Banks having trouble attracting advisors neednt gripe so much about their recruitment woes: they can bring in junior brokers.
These aspiring or rookie advisors are increasingly being paired with senior advisors who mentor and groom them into hopefully high-producing advisors. In 2011, 5% of the advisors working in banks or credit unions were classified as junior brokers, up significantly from 3.6% in 2007, according to a new report from Cetera Financial Institutions and Kehrer Saltzman & Associates, a management consulting firm for the financial advice industry.
The banks that are using junior brokers are hiring more of them, Kenneth Kehrer, a principal of Kehrer Saltzman & Associates, said in a telephone interview.
For many banks, the use of junior brokers helps relieve the competition for advisors. Brent Smith, the manager of the investment services program at Susquehanna Bank, noted that its difficult to recruit top talent from other firms no matter how great a program you have. More and more programs, he explained, have significant recurring revenue, which makes it hard to incent advisors to move.
Finding top advisors and pulling them over to ours is a difficult thing to do in this day and age, he said. Smith has hired three junior brokers in less than a year to grow organic talent internally and reinforce the programs advisor force of 24.
I think its the best way to grow our sales force and complement our top advisors, Smith said.
In addition to relieving the shortage of advisors, junior brokers increase an investment programs advisor productivity, boost program revenue and fatten profits, according to the report.
Banks and credit unions that used junior brokers produced an average of $285,074 in annual revenue, 3.8% better than those that did not. Junior brokers can help senior advisors increase their production by taking responsibility for less fruitful clients, freeing up the senior advisor to spend more time on clients with broader or more complex needs for investment advice, write the authors of the report.
One of the real advantages of the junior brokers is that they increase the firms overall production, said Kehrer.
The impact of junior brokers on program revenue and profit generation was significant. Programs with junior brokers produced $43.47 in average revenue per bank or credit union customer household, compared with just $28.29 for those that do not use junior brokersa striking 54% improvement.
Profit margins were also much wider for programs that used junior brokers. Banks and credit unions with junior brokers earned profits averaging 31%, while those that did not earned just 24%.
The wider profit margins was partly attributed to the fact that the combined payout for the senior advisor and broker is less than what the senior advisor would have been paid on that combined revenue if it had all been the advisors personal production, Kehrer explained.
Having the junior brokers increases profitability because the more brokers there are and the more production there is the less points the firms overhead takes off profit, Kehrer said.
The report, titled How to Maximize the Impact of Sales Assistants and Junior Brokers, is based on data from the annual Kehrer-LIMRA Financial Institution Investment Program Benchmarking Survey, primarily the 2011 survey, which polled 64 banks and credit unions.
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