'WEALTH' TEAMS

Investments & Insurance | Advisory Services | Wealth Management | Retirement Income

BISAMAGAZINE

First Tennessee Bank’s

‘WEALTH’ TEAMS Aim to Retain Clients

Quarter 4 2015

ON BLACK MONDAY, DAN MCCORMACK

RAISED HIS HAND...

IS A DEATH KNELL FOR PLATFORM

PROGRAMS LOOMING?

Rhomes Aur, FTB Advisors

Departments:

President’s Letter.............. 4

Compliance and Regulatory Watch ............ 32

News Briefs ...................... 36

Special Supplement ....... 37 Tools of the Trade

Ad Index ............................ 44

BISA Leadership Advisory Board ................ 44

On Black Monday, Dan McCormack Raised His Hand...by Andrew Singer

Table of ContentsQuarter 4 Volume 24 Number 4

Is Death Knell for Platform Programs Looming?by Andrew Singer

BISA Magazine is now available in a new, streamlined digital format.

Visit BISA’s website www.bisanet.org to access the digital edition.

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BISA

Cover Story

FIRST TENNESSEE BANK’S ‘WEALTH’ TEAMS AIM TO RETAIN CLIENTS’by Andrew SingerPhotographer: Richard Cherry Photography (Memphis) / Photo Coordinator: Ravitej Khalsa

Special Supplement37

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Investments & Insurance | Advisory Services | Wealth Management | Retirement Income

Special Supplement37

BISAMAGAZINE

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As 2015 comes to a close, there’s a lot to reflect on both personally and professionally. For BISA, this year’s annual convention was record-setting in terms of attendance, and we hosted a timely Regulatory & Compliance Summit in Washington, D.C.

Throughout the year, we worked on key initiatives to evolve our industry posture. In response to the proposed changes to the fiduciary standard, BISA issued a response to the Depart-ment of Labor. Earlier this year, we formed a diversity com-mittee to bring awareness to the importance of inclusiveness across our industry community.

We continued to enhance membership benefits with the introduction of the Career Achievement Award, which provides member organiza-tions a platform to recognize key leaders. Additionally, we enhanced the mem-bership benefits for the industry’s leading consulting partners to provide greater access and engagement to our member firms.

Next year’s annual convention, scheduled for March 15-18 in Hollywood, Florida, is certain to build from the success of our 2015 event. I look forward to continu-ing to work closely with Dan McCormack, our incoming president. We have built significant momentum, and I’m honored to pass the baton to such a respected and accomplished colleague.

Looking at this edition of the BISA Magazine, our cover story frames First Tennes-see’s successful utilization of wealth teams to increase share of wallet and add value to client relationships. The article includes an interview with my friend and col-league, Rhomes Aur, who serves on the BISA Board of Directors.

In closing, for me it’s a time to reflect on my term as BISA president and the strides we made as an association. My term began with the national search for a new ex-ecutive director that resulted in the hiring of Jeff Hartney. Together, with Jeff and a talented staff team, we continue to chart a course that ensures BISA’s standing as the industry’s top association in terms of thought leadership and advocacy.

I would like to thank my colleagues, the board of directors, emeritus directors and the Leadership Advisory Board for their continued support of our key initiatives. Our ac-complishments would not have been possible without successful collaboration among these groups and all of the volunteers and members who continue to support the BISA.

My association with the BISA has framed the best years of my professional career. I say that, not because it has brought money nor job security, but because of the established friendships, partnerships and relationships.

I wish you all a 2016 filled with positive reflections and much success.

Sincerely,

Dan Overbey BISA President

Dan Overbey BISA President

A Time for Reflection

PRESIDENT’S LETTER

BISA Magazine is published quarterly by the Bank Insurance & Securities Association.

BISA DIRECTORSMichael AndersonSecurities America

Rhomes AurFTB Advisors

Brett C. BowersMidFirst Investment Services

Bob ColeBank of Oklahoma Financial

Robert CorsarieFifth Third Securities

Scott DavisEssex National Securities, LLC

Scott Dixon

Wesley EganWells Fargo Wealth Management

Jim FujinagaPrivate Wealth Alliance

Richard R. GuerriniPNC Investments

John HoustonRaymond James

Andy Kalbaugh LPL Financial Institution Services

Michael MiroballiBMO Harris Financial Advisors

Kevin MummauCUSO Financial Services, LP

Rebecca M. NelsonTech CU

Chris RadzomCommerce Brokerage Services

Vance RichardIberia Financial Services, LLC

LeAnn RummelCetera Financial Institutions

Bruce StavaHudson Financial Marketing

Douglas C. WicksKinecta Financial Management Company

BISA OFFICERSDan OverbeyPresidentAtlantic Capital Advisors

Daniel J. McCormack President ElectU.S. Bancorp Investments, Inc.

Sam Guerrieri, Jr. Past PresidentM&T Bank, M&T Securities, Inc.

Frank A. Consalo Vice PresidentCiti Personal Wealth

James B. Nonnengard Vice PresidentRegions Investment Services, Inc.

Thomas N. HoweSecretary/Treasurer

Bruce A. Hagemann Asst. Secretary/TreasurerBBVA Securities, Inc.

BISA Magazine STAFFJeff HartneyPublisher

Andrew SingerEditor-in-Chief

Marc VosenContributing Editor

Dennis CoyleManaging Editor

Gina LauerCopy Editor

Trecien SchultzDesign

Emilia PhilipAdvertising [email protected]

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BISA Magazine

First Tennessee Bank’s

‘WEALTH’ TEAMS Aim to Retain ClientsBy Andrew Singer

New business development is important, of course, but if banks are to suc-ceed in wealth manage-ment they also have to

retain existing clients. To this end, “wealth” teams could be the way to go.

First Tennessee Bank (Memphis) be-gan using wealth teams about five or six years ago, Rhomes Aur told BISA Magazine, but it is only in the last year or so that the bank, a subsidiary of First Horizon National Corp. (assets: $25.2 billion), began to see dramatic results. Brokerage assets under management (AUM) leaped — the largest gains in the brokerage program’s 25-year history.

The number of financial advisors work-ing on such teams is not large, but it is growing, reported Aur, who heads FTB Advisors, the bank’s wealth management unit, which includes brokerage. Last year, five to eight of the bank’s 95 finan-cial advisors were working with trust department officers on wealth teams, which often include a trust relationship manager, a financial advisor, a financial planner — who also serves as a sort

of customer advocate — and a private banker, who, while Series 7-licensed, is primarily focused on loans and deposits.

This year, by comparison, 15-20 fi-nancial advisors have been working on teams, although some advisors are just dipping their toes in the water, acknowledged Aur. Increasingly, advi-sors recognize that a team approach is a good way to retain customers over the long term.

Case in point: When the patriarch of an affluent family dies, that individual’s funds tend to leave the bank because the institution often has little or no relationship with the patriarch’s heirs. A son or daughter might place those inherited funds with a former college friend-turned-advisor, for instance.

Banks, not surprisingly, want to stem that sort of migration of funds. Assum-ing a more holistic, team approach to wealth management is one way to accomplish that, in the view of some. The idea is to develop relationships with other family members before the patriarch dies.

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When the patriarch of an affluent family dies, that individual’s funds tend to leave the bank because the institution often has little or no relationship with the patriarch’s heirs. “Wealth” teams can counter that.

Internal Marketing ChallengesThe new approach requires a fair amount of internal marketing. At First Tennessee Bank, which has about 170 locations in the state, the bank’s portfolio managers and trust relation-ship managers make presentations to the bank’s financial advisors, explaining what exactly they do — things like suc-cession planning, establishing a family plan, drawing up a will, maximizing tax benefits as people pass away and so on. There are good reasons, in other words, to bring trust officers and others specialists into an existing advisor-client relationship.

The advisor often remains the “face” of the client relationship under such circumstances, but it still requires some accommodation. Advisors may have to sacrifice some revenue on the front end. But many advisors, said Aur, have begun to see gains in developing more long-term relationships with their clients.

The bank has made adjustments on the trust side of things, too. The bank’s portfolio managers, who used to re-port to the trust division, now report to the bank’s chief investment offi-cer. They are now called “investment strategists,” not portfolio managers, emphasizing the increasingly holistic nature of their work. “They’re not just sitting behind their computers picking stocks,” Aur said.

Traditionally, trust officers have been wary of brokers, not really believing that they will do the best thing for the bank’s clients. That remains a hurdle at many institutions. Nor is this problem completely solved at First Tennessee Bank, Aur said. But something simi-lar occurred 15 years ago when they brought financial planners into First Tennessee, he recalled. There was wari-ness on the part of bankers. “Any time you bring another person into the mix,” there tends to be a certain degree of suspicion and mistrust, Aur noted.

That said, the bank’s trust officers are beginning to notice that their number of accounts is multiplying, their busi-ness is increasing and even though they work mainly on salary, they are earning some more bonus income because of the new business.

Again, not all FAs work on wealth teams. Those who do are generally more experienced, longer tenured and have been working with private bankers for some time in many instances. Many hold retirement planning designations.

“We’re doing better, but not doing great yet,” said Aur, apropos of surmounting these traditional hurdles. It can take time for changes to be absorbed, like the fact, for instance, that “you can [often] solve a customer’s problem with more than one product” or that “you will be getting a smaller piece” but it will be from “a larger pie” that will result in a net gain.

Financial Planning Among banks, First Tennessee has been in the forefront of offering financial planning to its customers. It has always been offered to clients on a complimentary basis, but that was not always the case for advisors. (Ten years ago, the bank tried to charge advisors when a plan developed by one of its dedicated planners was implemented, “but that left a bad taste” in advisors’ mouths, so it was discontinued.)

Later — though still prior to the 2008 economic crisis — First Tennessee put many of its advisors through a year-long financial planning training program. At the program’s zenith, First Tennessee had 48 financial planners. With the Great Recession, however, the bank had to retrench. Today, First Tennessee has 11 full-time financial planners, and they are more selective in whom they advise. A client must have more than $500,000 in investable assets to qualify for financial planning these days.

The financial planners work on salary, with a bonus based on the extent to which plans are implemented. None of them sells. There is little turnover among the bank’s financial planners. In fact, they haven’t lost one in the past five or six years, according to Aur.

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Licensed Bank Employee ProgramFirst Tennessee, like other regional banks, focuses on the mass affluent client segment, but it has not turned its back on the mass market where investments are concerned. The bank has long had an active platform pro-gram, albeit one that has evolved over the years.

There was a time when “we licensed as many folks as we could,” recalled Aur. Some bankers flourished in that role, others did not. It was expensive to maintain licenses, to implement compli-ance regimens, to conduct continuous training and so on.

Today, the bank’s approach toward platform sales is “more surgical,” Aur said. If licensed bank employees (LBEs) fail to sell, they can lose their licenses.

They’ve also reduced their product set, particularly the number of carri-ers. LBEs sell primarily fixed annuities and life insurance (term life insurance, mostly). If earlier they had eight or nine fixed-annuity carriers, they might have two or three today.

In this area, First Tennessee is strug-gling with the same problem as other banks — reduced branch traffic. The bank’s LBEs, therefore, also make outbound telephone calls, both for banking and investment products and services, not a traditional LBE activity.

The bank’s LBE program is managed by Tom Friar, who explained that they have two LBE levels, standard and ad-vanced. “The major difference is in the self-selling limits for the investments (annuities of all types) and single premium life,” Friar said. Above the “self-selling limits,” (i.e., the ticket size limit) they must turn the client over to a full-time financial advisor.

The advanced group is definitely a small subset of the total rep population, accounting for about 8 percent of the total, said Friar, who noted that “com-mission payouts are not enhanced by being in the advanced group…just their

Advisors may have to give up some revenue on the front end. But many advisors have begun to see gains

in developing more long-term relationships with their clients.

Today, the bank’s approach toward platform sales is “more surgical,” Rhomes Aur said. If licensed bank employees fail to sell, they can lose their licenses.

self-sold limit. This limit is a “per ticket” amount usually.

Selling limits are further divided into those who have life insurance licenses only and those who also have Series 6/63 securities licenses. First the stan-dard group (see Figure 1).

And the advanced group (see Figure 2).

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Product Types Life Licensed – Standard Selling Limits

Series 6/63 – Standard Selling Limits

Annuities, Single Premium, Mutual Funds (Series 6 only)

$50,000 per ticket $100,000 per ticket

Term Life Insurance $1,000,000 per app $1,000,000 per app

Traditional Whole Life $150,000 per app $150,000 per app

One can see from the tables, for

instance, that the selling limit for a sin-

gle premium deferred annuity would

range from $50,000 for a standard

category LBE with a life insurance

license only up to $300,000 if sold by

an advanced LBE, who also holds a

Series 6/63 securities license.

How does the bank decide when a

standard LBE can become advanced?

“The decision on when to advance some-

one is extremely subjective,” Friar said.

“It’s based on the rep’s propensity to

regularly self-sell — rather than just refer,

the overall suitability of their sales his-

tory, their willingness to accept construc-

tive criticism,” and other factors. “While

I am the one that generally will make

the final call on someone getting an in-

creased limit, I also solicit feedback from their advisors on the FTB Advisors side,” as well as their bank branch manager and regional sales manager, Friar added.

Future GrowthLooking ahead, does First Tennessee see future growth in wealth/brokerage? The bank enjoys a dominant position in Ten-nessee, Aur noted, with some 400,000

household relationships. Wealth man-agement penetration of those 400,000 households is about 8 percent, “pretty good,” given that many of the bank’s peers are in the 5 to 7 percent range. Still, it also implies that “92 percent of our customers don’t have a wealth rela-tionship” with the bank, Aur said.

Many consumers still view banks primarily as providers of loans and de-posits — baby boomers can be includ-ed in this category — and they look elsewhere for their wealth management needs. (Younger clients are more open to banks, however.) Many people, too, still don’t even know that First Tennes-see provides wealth management/bro-kerage products and services.

“We wanted people to know we were in the business, so about two to three years ago, we changed our name to FTB Advisors,” Aur recounted.

They also built out an advisory seg-ment within brokerage (as opposed to trust, which tracks its own AUM). Karen Cruse heads the brokerage business’ advisory segment. Brokerage has its own Registered Investment Advisor (RIA) with some $1.3 billion in assets, and its own chief investment officer.

Aur was asked about the ideal mix of advisory/non-advisory business within brokerage. He would like to see about a 50/50 mix of fee-based and commission-based business. At present, about 30 per-cent of its business volume is fee-based.

Developing more fee-based business can be tricky because long-term revenue is being increased at the expense of short-term revenue, Aur observed. And if you make the transition too fast, you kill revenue. (First Tennessee bit this bullet some years back, he recounted.)

Then, too, advisory products aren’t ap-propriate for every customer need, and there is also the issue of complacency: Advisors may get too comfortable if and when their fee income component reaches a certain level. At that point, they are reaping a generous annual

Figure 1: The Standard Group

Product Types Life Licensed – Standard Selling Limits

Series 6/63 – Standard Selling Limits

Annuities, Single Premium, Mutual Funds (Series 6 only)

$100,000 per ticket $300,000 per ticket

Term Life Insurance $1,000,000 per app $1,000,000 per app

Traditional Whole Life $300,000 per app $300,000 per app

Figure 2: The Advanced Group

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annuity, after all, with very little effort required to keep the fees coming.

One way to “keep the fire in the belly” of fee-based advisors, however, could be to create advisory teams (to be distinguished from the “wealth” teams mentioned above.) These are teams of advisors and investment assistants.

Along these lines, three years ago, First Tennessee gathered its top producers — those doing more than $1 million a year in business — and asked them what it would take for them to boost produc-tion to $5 million a year. Build advisory teams, they suggested.

The bank now has 11 such teams, which typically consist of a senior advisor, four junior advisors and two sales assistants. About 40 percent of the bank’s financial advisor (FA) sales force now participates on such teams. Col-lectively, advisor teams account for 60 percent of program volume.

Traditionally, brokers have sold invest-ments based on investment perfor-mance — how well the clients’ stocks and bonds have done or will do — “but eventually you lose that game,” said Aur, especially in a “sideways market” like the present, when stock prices neither gain nor fall in any appreciable pattern.

Three KeysAur has been at First Horizon National Corporation, parent of First Tennes-see Bank, for 34 years, and, as noted, trust, brokerage and financial plan-ning all come under his purview. BISA Magazine asked him what it takes for a bank to develop a successful wealth/brokerage program. First, you must have the buy-in from bank leadership, he said.

“If they don’t believe in the wealth business, you won’t make any head-way,” Aur said. Most bank brokerage programs, after all, are still referral based. Advisors need bankers to refer potential clients to them. Bankers, for their part, must understand how the bank and its clients benefit from those referrals. “Bank leadership needs to provide that vision,” Aur said.

A second key: The bank needs to invest in a robust product platform if it wants to compete with the wire-houses and other traditional providers in the wealth area. First Tennessee, like other banks, began as an annuity shop, recalled Aur, selling fixed and variable annuities to the mass consumer market. But, over the years, it developed strong financial planning and managed money

components. Today, their managed money offerings are as good as any of the wirehouses, Aur asserted.

A third key: You need to take a team-based sales approach. Offering customers a holistic financial experi-ence remains beyond the capacities of any single person. You need a private banker on the team to provide a jumbo mortgage, for example. And that private banker, for his or her part, usually doesn’t have the expertise (even if they hold a Series 7 license, which many at First Tennessee do) to implement the recommendations that the team’s financial planner provides to the client. The client really needs an expert, like an experienced financial advisor, to do that.

Put another way, “You can’t expect the quarterback to throw and catch the ball,” Aur said. ▲

Andrew Singer is editor-in-chief of BISA Magazine. He has been writing about the financial services industry since 1985 and is the managing director of Singer Publications based

in New York City. He can be reached at [email protected].

A client must have more than $500,000 in investable assets to qualify for (complimentary) financial planning.

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FEATURE STORY

BISA Magazine

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On Black Monday, Dan McCormack Raised His HandAnd so began a career for BISA’s president-elect.By Andrew Singer

On that day, known as Black Monday, stock markets around the world nose-dived.

The Dow Jones Industrial Average plummeted 23 percent, the largest one-day drop (percentage-wise) in the index’s history.

McCormack, who had joined First Wisconsin National Bank about a year earlier as a trainee, was attending a classroom session at the bank when the call went out from the bank’s broker-age unit. They needed help.

About 16 months prior to that time, McCormack, with a recent degree in finance and marketing from the Univer-sity of Wisconsin at Madison, had par-ticipated in the bank’s training program, moving through the rotations — teller, personal banking, small business bank-ing, commercial lending, real estate and so on. He had even spent time in the bank’s brokerage unit.

McCormack learned a lot as a manage-ment trainee working in the bank’s various businesses but still wasn’t wholly convinced it was “really up my alley,” he said.

Now, as investor panic gripped the world — stock prices were collapsing from Hong Kong to Europe to the United

For Dan McCormack, the path to becoming BISA’s president-elect began Oct. 19, 1987.

McCormack learned a lot as a management trainee working in First Wisconsin National Bank’s various businesses, but he still wasn’t wholly convinced it was “really up my alley,” he said.

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FEATURE STORY

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States — First Wisconsin’s trading desk was overwhelmed with calls; they asked for help in answering the phones.

“I raised my hand, happy to help,” McCormack recalled, even though he couldn’t conduct any trades himself because he was unlicensed. “It got me out of the classroom.”

Over the next 28 years — all of it spent at U.S. Bank (First Wisconsin, later known as Firstar, merged with U.S. Bancorp in 2001, and the institution has gone by that name ever since) — McCormack worked as a financial advisor, a producing manager, a regional manager and national sales manager for investments at what is today the nation’s fifth largest bank. He has played a lot of roles, even heading new trust business development for a time and was interim CEO of U.S. Bancorp Investments before Bill Benjamin, his current boss — of whom he speaks highly — was hired. His current title is senior vice president, U.S. Bancorp Investments, Inc. (USBI) and is based in Milwaukee, Wisconsin. He feels “blessed to have all those different experiences.”

‘Extremely Helpful to Me’McCormack, who will assume presi-dency of BISA in March 2016, is “super

excited to take a more active role in the association.” The organization has been “extremely helpful to me through my career,” he told BISA Magazine in a recent interview.

“Bank brokerage has come of age in a short period of time,” he observed. McCormack spent almost 29 of his 30 years working in U.S. Bank’s wealth management group, but that is a brief moment compared to how long the large wirehouses have been plying their trade. Yet many large banks — and even smaller institutions and credit unions — can today stand “toe-to-toe” with more traditional providers of investments, McCormack said. The industry made rapid strides during the past 10 years, particularly, in his view, especially as banks began to look for more comprehensive solutions to their clients’ financial needs. The “tools and capabilities at the fingertips of [bank-based] advisors” today is extraordinary compared to what was seen a genera-tion ago, he said.

BISA’s membership is wide and diverse, with small shops, large shops, third-party marketing firms, credit unions, product and service providers. It has helped to put financial institutions in a great place to compete in the wealth arena, which McCormack defined broadly,

including broker/dealers, trust businesses, private banking, insurance, investment management and other functional areas.

Moving into a Retail Branch OfficeMcCormack earned his securities license in 1988 and his CFP certification in 1991. He initially worked with commercial paper and short-term treasuries in an office on the 12th floor of First Wisconsin’s headquarters. Meanwhile, he was playing on the bank’s basketball and football teams, getting to know a range of bankers, including one (still a friend today) whom McCormack persuaded to let him work with the bank’s personal bankers. So McCormack was given a desk in a First Wisconsin branch, and he began to team up with several personal bankers to deliver clients an even broader set of solutions. Both parties benefited from the new arrangement and, most importantly, so did the client. This was at a time when banks across the country were beginning to establish retail investment offices.

McCormack’s involvement with BISA started early in his career. He initially

It’s a rewarding business to be in, to sit down with someone, to get to understand their goals and dreams, and to put them in the best position for success. Few careers can have such an impact on a person’s life,” McCormack said.

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attended his first event as a financial advisor and then participated in several workshops and sales management seminars. At that time, BISA was called the Bank Securities Association. “I always walked away with insights.” He met lots of people who helped him in his career as well.

McCormack salutes the “great work” of his predecessors over the past years, who “put BISA in a strong position, financially secure, with a vibrant membership and an active board.” Current BISA president Dan Overbey has done “a phenomenal job,” as did Sam Guerrieri Jr. and Marc Vosen, presidents before him. And the organization has in Jeff Hartney a “dynamic” executive director.

Where does BISA go from here? “Much depends on feedback from our members,” McCormack answered. “We are here to serve our members.” But, at a minimum, an organization like BISA needs to present opportunities for people to learn, to keep up to date with the key issues of the day.

Attracting New AdvisorsMuch has been written about the aging population — not only superannuated consumers, but also aging financial advisors. Would he advise a young person coming out of college today to

enter the bank brokerage industry? His answer was a resounding “yes.”

“It’s a rewarding business to be in, to sit down with someone, to get to understand their goals and dreams, and to put them in the best position for success. Few careers can have such an impact on a person’s life,” McCormack said.

If a person enjoys interacting with others, is intent on forming relationships and that is what you enjoy, then this is a great career, according to McCormack, who also heads the Community Division at U.S. Bancorp Investments. “We’re in the advice and guidance business. Advice matters,” he added, especially with so many baby boomers leaving the work force and looking toward many years of retirement.

A Wisconsin NativeMcCormack was born and raised in Wisconsin. He and his wife, Karen, have four children (three girls and one boy). Two are in college and two are out of school. McCormack came from a family of six boys, so he is thrilled to have three daughters.

McCormack always enjoyed team sports like basketball and football. In fact, he was playing basketball until age 47. About that time, however, he had

seen enough “old guys go down” and had had his fill of twisted ankles and sprained fingers. He took up running, a less stressful pastime and one he shares with wife. When McCormack, now 51, travels, which is often, he regularly packs his running shoes and shorts and makes time for a jog.

McCormack spent his summers as a youth in northern Wisconsin where he learned to ski — both on water and snow — and he continues to be pas-sionate about those activities. He also remains true to his alma mater — the University of Wisconsin — and is a devoted Badger sports fan.

Regarding BISA, “I am honored to play this role for two years,” he said about his upcoming term as president. The bank brokerage industry has so many “involved, passionate individuals willing to give their time.” When asked to assume such a role himself, it was an easy decision.

He raised his hand. ▲

Andrew Singer is editor-in-chief of BISA Magazine. He has been writing about the financial services industry since 1985 and is the managing director of Singer Publications based

in New York City. He can be reached at [email protected].

The “tools and capabilities at the fingertips of [bank-based] advisors” today is extraordinary compared to what was seen a generation ago, according to McCormack.

FEATURE STORY

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BISA Magazine

FEATURE STORY

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BISA Magazine

Craig SimmsRich Guerrini John RichterMarc VosenBetty Moon

Is a Death Knell for Platform Programs Looming?Not yet, say industry representatives.By Andrew Singer

Bank platform programs were devised long ago to support bank investment programs by extending their coverage (i.e., to serve remote bank

branches beyond the reach of a full-time Series 7-licensed financial advisor).

In recent years, however, bank platform programs appear to be in decline — at least if one looks at data from Bank Insurance and Securities Research Asso-ciates (BISRA). The number of licensed bank employees (LBEs) industrywide has plunged from a high mark of almost 50,000 in 2005 to only 10,000 in 2013.

The continued low interest-rate envi-ronment is one reason for the decline. It’s killed fixed annuity sales, the traditional staple of LBE (or platform) programs. More regulatory scrutiny of bank brokerage programs hasn’t helped either — raising the costs of maintain-ing platform programs

“Directionally, there seems to be a re-duction in the numbers [of LBEs] in the last 10 years,” said Betty Moon, manag-ing director of BISRA, a collaboration between the BISA and LIMRA. She cau-tioned about reading too much into the numbers, however. LBEs are defined

differently by different banks, after all, and developing an absolute head-count is somewhat problematic.

More ‘Referrals-Only’ ProgramsStill, some trends appear clear. “Referrals-only” LBE programs have become more common in recent years. In 2008, only 8 percent of LBE programs were referrals only; that is, licensed bank employees referred clients to financial advisors

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(FAs) but didn’t sell annuities, life insurance or securities products. Conversely, 92 percent of bank programs had LBEs who actually sold some investment products on a part-time basis (in addition to providing traditional banking products and services, like selling CDs or opening checking accounts).

Today, one-third of bank programs are referrals only, with LBEs selling in only two-thirds of those programs. There’s been a “shift,” according to Moon.

Why more referrals only? Such programs reduce compliance and training costs as well as conflicts with bank managers (e.g., who owns the LBE — the branch manager or the investments manager?). It also reduces banker overload (i.e., piling too many tasks on a customer service representative).

“Banks are really struggling to find the perfect solution,” Moon commented, and this applies to banks across the spec-trum — money-center institutions as well as large, medium and small banks, she added.

A number of large banks have tried it both ways, moving from programs with selling LBEs to ‘referral-only’ LBEs and then back to selling LBEs.

With that as a prelude, it may still be too early to sound the death knell for platform programs.

A ‘Select’ Program for LBEs at Key BankNot all banks are giving up on plat-form programs. “I’ve taken the opposite

point of view,” said Marc Vosen, CEO of Key Investments, the retail broker/deal-er of Key Bank (Cleveland). Now is the time to do more LBE training, to secure more licenses — even if not licensing more people within the branches.

Why? “Interest rates will come back,” Vosen said, and “those banks that haven’t given up [on LBE programs] will capitalize on the opportunity.”

At Key Bank, “We’re going to have two levels of LBEs,” Vosen said. LBEs in the larger group will have insurance licenses

There’s been a shift toward referrals-only LBE programs,” Betty Moon said. Now one-third of bank programs are referrals only with LBEs selling in only two thirds of them.

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and continue to sell fixed annuities, but they will mainly refer potential clients to the full-time advisors. They will be compensated for the referrals (hence the need for insurance licenses).

But there will also be a “select” pro-gram for LBEs, maybe 20 percent of the LBE population. These are LBEs who have shown the ability to sell. From a product standpoint, they will have “more arrows in their quiver,” with se-curities licenses that enable them to sell mutual funds as well as some simplified variable annuities and maybe indexed annuities. They will have dollar ceil-ings. That is, if the transaction is over a certain dollar amount, they will have to pass the client on to a full-time advisor.

Not only will the program achieve higher productivity within this struc-ture, Vosen said, but “that’s our bench for future advisors.”

It’s been well-documented, after all that the financial advisor population (all dis-tribution channels, not just banks) has been aging and shrinking. (See story in the Q2 2015 issue of BISA Magazine, “The Recruiting Quandary.”) Many baby boomer advisors are retiring. Who will advise all their retiring boomer coun-terparts, i.e., bank clients with IRA rollovers and the like? Key’s select LBE program is seen as a way to gradually train licensed bankers in the ways of brokerage so that they eventually can become full-time advisors.

The idea is “to let the cream rise to the top,” Vosen said. These sales-savvy LBEs don’t know how things work at

Merrill Lynch or a wirehouse, but they don’t need to know.

A two-tiered structure like this will need to be continuously monitored. At Key, sales managers now informally rate LBEs on a scale of one to three, defined as: 1) actively engage in selling every day, 2) don’t really sell but are excellent referrers and 3) do “absolutely nothing.”

Commented Vosen: If they want to do nothing, that’s fine. But then get them out of the program. You can’t make a fish fly. Or as he explains it, “it’s easier to teach someone to swim faster than to teach them to swim.”

Key now has about 1,000 LBEs. Vosen expects to bring that total down to about 700 within a year, or less than half of Key’s customer service representative

(CSR) force (i.e., less than half of potential LBEs). The key question to ask vis-à-vis coverage, according to Vosen: How many branches realistically offer an opportunity for significant bank brokerage activity? Any branch that offers some investments opportunity should have its own LBE.

PNC BankShould LBEs be selling or referring? Pittsburgh-based PNC Bank has tried it both ways. Years back, PNC Bank had a traditional platform program with licensed bank employees selling prod-ucts like fixed annuities to mass retail customers. A couple of years ago, how-ever, the bank moved to a referrals-only program, according to PNC Investments chief Rich Guerrini.

Then in January, PNC Bank changed again. Its LBEs, called financial special-ists, are again selling investment prod-ucts to consumers. The motivation was to better serve the mass retail customer segment, according to Guerrini.

It isn’t just fixed annuities and simplified issue life insurance, either, that are being sold by some licensed bank employ-ees. Mutual funds and — perhaps most unusually — a managed money invest-ment alternative are now offered via the platform. The latter, called Premier

We will not overlook the mass segment,” PNC’s Rich Guerrini said. That segment “is critically important” to the bank and deserves the same treatment as the mass affluent segment.

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Directions, is described by the bank as a mutual fund investment advisory program designed for investors taking those first steps toward achieving their fi-nancial goals. Because it is being targeted to the mass retail customer, the minimum required deposit for this managed money option is very low, $10,000.

“We will not overlook the mass seg-ment,” Guerrini vowed. That segment “is critically important” to the bank and de-serves the same treatment as the mass affluent segment, which is served at PNC, as at most bank programs, by Se-ries 7-licensed financial advisors. (They too sell the Premier Directions prod-uct.) Premier Directions allows “a mass [retail] customer to have a managed money experience,” Guerrini added.

That said, LBEs can also introduce mass retail clients, or others, by phone to investment reps in three call centers that PNC has established in Cleveland; Char-lotte, N.C.; and Pittsburgh. The idea is to provide mass retail clients with choices.

BISA Magazine asked Guerrini what, in retrospect, the bank had learned from it referrals-only LBE experience. Before, when an LBE introduced a client by phone to one of the bank investment centers, a telephone interview often followed — but sometimes it didn’t, Guerrini said. Sometimes — between the introduction by phone and the scheduled dialog appointment — the client simply vanished. “There were drop-offs,” Guerrini explained. Joe was too busy with the “mundanities” of life to have his scheduled investments conversation with the call center that week. Some clients, too, were simply more comfortable discussing

investments with a person whom they knew, like LBE John Smith.

“We have seven million customers at PNC Bank,” Guerrini said, “and we want to make an offer to every one of them. Now we have an option for each of them.”

Has the new regimen yielded significant results? Since January, PNC has seen a “lift in household acquisition” on the investments side, Guerrini said.

Focusing on the Middle Income Bank CustomerSome providers, too, see merit in mak-ing investments available to a wide swath of bank customers for whom LBEs are critical. Vantis Life Insurance

Company (Windsor, Conn.) is an insur-ance carrier that has made a specialty of working with strong bank LBE pro-grams. “That’s where we play best,” said Craig D. Simms, senior vice president, Sales & Marketing. The insurer’s focus is on the middle-income bank customer with a household income of $50,000 to $175,000. A lot of banks have turned their backs on this group, acknowl-edged Simms, dealing mainly with more affluent bank clients.

Simms doesn’t favor a referrals-only LBE program because most full-time financial advisors simply don’t want to sell insurance at lower face amounts, the levels that most middle-income customers require. If an LBE refers a $200,000 term life insurance candidate, for instance, the FA may not pursue that referral aggressively — or even at all. It just isn’t worth his or her time.

It’s better for a bank to tell its LBEs: You sell up to X amount of life insurance or X amount of annuities, and above that you must refer to a full-time FA. The FA may find other investment needs given that this appears to be an affluent bank client, Simms said. The pass-along threshold could be something like $500,000 (face amount) for a term life insurance policy or $100,000 for a whole life policy.

Interest rates will come back,” Marc Vosen said, and “those banks that haven’t given up [on LBE programs] will capitalize on the opportunity.

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What’s key, Simms added, is to create a partnership between the bank’s plat-form bankers and its FAs. The FAs need to be actively involved and rewarded for working with the LBEs. Overrides here are appropriate.

What is being described here is really a hub-and-spoke relationship, added John R. Richter, Vantis Life’s National Business Development director, where one FA works with five or six licensed platform bankers. The FAs mentor the LBEs, and FAs receive additional compensation for their efforts. If you do this, a bank’s FAs’ insurance sales will also rise, Richter said, because now the FA has these products in his or her back pocket, is comfortable with them and doesn’t hesitate to sell them when the opportunity is right.

Don’t License EveryoneThere was a time when banks licensed ev-eryone who worked on the retail branch platform, but that didn’t really work, as suggested above. It cost money to license and train platform bankers through to the Series 6 securities license (with an insur-ance license along the way), and when they did, the banks found that numbers of these licensed bankers never sold even a single life insurance or annuity policy.

The Great Recession, followed by a stressful low interest-rate environment, led to some reflection on the part of institutions. Maybe they forced too many people to get licensed back in the heydays of 2006 and 2007? Maybe they really need to pare down the number?

There has also been increased regula-tory scrutiny of bank programs in re-cent years. So why waste the time and resources on people who aren’t really keen on selling, asked Vosen.

The recent trend, therefore, has been to license bank employees selectively or develop a formal nomination-and-approval process before putting a bank employee on the path to licensing, added BISRA’s Moon.

All of the relevant managers, includ-ing retail branch managers, need to be involved in this selection process. What you want to do is find people who will be really excited about doing their job, Moon said. Bank can now utilize test-ing tools that can help determine sales aptitude, like LIMRA’s Performance Skills Index (PSI). A bank might even consider taking its bankers out of the branch for a one-week training pro-gram to help them pass the test.

The Impact of Low Interest RatesMeanwhile, the low interest-rate en-vironment persists, and fixed annuity sales, an LBE specialty, continue to lag. In its second quarter 2015 report, BISRA reported that fixed annuities comprised only 16 percent of bank bro-kerage program overall revenues. There was a time when they generated half (50 percent) of program revenues.

In difficult economic times, with margins compressed, banks are always looking to cut costs, and LBE training is expensive, according to Moon. Training needs to be continuous, which raises the overall cost.

That said, “(interest) rates will turn-around,” Moon said. They’ve been down for a long time, and when they rise again, those banks “that maintained their [platform] programs” and continue to use internal wholesalers to support the program, for example, “will be well rewarded,” Moon asserted.

Vosen concurred: Once interest rates rise again and fixed annuities are hot again, “they [banks] are going to kick this [i.e., their LBE program] up again,” he said. Meanwhile, though, they’ll be “behind the eight ball.” They will have lost time — as much as a year and a half, according to his very rough estimate.

Indeed, if banks ignore the insurance needs of these middle-income custom-ers, warned Simms, then there may be multi-line insurance companies that will meet those needs. And many of these large insurance companies also offer banking services. It isn’t unrealistic to then anticipate that these giant insur-ance companies may eventually com-pete with banks in traditional banking services. Why would banks want to give them that opening? An LBE program can be a good defensive strategy — above and beyond any incremental fee income such a program might generate.

Meanwhile, “I don’t believe banks are phasing them [platform programs] out,” Moon said. One needs to go back to the reasons these programs were established in the first place. “They were trying to reach customers who were not being otherwise served,” she added. (And, yes, the higher margins that banks reaped by using non-commissioned sales staff was also an attraction, but secondary to reach.)

You just can’t find enough full-time FAs to put in all the places that need to be served, Moon said. Affluent clients will always have enough people willing and eager to serve them, but middle America is another story. Banks need to help these people that are still coming into the branches.

In the end, “People trust their bankers (LBEs),” Moon concluded. “These programs won’t be going away.” ▲

Andrew Singer is editor-in-chief of BISA Magazine. He has been writing about the financial services industry since 1985 and is the managing director of Singer Publications based

in New York City. He can be reached at [email protected].

In the end, “People trust their bankers (LBEs),” Betty Moon concluded. “These programs won’t be going away.”

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COMPLIANCE & REGULATORY WATCH

The financial services industry has traditionally provided a wide range of investment services through a per-sonal network of registered

broker-dealers (BDs) and investment advisors (IAs). These registrants generally dispense investment recommendations and advice during face-to-face interac-tions with clients and conduct business from brick-and-mortar office locations.

However, the traditional landscape for registered BDs and IAs has significantly

changed over the last few years with the rise of automated investment platforms (including “robo-advisors”).

According to a Securities and Exchange Commission (SEC) and Financial Industry Regulatory Authority, Inc. (FINRA) joint investor alert on automated investment tools issued May 8, these tools range from personal financial planning tools (such as online calculators) to portfolio selection or asset optimization services (such as services that provide

recommendations on how to allocate your 401(k) or brokerage account) to online investment management programs (such as robo-advisors that select and manage investment portfolios). These services are appealing to younger generations of investors by utilizing technologically savvy online investment tools that operate seamlessly on personal devices, such as smartphones and tablets. Indeed, a report cited by Bloomberg estimated that one type of automated investment platform that has been garnering recent media attention — robo-advisors — may manage more than $2 trillion in assets by 2020.1

In the past few months, an astounding number of press reports have noted many instances of larger mainstream financial institutions investing in (or acquiring) the technology needed to provide automated portfolio manage-ment services.

Given these developments, it is no surprise that the SEC and FINRA issued the joint investor alert mentioned above.2 While primarily targeted to investors, this alert provided insight into the SEC and FINRA’s perspectives on automated investment platforms. While fashioned as an investor alert, it does provide a glimpse with respect to regulatory considerations, including examination and enforcement priorities in this space. While it is the first word from the regulatory community, it is not likely to be the last word. The alert makes five recommendations to investors using automated investment tools:

1. Understand the platform’s terms and conditions. Investors should review all relevant disclosures, such as fees and expenses associated with the automated tool, and un-derstand whether the automated in-vestment tool sponsor receives any form of compensation for offering, recommending or selling certain

Automated Investment Tools:Coming to an Advisor Near You

By Clifford E. Kirsch and Ben Marzouk

1 See www.bloomberg.com/news/articles/2015-06-18/robo-advisors-to-run-2-trillion-by-2020-if-this-model-is-right 2 SEC and FINRA Investor Alert: Automated Investment Tools, available at www.sec.gov/oiea/investor-alerts-bulletins/autolistingtoolshtm.html

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services or investments. Understand the compensation being paid.

2. Consider the tool’s limitations and assumptions. Investors should un-derstand the assumptions (e.g., inter-est rates will remain low or housing prices will increase) and investment limitations of any automated tool.

3. Understand how input affects out-put. Investors should recognize that an automated tool’s output directly depends on the inputs and informa-tion provided by the investor.

4. Understand that the output may not be personalized. Investors should understand that an automat-ed tool may not consider all relevant personal financial circumstances and factors (e.g., specific financial goals and needs may not be factored into investment strategy based only on investor’s age or time horizon).

5. Safeguard personal information. Investors are cautioned to understand when and with whom their personal information may be shared and to look out for phishing and other scams designed to trick you into revealing personal financial information.

Larger financial institutions looking to build or acquire their own automated investment tool will need to be mindful of the concerns raised by the investor alert. Some of the other issues that will need to be tackled include:

• Registration. Automated investment tools and other financial technol-ogy firms must be careful to obtain the appropriate registrations and licenses to engage in the securi-ties business. For instance, anyone engaged in the business of effect-ing transactions in securities for the account of others must register with the SEC as a BD and become a FINRA member firm subject to FINRA’s rules and regulations.3 In addition, those engaged in the busi-ness of providing investment advice, must register as IAs with either the

individual states in which they do business or the SEC.

• Suitability. FINRA rules require BDs to have a reasonable basis for believing that a recommended transaction or investment strategy is suitable for a customer, where “suitability” is determined by a cus-tomer’s “investment profile,” which includes, among other things, information such as the customer’s age, other investments, financial situation, investment objectives and experience, investment time horizon, liquidity needs, and risk tolerance.4 When recommending certain investment strategies or specific security transactions, au-tomated investment platforms that are engaging in business as BDs should ensure they are engaging in reasonable efforts to ascertain the customer’s “investment profile” in accordance with the factors cited in FINRA Rule 2111. Platforms subject to the Advisors Act, such as robo-advisors, will need to satisfy the duty that advisors have as fiducia-ries to provide suitable investment advice. In addition, the SEC has stated that an advisor has a duty of care to make a reasonable inves-tigation to determine that it is not basing its recommendation on inac-curate or incomplete information.

• Supervision. Even though automat-ed investment tools may not antici-pate much (if any) human support, FINRA rules require BDs to establish and maintain a reasonably designed supervisory system.5 This super-visory system must include, at a minimum, procedures for the review of all securities transactions, incom-ing and outgoing written correspon-dence as well as internal inspections of the firm’s business activities. Since FINRA generally expects these supervisory requirements to be per-formed by a human, and not through any automated or computerized program, program sponsors should ensure they employ a compliance

staff capable of fulfilling these super-visory responsibilities.

• The fiduciary relationship and conflicts of interest. The Advisors Act imposes on IAs a broad fiducia-ry duty to act in the best interest of their customers. Several obligations flow from the IA’s fiduciary duty, including the obligation to disclose all material facts and conflicts of interest so that the customer can make an informed decision about the advisory relationship. Financial institutions should consider how best to make client disclosures as part of their automated platform.

As these online and automated investment platforms gain more popularity, larger financial institutions (such as bank wealth management platforms) may be forced to adapt their business model to this changing landscape and offer investment management services that appeal to this increasing segment of technologically sophisticated investors. These financial institutions may even look to leverage the technology of the automated tools and improve upon the investment strategies and securities offered to their current customers.

While this article provides just a broad overview of the regulatory challenges that may face automated investment tools, as more traditional financial in-stitutions continue to enter this space, the regulatory framework is expected to continue to evolve. ▲

Clifford E. Kirsch is a partner with Sutherland Asbill & Brennan LLP (New York). He can be reached at [email protected]

Ben Marzouk is an associate at Sutherland Asbill & Brennan LLP.

3 Section 15 of the Securities Exchange Act of 19344 FINRA Rule 21115 FINRA Rule 3110

COMPLIANCE & REGULATORY WATCH

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NEWS BRIEFS

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GOP Lawmakers Press DOL to Reissue Amended Fiduciary Rule

More than 100 House Republicans told Labor Secretary Thom-as Perez in an October 6 letter to tell them by October 21 how the Department of Labor will make “substantial changes” to “shortcomings” in its fiduciary plan, but to also allow stake-holders to view those changes before issuing a final rule. The letter, sent by Reps. Mike Kelly (R-PA) and Sam Johnson (R-TX), both members of the House Ways and Means Committee, told Perez that “given the scope of the necessary changes and the significant consequences for retirement savers — espe-cially those with smaller account balances — we strongly urge you to provide stakeholders with an opportunity to review the changes” before the rule advances and is submitted to the Office of Management and Budget. The lawmakers said that while they support a best interest standard, they have “serious reservations that the details of the current proposal will se-verely disrupt the availability of affordable financial education and investment advice while also restricting product choice and retirement security for many American families.”

— Think Advisor (10/07/15) Melanie Waddell

DOL to ‘Simplify and Streamline’ Fiduciary Rule: Borzi

Phyllis Borzi, the main architect of the fiduciary rule proposed by the U.S. Department of Labor (DOL), said Tuesday that DOL was still wading through the comment letters that poured in during the plan’s six-month comment period, but that she expects a final rule to be out in the first half of 2016. “We are trying desperately to get through the rest of the comments,” Borzi, assistant secretary of Labor for DOL’s Employee Benefits Security Administration, told attendees at the American Society of Pension Professionals and Actuaries annual conference. However, while Borzi said the com-ments are a “mixed bag of opposition and support,” DOL is looking for “constructive comments” on ways to enhance the rule — and has “found them.” DOL’s goal in amending the rule is “to simplify and streamline,” Borzi said, noting that DOL has found nuggets of “good ideas” on how to change the much-maligned best interest contract exemption as well as for comments suggesting that DOL explain “the types of investments that should be subject to the rule.”

— Think Advisor (10/07/15) Melanie Waddell

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BISA WOULD LIKE TO THANK THE FOLLOWING PARTNERS FOR SUPPORTING ITS SPOTLIGHT ON TOOLS OF THE TRADE: TPMS, TECHNOLOGY & TRAINING

SPECIAL SUPPLEMENT: TOOLS OF THE TRADE: TPMS, TECHNOLOGY & TRAINING

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SPECIAL SUPPLEMENT: TOOLS OF THE TRADE: TPMS, TECHNOLOGY & TRAINING

MANAGED-MONEY OPPORTUNITIES: FACTORS FOR GROWTH IN THE FINANCIAL INSTITUTION CHANNELBy Timothy P. Munsie

Assets invested in managed-money solutions have grown dramatically over the past five years. In 2015, the total amount invested across the industry surpassed the $4 trillion mark, with a growth rate of about 46 percent over the previous two years (Managed Mon-ey Institute, 2015). Given this shift, the opportunities associated with fee-based business will continue to develop in the years ahead.

To leverage this trend and serve clients to the best of our abilities, financial institutions must broaden their perspective on managed-money. Instead of placing the responsibility solely on advisors, we must deter-mine how banks and credit unions can drive this line of business on an institutional level. While advisors work on the licenses and skills necessary to manage clients’ portfolios, investment programs and their broker-dealers must also put in the work, promot-ing the following factors that lead to managed-money growth.

Define relevant program goals and a clear action plan. Make them known. At Infinex Financial Group, our most productive advisors come from programs that establish straight-forward goals and comprehensive action plans, unique to their capabili-ties as an organization. One program may consist of experienced managed-money advisors with mature books of business. An increase in revenue could simply require exposure to new ways of uncovering assets or the use of enhanced planning software. This particular program’s monthly objec-tives, training schedules and market-ing plans, would be far different than a program comprised of less seasoned advisors or those unfamiliar with fee-based solutions. In the latter, a more

detailed, long-term strategy would need to be implemented. It should include regular education that builds advisor confidence and encourages a planning approach practice that un-covers new opportunities within each individual book.

Everyone involved must be held re-sponsible for executing the program’s tailored plan. In the BISA OneSource article, “Create a ‘No Excuses’ Sales En-vironment,” the Anthony Cole Training Group noted, “Tracking activity is ben-eficial only if the data will be used to hold people to their promised goals” (December, 2014). Thus, the most rel-evant goals and plans quickly become irrelevant if no one knows about them. Accountability is key to success, and managed-money is no exception.

Expand your team with the right team members. An investment program must selectively expand its team to ef-fectively put a plan into action. Program managers cannot go it alone to help the program’s investment team succeed.

On an advisory level, Infinex Financial Group believes that broker-dealers must have the resources and structure to support advisors on all levels of the managed-money learning curve. Next, the individuals who form this group must place accountability not only on the advisors they serve, but on themselves as the broker-dealer. Lastly, this team must have the experience and skills required to boost busi-ness; broker-dealers must offer more than operational support. To become leaders in the advisory marketplace, a program’s extended team must simultaneously provide case study design, compliance guidance, portfo-lio reviews, point-of-sale support and one-on-one coaching.

Meet the clients’ objectives. Through hands-on experience, Infinex’s Wealth Management Group discovered that an advanced planning desk is imperative to addressing the needs of high-net worth individuals. Likewise, retirement planning tools must be integrated into a financial institution’s everyday contact management system, identify-ing portfolios at risk and generating customized client plans and illustra-tions. To respond to the demands of this industry, solutions available must also include an open architecture platform with highly competitive pric-ing; customized, detailed reporting capabilities; top notch asset allocation; proprietary portfolio option and more.

Although each financial institution must determine which solutions pro-mote both an advisor’s achievements and their clients’ overall experience, the broker-dealer must be nimble and available for the type of personalized, internal support that can truly make a difference. At Infinex Financial Group, our motto has always been, “By Banks, For Banks.” In applying this motto and the three defined factors for managed-money success, we have grown our advisory business 86 percent over the last two years. Instead of simply following the trend, let’s lead the way and enhance your program’s fee-based business in 2016.

Tim Munsie, portfolio manager, Infinex Financial Group, is co-manager of Infinex’s proprietary investment models, while also working one-on-one with investment programs

and individual representatives. He has more than 10 years of experience with managed money.

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SPECIAL SUPPLEMENT: TOOLS OF THE TRADE: TPMS, TECHNOLOGY & TRAINING

GETTING MORE RIGHT-FIT REFERRALS WITHIN YOUR FINANCIAL INSTITUTIONBy Michael Anderson

How can you get your colleagues to send you more right-fit prospects? Train them one colleague at a time.

You have a desk in a bank or credit union, either as a full-time employee or as an independent advisor servicing the financial institution’s customers. You’re getting a few referrals but not as many as you would like, and many are not a right fit for your services. How can you get your colleagues in the financial institu-tion to send you more right-fit prospects? Train them one colleague at a time.

That may sound inefficient at first. Why not herd them into a room, pull up your PowerPoint presentation and tell them to send you clients? Like most training we receive at work, your col-leagues will learn more and learn faster when you involve them in the process. And having a process is the key to get-ting more internal referrals.

If you have a steady flow of referrals from your colleagues but only a portion of those are right fit, you may have in-consistencies in your Unique Value Prop-osition (UVP). Your colleagues like you and think you do a good job, but they are not entirely sure what it is you do or what kind of people you work with. Your UVP helps them understand exactly what characteristics prospects have that make them a good fit for your practice. That, in turn, helps them identify customers they interact with who would also be a good fit for your practice.

Much of the training financial institu-tion employees receive on making re-ferrals to the advisor focuses on asking them to refer anyone they know who could use an advisor’s assistance, and that strategy might garner a few refer-rals. Your colleagues, however, have a lot on their minds — their own job du-ties, kids’ activities, parents who need help, household chores, dry cleaning, dog vaccinations, car repairs and so on. They may simply not remember to tell customers about your services.

Far more likely are tipping-point conversations or opportunity referrals. These occur when, during the normal course of a conversation, the customer says, “It’s been so hard since mom died. Now I’ve got to figure out what to do with the inheritance. I wish I knew someone I could trust to help me.”

If you were a fly on the wall, you’d be thinking, “Mention me! Mention me!” For that to happen, your colleague needs to have you top of mind. And you can only be top of mind if you have a consistent, memorable UVP and have trained your colleagues — multiple times and in multiple ways — how it applies to the customers they interact with. The great thing about top-of-mind awareness is that it doesn’t rely on your colleague remembering to tell the customer about your services. It happens spontaneously.

Let’s look at some of the tipping points that can cause a person to seek out a new — or a first — advisor relationship: marriage, divorce, death, inheritance, prob-lem with the current advisor, job change, birth of a child, starting a business and selling a business, just to name a few.

Next, think about your colleagues in the financial institution who are most likely to be in contact with your target market members during those times. How can you involve them in a way that educates them on your right-fit client profile? By asking for their opinions, their expertise and their help using a formalized refer-ral discovery interview process.

A referral discovery interview process helps advisors in financial institutions

systematically involve their colleagues in the referral process. The process has six action steps:

1. Create an approach call script.

2. Identify a list of colleagues to interview.

3. Write out “ideal” client profiles to explain who you serve best.

4. Develop discovery interview ques-tions around your client profiles and their tipping points.

5. Schedule and conduct discovery interviews.

6. Determine next steps for working together.

While doing a paper survey of the financial institution’s employees might seem more efficient, conducting the in-terviews in person provides the biggest benefit. Conversations spark dialogue and uncover opportunities better than a form. The conversations also give you the opportunity to provide other useful information to your colleagues.

Securities America, Inc., Member FINRA/SIPC

Michael Anderson is first vice president of financial institutions/mergers & acquisitions at Securities America. For more on the internal referral discovery process, including sample

scripts and questions, contact Anderson at [email protected].

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AD INDEX

Ad Index

Allianz ..................................................... 38, 39

www.allianzlife.com

Annuity Marketing Services .................. 13

www.annuitymarketingservices.com

Athene USA ....................................................1

www.athene.com

AXA ............................................................................33

www.axa.com

BISA. ............................................................... 35

www.bisanet.org

CUNA .............................. 25, Digital Edition

www.cunamutual.com/cbsi

CUSO .............................................................. 36

www.CUSONET.com

Eagle Life Insurance. .................... Inside Front Cover

www.eagle-lifeco.com

Forethought Financial Group ...........Inside Back Cover, Digital Edition

www.forethought.com

Genworth ...................................................... 29

www.genworth.com

Great American Insurance .................... 23

www.GreatAmericanAnnuityFI.com

Infinex .............................................. 19, 40, 41

www.infinexgroup.com

Jackson National Life Insurance .......................... Back Cover

www.Elite-Access.com

LifeQuotes.com .......................................... 17

www.lifequotes.com

Metlife ............................................................ 11

www.metlife.com/shield

Nationwide. .......................................... 30, 31

www.nationwide.com

Protective Life Insurance Company. .........................5, Digital Edition

www.myprotective.com/boost

Raymond James. ........................................ 27

www.realbrokerageatrj.com

Securities America. .......................... 42, 43

www.FI-SA.com

Vantis Life. .......................................................3

www.vantislife.com/ABLE

BISA Leadership Advisory Board

Frank Consalo, ChairmanCiti Personal Wealth

Keith BurgerAIG Financial Distributors

Randy GabrielsonAllianz Life Insurance Company

Keith PinkleyAthene USA

Jon ZalesAXA Distributors, Inc.

Dean BorghCarey Financial, LLC

LeAnn RummelCetera Financial Institutions

Kevin MummauCUSO Financial Services, LP

Tom PelloweDividend Capital

Scott DavisEssex National Securities, LLC Mary Beth Dvorak First Trust Portfolios

Brenda GemplerForethought Financial Distributors

Gina M. RiepelFranklin Square Capital Partners

Eric TaylorGenworth Financial

Scott BeshanyInCapital, LLC

Tori BullenJackson National Life Insurance Co.

Martin PowellLincoln Financial Distributors

Arthur OsmondLPL Financial Institution Services

Matt DiGangiMassMutual

Gerard NigroMetLife Investors

Amanda SmithNational Financial, a Fidelity Investments Company

Tom OlsonNational Life Group

Mark MerrittNationwide

Tim BonnacciNavian Capital

Andrew CapaccioNew York Life / MainStay Investments

Chris FunkOneAmerica - Care Solutions

Randy ReynoldsPershing, a BNY Mellon Company

Fred TecenoPIMCO

Steve BeckerPrincipal Financial Group Michael Korthaus Protective Life Insurance Co.

Wayne Chopus Prudential Annuities

Bob MittelPrudential Life

John HoustonRaymond James Financial Services

Lynn BergerRealty Capital Securities, LLC

Michael AndersonSecurities America

Dave ByrnesSecurity Benefit Group

Wesley SeverinSymetra Financial

Tracy FraserTransAmerica