advisor with that of an FA in the branch of a large financial institution.
Bank advisors and industry experts see real distinctions between the two that boils down to one thing: corporate culture. And while generalizations about bulge-bracket banks and community banks may seem an oversimplificationa variety of situations can be found across the industrythere do appear to be some broad-based differences worth exploring.
So Bank Investment Consultant set out to find the answers to a few nagging questions: How does bank size affect corporate culture? And what does this mean for the financial advisors day-to-day existence?
Perhaps it goes without saying that not everyone is cut out for life in a small town, or even a midsize city. But for financial advisors who are looking to slow down the pace, there appear to be a few key advantages to the community bank environment. Most notably, there is an intimacy that can benefit the advisoraccess to management, familiarity with colleagues and more time to build relationships with clients.
If youre an advisor at a large bank, you probably have less opportunity to do business with the board of directors, which tends to be much more intimate at a smaller community bank, says Thomas Kane, managing director at financial services consultancy firm KaneCarlton. At a smaller bank, theres an access to key decision members.
Part of this is size, pure and simple, but another part of it is retention. When looked at as a whole, bank branches have a difficult time holding on to employees, from bankers, to mortgage lenders, to tellers. Average branch employee turnover is 15% to 30% overall, but can be as high as 40% for certain positions, according to analysis done in 2014 by McLagan, a financial services consulting firm based in Stamford, Conn.
The McLagan research did not break out institutions by size, and hard numbers on branch turnover by bank size are difficult to find. However, anecdotal evidence paints a picture of higher turnover at the urban branches of large banks than youll find at a small town community bank.
This could have something to do with demographics, and the ebb and flow of city life, but whatever the cause it makes the financial advisors job more difficult, especially when it comes to referrals and training.
One thing thats a challenge for bank advisors in the big programs is the turnover in the branches is tremendous, says Monty Hatcher, 54, a financial advisor for Southern Community Bank in Tullahoma, a town in south central Tennessee with a population just shy of 19,000.(Raymond James is the TPM for Southern Community.)
Prior to joining the bank in May 2014, Hatcher also worked for Wells Fargo in Nashville, which entailed rotating through the banks 11 local branches. By the time you get somebody trained, theyre gone, and thats frustrating for an FA. They invest the time and effort and energy, and it leads them to zero dollars in production.
Hatcher, who also previously worked for Regions Financial Corp. as an advisor, also in a small town, says there was one Regions branch where the average tenure was 18 years. And because people at small town community banks stick around and develop strong personal relationships, it takes a while for a newcomer to gain the trust of the other bank personnel. But once that happens, it pays off in solid referrals.
Theyre not just going to refer to you on the fly, Hatcher says. And if they do, theyll ask: Are you really going to call them? Are you going to talk nice to them, or talk down to her?
Not only does high turnover limit the number of referrals an advisor receives, it can cause problems in the reverse, advisors say. Cross-selling is typically a way of life at larger institutions, hitting certain numbers is expected. And when an advisor doesnt have confidence in other departments, anxiety ensues.
Another advantage to working at a community bank, advisors say, is having fewer time demands for meetings, compliance and training other employees.
Ultimately, you cant do the right thing by a large book and work in a large bank that has all of these demands on you, Hatcher says. I calculated that I was spending 60% of my day doing bank-related activities that were not directly related to me servicing my own clients.
In response to the comments made by its former employees, Wells Fargo provided this statement: Wells Fargo is committed to creating a great place to work for our team members. We help our customers succeed financially when we offer them financial solutions that are right for them; offering products and services responsibly, and offering trusted financial advice and education. We value what is right for our clients in everything we do.
Hatcher, who joined Southern Community Bank after the unexpected death of his predecessor, inherited the advisors book in addition to bringing some of his own Wells Fargo business with him, for a total of $129 million in investment accounts today. That is more than twice what he was handling at his previous post and still more doable, he says. He adds that he does have help: the former FAs right-hand person, whos been in the business for 20 years and has served as the relationship manager on a lot of accounts.
While large financial institutions cannot offer the intimacy of a community bank, there certainly is plenty they can offer. Advisors and industry experts we spoke to reveal that large banks provide strong training programs, talented coworkers and management, good benefits, superior technology and name recognition.
Bank Investment Consultant contacted a number of large banks: Bank of America Merrill Lynch, Citigroup, Wells Fargo, U.S. Bank and PNC Bank, all of which either declined to participate in this article or did not return calls or emails.
For financial advisor looking to move to a community or regional bank, it would appear those opportunities are diminishing.
The number of federally insured institutions nationwide continues to shrink each year, down to 6,659 in 2014, according to the FDIC.
The decline in banks, from a peak of more than 18,000, is due almost entirely to the loss of banks with less than$100 million in assets, with the bulk occurring between 1984 and 2011. More than 10,000 banks left the industry during that period as a result of mergers, consolidations or failures, FDIC data shows.
The community banks that remain face financial challenges that are leading them to turn to wealth management. Low interest rates have made it difficult for banks to make money on loans. As a result, community and regional banks are looking to augment their businesses and wealth management is seen as an attractive option because it is less capital-intensive and brings the potential for better yield.
Nearly a third of all community banks said they expect asset and wealth management services to be the biggest driver of revenue growth over the next three years, according to the survey released at the start of the year by global audit, tax and advisory firm KPMG. Wealth management provides community banks with the opportunity to cross-sell a new service to existing customers and have a steady stream of fee-based revenues to supplement their less predictable transaction-based deposit and loan business, which depends heavily on fluctuating interest rates.
Moreover, since the financial crisis, many believe community banks have an advantage when it comes to attracting wealth management clients because their reputations escaped less tarnished when compared with the negative image of the national wirehouses. Not to mention the strong local connections and relationships they have.
Many of the community and regional banks that are adding wealth management services are doing so by acquiring established firms; however, others are hiring advisors to launch new wealth management divisions.
For example, LPL Financial, the largest independent broker-dealer in the country, has seen the number of financial advisors it supports grow steadily in recent years. From 2011 through the third quarter of 2014, the number of financial institutionscommunity banks, regional banks and credit unionsfor which it provides services increased to 741 from 668.
While all of this is good news for financial advisors looking for opportunities, the marriage between community banks and wealth management doesnt always end with happily ever after. The relationship can bring with it a culture clash of its own.
Sometimes, typically conservative and highly regulated banks make for a sedate corporate environment for more entrepreneurial wealth managers who are used to operating independently. Banks have also gained a reputation for lacking competitive advantage when it comes to compensation and being unwilling to enough for top wealth management talent. Theyre also often seen as being behind the curve on state-of-the-art investment products and strategies such as alternatives and emerging markets.
SMALL BANK CHALLENGES
Some smaller institutions have a conundrum because they typically will have management at the senior levels who will admit that they really dont know anything about the wealth management business, Kane says. As such, if they try to build a wealth management business in a manner that is similar to the way theyve built banking, and they expect the same kind of margins and returns and compensation plans that theyre accustomed to, theyre often met with resistance and dissatisfied advisors.
This leads us back to the question: Does the size of a bank dictate the corporate culture as much as it might appear to? Some dont believe it does.
My instincts tell me that its not the size of the bank that influences the culture, says Betty Moon, the managing director at the industry association Bank Insurance and Securities Research Associates.
Ive worked for very large banks that had very strong cultures, then Ive worked a smaller banks where the culture was not as clear or supportive. I think its more about the leadership of the organization. The people drive culture, not size of an institution.
Moon says that, big or small, the type of corporate culture that makes advisors happy and keeps them on the payroll is one that aligns with the advisors values and makes his or her job easier. Anything that frees them up to spend more time building relationships with their clients, she says, adding management support of technology that eases the workload and streamlines administrative and compliance processes as examples.
Also, supporting an advisors personal development, through training and coaching is extremely important. You cant underestimate the power of strong mentoring and coaching within an organization, Moon says. People tend to be loyal to people much more than they tend to be loyal to the name on the door. If leadership builds strong relationships with their advisors, and shows them that they support them and understand the challenges of their job, I think it makes them more loyal to that leader and therefore the organization theyre working.