In the bank channel, fee business is still the exception, not the rule. Likewise, working in teams is not the norm.
Christopher Cotterell colored outside the lines when he decided to embark on both strategies: First, starting right out of the gate building a fee business, and later, after getting to know a new advisor who had joined the bank, suggesting that they partner and split the fees 50/50. The process was slow, taking him years to get where he is now, but it has been a success.
Beginning in 2007, when Cotterell initially came to First Bank in Winchester, Va., he handled clients on the north side of the city, while an existing advisor handled the south side of town. (Infinex Financial is the TPM for First Bank.)
The two men had different approaches. The older advisor tended to favor transaction-based business, while Cotterell, who had previously worked with an independent advisor whose business was 90% fee-based, wanted to continue doing fee business.
I had left my position with an independent advisor and came to First Bank looking for an opportunity to be on my own, recalls Cotterell.
He says the banks program manager was looking to grow First Banks investment program and gave him free rein to build his book with a fee-based approach.
Cotterell had to start building a new fee business from scratch, but the bank supported his plan. It even negotiated a payment scale with him, which provided a salary that declined in stages over several years as his book of business grew.
It might seem like a terrible time to be starting in this business, he says, of 2007. But people were looking for help. They were asking for new advisorsoften at banks. And its a small enough community that your reputation carries some weight.
As a result, his business began to grow based on referrals. A lot of my relationships start off fairly slowly, says Cotterell. Im a big believer in education. Its not a matter of saying, Heres an investment. Lets go with it. With all weve been through these past few years, you dont just try to get it right from the start. Its got to be a fluid thing.
One thing that may have helped with that patient attitude was the experience he had during the big market collapse in 2008/9. Advisor production suffered a big decline everywhere, he says, but the fee-based portion of the business held much steadier.
Today, his businessroughly $105 million in AUMis 40% fee-based, with more of the commission business also transitioning over gradually. Partly thats a matter of the
client mix in the bank channel.
As Cotterell explains, With clients who have assets to invest of less than $50,000, fee-based doesnt always make sense. But fees tend to get lower [in percentage terms] as the assets are higher. For example, the fee for managing a $50,000 to $250,000 investment might be 1.25%, whereas a $250,000 to $500,000 investment might carry a fee of 1.15%. And over $500,000? Just 1%.
He says that it took him three years to reach a point where his practice was adequate for him to be self-supporting. Fortunately the bank was supportive and had the confidence to stick with it, he says.
About that time, the original advisor at First Bank left. Ryan Oates was then recruited from Wells Fargo Advisors to replace him.
Initially, Cotterell and Oates continued with the same arrangement, with Oates taking over the branches in the southern part of town while Cotterell continued to focus on the north. It wasnt until the middle of last year that the two decided to start working as a team instead of as
separate advisors with distinct
As Oates recalls, Too often, people in this business work pretty much for themselves, and that can really limit your ability to grow. We talked about how we could benefit by working together and combining our efforts, and about how we might structure it, and we decided to just split the revenue from new clients 50/50.
Cotterell says their different strengths are a benefit of the team.
Im kind of good at fixed-income and dividend income. And Ryans strong point is growth. And when you get as many clients as we have, you need to be able to share the work.
Different personalities help too because they can offer a better fit for particular clients.
Im a little more reserved by nature, and I listen a lot, says Cotterell. Ryan is very matter-of-fact. Hes short and straight to the point. Some people prefer that, and others want more of the one-on-one guidance that I tend to offer.
Cotterell says that he and Oates are six months into this partnered approach, which he says even helps once clients have decided which of the two they want to work with. We can backstop each other, he explains. For example, I may come to something where I want some advice, and Ill say, Give me a minute, and let me bring Ryan in on this.
Another plus of the partnership approach: If theres an emergency and someone has to be away from the office, its easy for the other one to take over. Theres always someone behind the wheel. He adds, Were fortunate that this community is small, so that it is easy for us to get to know each others clients.
Its not just the team approach, or the fee business, that they relish. Its the freedom theyve enjoyed while building it.
An advisor could not do something like this on a handshake at one of the big wirehouses, says Oates. You could put together a team, but all the arrangements and the allocation of income would have to be done through corporate.
In terms of getting out to visit the branches, the two men still split the coverage, with Cotterell covering four, including the main office, and Oates covering five.
Both men meet regularly with bank staff. We have a referral policy, he says, but maintaining a personal relationship with the bank staff is important too. The competition between large and small banks has been a struggle, so the relationship with both clients and with bank staff is critical for referrals.
The payoff can be big in taking things slow, Cotterell says.
For example, I had a client whod been holding some CDs. We worked on a 401(k) plan, starting out with about $50,000 to $60,000. Later his wife passed away, and he got an insurance policy payout, and his investment grew into a $700,000 relationship.
Cotterell says this client, aged 56, wanted to ensure that his children were cared for, so he set up a fee-based annuity with a death benefit.
Cotterell says that his early decision to focus on fee-based business has made patience a virtue.
The temptation to take an up-front commission or a payout on a product is tempting when you dont have much of a book, he says, but even though it can be slow, the long-term advantage of being on the same side as the client ends up being a big advantage.
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