Many banks and credit unions struggle to find the secret ingredients to a successful investment program. Some obsess over the client brochures; others think they need that one special advisor who will magically transform the program; and yet others think that getting the right information on the website will somehow drive prospective clients to their investment representatives.
But there are really just three critical success factors, and they all contribute to the same goal: increasing the effectiveness of the network that exists at every financial institution.
Aside from some off-field foibles, most baseball fans remember Pete Rose for having more hits (4,256), than any other person to have ever played the game. Was Rose really the best hitter of all time? Frankly, no. Many other players had better batting averages. Rose had more hits than anyone else because he held another record—the most times at bat (14,053). And that's exactly what banks and credit unions need to do—increase the number of "at bats" for their advisors.
Financial institutions must continually work on increasing the number, frequency and quality of referrals they receive. This will not happen by itself. No bank that has ever been successful in the investment business has done so passively. However, the advisor must be the catalyst for this key activity. The bank investment consultant has what no independent or wirehouse investment rep has—an in-house network of referral sources. However, for advisors the success of the bank's investment program is 100% of your professional life, while you'd be lucky if others in your network felt it was even in the single digits of importance. You need to change that.
FACTOR #1 — Referral Activities
The most important of the three success factors is the presence and prominence of sustainable referral-generating activities. The identification, surfacing and referral of active investors is the key function of a bank investment program—it is the core value that the financial institution brings to the table.
But many investment reps think that qualified referrals will just magically come their way. When they realize that this doesn't happen, they move to the No. 1 tool used by most bank investment reps: They bring doughnuts around to their branches on a regular basis in the hopes that this high-caloric incentive, mixed with some pleasant conversation will spur significant referral activity. Unfortunately this is as far as many advisors go.
Top investment reps in banks and credit unions do the following:
• Seminars/workshops. Before you start thinking auditoriums, hors d'oeuvres, engraved invitations and cocktails, think again. These lavish affairs are expensive, difficult to arrange and are not repeatable with any frequency. Additionally, hosting a seminar at the function room of your local Holiday Inn not only detracts from the professionalism of the seminar, it also doesn't build on the powerful brand of your financial institution in the minds of customers.
The most effective seminars are regularly scheduled, small group workshops, held at your bank in a conference room or boardroom setting. The invitation list should be eight to 12 people, and there are no refreshments. No outside speaker is needed, since this will be a much more informal presentation, hopefully with an interactive element (examples would be a retirement calculator or college planning worksheet that the attendees complete and which also serves as the beginning of your fact-finding document with this potential prospect).
Unlike the typical big-show seminar, you will personally meet each participant, and if only a handful show up, it okay, it's no embarrassment for a few folks to meet around a conference table (unlike the sinking feeling when a low turnout at a rented hall makes the place feel like a tomb). In fact, even if just one person shows, it's really like any other initial prospect meeting.
By having a retirement seminar every other Thursday, or a college planning seminar the third Monday night of each month, you can create an ongoing way to service active investors and potential referrals. By not offering great food or drink, you are reasonably assured that attendees will have at least a notional interest in your topic. Having seminars on a scheduled basis also keeps the branch system informed about what is going on and many of your sessions can focus on finding customers who might be interested in your next seminar.
• Branch manager one-to-one meetings. A scheduled branch manager meeting is a good way to institutionalize referral activity. Ask the branch manager to have a 30-minute weekly or biweekly meeting, where he or she brings you information about just three branch customers (it may be actual written information or just their own personal knowledge). Their role will be to spend five to 10 minutes discussing what they know about each one. The advisor's job is to select one or two that might benefit from a personal meeting. It's best if the branch manager makes the call to set up a meeting or lunch with the advisor. However, if they are reluctant to do so, the advisor (with the manager's permission), can make the call using the manager's name as a reference.
The subsequent meeting should only be for fact-finding and not a product presentation or sales pitch. This will preserve the professionalism of the advisor and the institution, and make the branch manager much more comfortable about making further referrals.
• Pay attention to the whole institution. Many advisors concentrate 100% of their referral activities around their branch system. True, these people see the greatest number of customers, but there are great pockets of referrals all around your institution. It takes some work on your part to find them.
• The mortgage department. How many advisors really build up a good rapport with the mortgage folks? Yet there is probably no one in your bank that knows more about the complete financial picture of its customers that the mortgage loan officer. They're unlikely to be excited by the nominal referral fee of your investment program. Instead, try making a cross-referral to them. Nothing will go farther with loan a officer.
• The executive staff. Not only should they be leading by example with investment accounts of their own with you, they are in a position to refer many potential clients as well. If your bank sets goals and does not include this group, that's a mistake. The executive staff are also your best source of referrals to centers of influence. Collectively, they probably know 90% of the attorneys, estate planners, accountants and plan sponsors in your community.
• The board of directors. Incredibly, as I visit with banks and credit unions, I find very little involvement between the board and the investment advisor. The CEO needs to get the advisor on the board agenda at least a few times a year (and the advisory boards even more often), even if it's just for the social part of board functions.
• The operations managers. Who does your institution do business with? Who are your suppliers? Who does the bank's outside legal work? Who maintains the branches and grounds? Your institution writes lots of checks to many people and companies. The operations managers or accounting staff may be able to refer you to many potential clients from this group.
The guiding principle behind a successful referral program is that it be ongoing and institutionalized, otherwise the advisor will end up right back at delivering doughnuts. And remember to make at least one cross-referral to each branch each month (at least).
FACTOR #2 — Internal Communications
The oil that keeps the referral machine running is regular communication with everyone in the referral network. Again, the investment program is only a small part of the institution's business. It's the advisor (with a little help), who must bring it to the forefront.
So what should be communicated?
• Sales success: Report on sales both big and small.
• Lead-generation success: Give specific examples—people learn by example.
• Great stories: Tell one-of-a-kind stories about a great sale, a great handoff, or how someone has helped make investments part of the culture.
• Tips and training: Offer a good prospecting idea you heard from a wholesaler this month.
• Cross-referral activity: This is critical to the institution and the network.
• Announcements: For example, the date and time of the next seminar.
Communicate all of the above in any way possible. Depending on the particular institution and its internal communication capabilities, this information should be spread in emails, newsletters, scorecards, staff meetings, phone calls and written notes—any way the information can reach the internal referral network.
Communication becomes even more effective if there is an investment program champion within the institution to tell the story. Preferably it's the CEO, but it can also be a program manager, head of retail or a branch manager.
I worked with a program a few years ago that became so focused on internal communications, that the CEO (and "champion" of the investment program), completely reoriented his branch visitations. He used to walk into branches and talk with the manager and staff about branch traffic, new deposits, loan growth and whatever the current bank promotion was. Instead, the CEO deferred all of that discussion and first asked two questions of the branch manager each time he entered the premises: How many investment referrals have you made this week, and how many referral appointments were held?
After a few weeks of such constant reminders, the branch personnel finally realized how important this activity and the related fee income were to the CEO and to the bank. Needless to say, this was a top-performing community bank that was recognized for the success of its program. The other local community bank has never even started an investment program because they never felt able to compete.
FACTOR #3 — Recognition
The last leg of the stool is recognition. Without this important reinforcement, good sales and referral habits wane. Recognizing individuals, branches and departments on a regular basis makes the network appreciate the investment program. Much of this should happen with the communication efforts described above, but this is a special, more personal communication to recognize good behaviors.
If possible, be sure that those individuals responsible for the success of the program and their managers are recognized both personally and publicly. Such recognition is not just for top performers, but needs to go on at all levels: the best rookie, most improved, most difficult referral, best seminar turnout, maybe even a "coach's award" for best effort.
Many advisors make the mistake of thinking that the nominal monetary reward is going to be a great motivator to getting referrals. Frankly, this is a misconception. While many institutions have good referral incentive programs in place, they will never take the place, or be as motivating, as the recognition efforts I have described above. First of all, the payment is nominal—and by definition is not significant enough to be meaningful (especially after taxes). Second, if the branch staff in your referral network were really incentive oriented, they wouldn't typically be in that type of job.
Certainly there are exceptions, but my experience tells me that most branch staff are much more motivated by recognition than they are by small monetary incentives. In fact, in an experiment we conducted at a large mid-Atlantic bank where part of the network had their referral fees turned off, there was no significant drop-off in referral activity. However, it should be noted that the referral culture of this institution was well established, with significant and ongoing and sustainable referral activities, excellent internal communications, and a true recognition program.
Referral activities, internal communications and recognition—it may seem pretty simple but if you look at low-performing investment programs, I'm sure you'll find that one of these is either missing or poorly executed. If you look at investment programs that enjoy a high degree of success, I'm equally positive you'll find them doing all three of these three things well.
Over the years, I've worked directly with scores of bank and credit union programs, and have knowledge of many others. One extremely rural institution (it was so remote there was no daily newspaper even available from anywhere), decided to intently focus on its start-up investment program, and agreed to follow the steps I outlined above. They had a great champion for the program (their CEO), institutionalized several sustainable referral activities, and made communication and recognition a major element of their program. Even with a nearly new advisor (less than a year in the business), they were able to generate over $450,000 in new revenue in their very first year of business and still produce nearly double that now—despite a geographic market that belies success.
It's just three things—do them well and your investment program will prosper.
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