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10 Requirements For Building A Successful Bank Program

SuperUser Account posted on August 01, 2012

August 1, 2012


Consider our story of a CEO of an average-size bank. He could never figure out why his brokerage division did not generate more revenue or see more growth.

Every five years or so, he would fire his program manager and hire a new one. He had enjoyed a successful career as a banker, working his way up the ladder from a part-time job as a teller. But the one thing that he could never figure out was why history would repeat itself with each program manager he hired.

It may sound like a silly story, but the situation is characteristic of many banks across the country. And if you consider all the angles to this story, it is easy to understand why.

Our fictional bank manager, like many of his real-life counterparts, is a man who never worked on 100% commission and therefore has a tough time understanding and relating to those who do.

Indeed, anyone willing to take the risk of working on commission is going to be different from someone who has always been on a salary.

And a bank manager, of course, thinks like a banker. Even though he has a program manager, he ultimately makes all the big decisions. And while some managers realize they cannot manage everyone the same-we're too different-the differences in our industry are just too big sometimes. It's like a cricket player managing a boxing gym.

When it comes to this industry, advisors know that if they can sell, they will be successful anywhere and are very driven by monetary rewards. Furthermore, they know if they hit a certain level of production (usually $500,000) they will be in demand across the industry.

Advisors are attracted to this industry because they like the idea of being able to make as much as their talent permits. And since they are risk-takers, they will leave a bank once they feel the bank is hurting their ability to make money.

Here at the Rummage Group, I have consulted with numerous banks and I am shocked each time a program goes back to its old ways. Most often they are unwilling to even try the ideas that will make them more successful.

Here are 10 things that all bank- based programs should do:

• Hire a great program manager — one who started as an advisor and successfully worked his or her way up through the ranks. They should also understand banking.

• Allow your program manager to run the division and make the decisions. Do not micro-manage the division. A good program manager knows what will help the advisors become more successful and what will keep them in the seat.

• Have one of the best bank-based payout grids. Many banks are notorious for having low payout grids. A good payout grid should go as high as 60%, but most banks top out at 40%.

If an advisor is generating $600,000 in revenue and is at the top of the grid, give them even more incentive to increase it to $700,000 or $800,000. Compare your grid to other banks and make sure you have one of the best.

• Make sure your bankers have it in their goals to send referrals to the advisors. A good program should require all branch bankers to make at least 12 referrals per month to the advisors.

This will require top-down management. If this goal is not brought up in every sales meeting the bankers may not think it is important. Give awards to bankers for the most referrals. Most banks have weak or no goals when it comes to brokerage referrals.

• Give monetary incentive for qualified referrals. Having goals for referrals is great, but giving a monetary reward is even better.

If a teller knows they will get, say, $20 for every referral, this will allow them to increase their income and also generate more revenue for the bank.

In addition, there should be a bonus each month for any banker that hits his or her referral goal. Maybe an additional $250 if they hit their 12 referrals. You can get creative but it needs to be enough to get every employee interested about the monetary potential.

• Give upfront money to recruits. If you want to get the more successful advisors with established books, you need to give an upfront check. Something between 20% and 50% of trailing-12 production is at least a start. If a bank chooses to skip this step, it risks losing good advisors to the firms that give upfront money or have a better program.

• Listen to your advisors. Survey your advisors at least once a year to gauge what is needed to make a better program.

Some of the best companies in the world have made a habit of asking employees for good improvement ideas. Remember, advisors tend to be emotional and want to feel that you care. If they don't, they will leave you for a company that does.

• Stop making compliance and paperwork a nightmare. Banks are notorious for being conservative when it comes to compliance. There are industry regulations and then there are "bank regulations." This makes no sense to advisors and is a big point of frustration.

• Provide the advisor with leads. Referrals are the best, but leads are necessary when referrals slow down. At any given time there are hundreds of great leads in every branch, such as customers who have high balances in deposit accounts or maturing CDs. These are all customers a bank should want their advisors to call on. I understand the challenges that bank CEOs sometimes face with using too many deposits for brokerage investments. However, if this is the case, the bank needs to find a way to bring in more deposits instead of hurting brokerage.

• Use good third-party recruiters. Recruiting financial advisors is one of the hardest types of recruiting, and I have never seen HR do it effectively. It involves a lot of time and effort that HR does not have.

The most successful bank-based programs use outside third-party recruiters for a reason. If you are going to use typical Internet-based candidate sourcing websites, you likely will end up with advisors who have little to no existing book of business. Moreover, many talented advisors don't put their resumes on the web.

In summary, banking and brokerage are two very different animals. At the Rummage Group, we see this every day in our conversations with both sides.

At a bank, you already have a captive audience to sell financial products and services to. So what all programs need are some talented salespeople. The days of the service-driven banks are over.

All banks need to capture as much wallet share as possible. And you are not going to do that by going cheap on the potentially best salespeople you employ.