Forty percent of bank-based advisors say that cross-selling is critical to their business, according to a Bank Investment Consultant survey. Still, most said they received only a fraction of their business referrals—less than one-fifth—from tellers and retail bankers. "This is the biggest ball that firms drop," says Rick Rummage, a consultant who works with advisors. (Rummage, a regular contributor to Bank Investment Consultant, wrote an article about common mistakes made by advisors). "The biggest disconnect surrounds the incentive plan. They just don't get it," he says, referring to bank management teams. He says that up to 70% of bank managers or executives have never been paid on commission. He also notes that up to 40% of institutions don't give incentives to bank employees to send referrals for financial advisors. "How are you going to get them to send you referrals if they don't get any compensation?"
(To view BIC's survey results, click here.)
Rummage's sentiment is reflective of the survey. Fifty-five percent of bank advisors reported that their retail and platform colleagues received a small amount of compensation for sending them referrals, while 25% of advisors said their colleagues were not paid at all.
Todd Colbeck, president of the Colbeck Coaching Group, notes that there are ways to reward colleagues besides financial compensation. In addition to a box of doughnuts or pizza party, Colbeck suggests an updated version of the old-fashioned pat on the back. Send the teller or platform rep an email thanking them for the job they did, and copy that person's manager, he says.
One advisor from the survey said he referred business back to the individual, while another hosted wine parties as a thank-you. "[I] express my appreciation to them for working together to provide the best possible services for the client." Another respondent said he gives "small gifts."
While incentives, or the lack thereof, are a significant cause for the shortage of referrals, a lack of proper information is also a contributing factor. According to the BIC survey, 90% of advisors worked personally with retail and platform personnel to help them better identify and qualify potential clients. One survey respondent said that they trained their colleagues "on what to listen for."
However, training for retail personnel and platform reps to help in qualifying prospects fell short, as 60% of respondents said such training was simply "adequate, but not exceptional."
BRIDGING THE DIVIDE
But even as advisors continue to grapple with these issues, analysts say the biggest problem they face is cultural. Tellers tend to be customer service focused, not sales oriented. "They don't want to look pushy," says Sophie Schmitt, an analyst at Boston-based Aite Group, a research firm focused on the financial services industry.
To be sure, there are some rays of hope. Schmitt notes that some of what she calls "best practice banks" are beefing up the presence of bankers with Series 6 licenses in branches as a "bridge between tellers and advisors."
Bank of America/Merrill Lynch, she notes, has designated staffers sitting in branches, working their way up to being full-fledged FAs. While these individuals are more customer service oriented, they are also knowledgeable about investments. "They're not [there for the] hard sell. They can speak intelligently about the offers and can potentially sell the products to a mass-market client," explains Schmitt.
"They typically have better selling skills than tellers because they're more sales oriented, and can also probe and make appropriate referrals and hopefully get compensated appropriately for that referral. It's a more cost-effective way of handling the needs of the mass-market client," she observes.
ADOPTING BEST PRACTICES
Schmitt notes, however, that banks still have more work to do in adopting best practices. According to Aite's own survey of 18 large North American banks, cross-sell ratios for many of them are in the range of 3% to 5%.
Meanwhile, reps and industry analysts agree that best practices must be set from the top. Ninety percent of BIC's survey respondents said the support of senior management was critical for the successful implementation of a cross-sell program. About 40% of the respondents said that top management was supportive of cross-selling efforts, while another 40% supported the idea, but did not actively encourage it.
Schmitt notes that some banks are moving investment leadership closer to the retail bank. In fact, some retail banking executives are being made responsible for investment sales in the branch.
Schmitt cited U.S. Bank, which has made investment sales growth a metric in its branch manager's evaluations. "It's about bank management supporting investment, and bank and investment leadership working together. If you don't have leadership commitment to work through the kinks on a day-to-day basis, it won't work," she says.
Analysts say banks can do more work to promote cross-selling by fostering relationships between reps and the higher-end bankers. Schmitt notes from her survey that only a few banks were even talking about the importance of the commercial banking channel.
The small business owner clients may not be as wealthy as the CEO of a large company, she notes, but they'd be very good clients for an FA who's targeting in the $250,000 to $3 million investable assets range. "That small business organization, in some ways, should be your main partner. Banks are so focused on retail banking, because of the volume, but the quality is in the small business channel."
FOCUSING ON CASH
One more thing analysts suggest bank reps could do better is to differentiate themselves from their wirehouse brethren. One way to do that is to stress what banks are already expert in: cash management.
Schmitt suggests offering different services like detailed analysis of a client's cash flow or providing budgeting services. "A lot of FAs at wirehouses are not going to take the time to deal with that. They only want to deal with investments. But banks, because they own the cash, need to make a more holistic offer. In addition to having the ability to manage the cash and debt portion of the individual's balance sheet, they can provide value-added advice on that." She suggests reps figure out a way to capitalize on the online banking technology and personal financial management tools already at their fingertips. They could pitch it to clients as a way "to help you save better."