Slideshow 7 Ways to Improve Your Bank's Investment Program

  • October 10 2013, 10:33am EDT
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7 Ways to Improve Your Bank's Investment Program

by Kayan Lim

When hearing about investment programs it would seem like banks are doing well. We hear large numbers associated with assets under management, gross revenues, assets per advisor etc. The truth is however, that after TPMs and advisors get their share of the profit, the net income to the bank is really not that much. Bank investment programs require a high amount of resources, and also do little to further the bank’s bottom line. At the moment, many existing programs in the industry operate well below their income potential.

In his article, Reevaluating Banks’ Investment Programs, John Brunett, Chief Trust and Investment Officer at Los Alamos National Bank, proposes seven ideas to help assist bank managers, investment program directors, and bank investment consultants to improve and streamline their programs to achieve a higher bottom line.

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1. The 30% Solution

A good benchmark for a bank program’s profitability is 30% of revenue.

While some firms may choose to go higher or lower depending on certain factors, this is a good guideline to keep to. Brunett cautions that netting lower than 20% is cause for alarm and re-evaluation of current modes of operation. Not only is netting below 30% financially risky for your firm, it could also potentially hurt your reputation. Shooting for 30% is a good way to make sure your firm is doing well and that earnings are also growing.

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2. Referrals

Many people only use banks as their referral sources. Why limit yourself to just banks when the whole world could be your oyster?

Make a game out of it. Look for every opportunity to introduce and refer within your total professional network and watch the referrals come back to you.

3. The CD List

It is a common misconception that CD lists are where all the money lies. While CD lists can indeed be converted, the bulk of the money is actually held elsewhere. When one looks at a client’s portfolio, the CD list makes up only a small – and likely, conservative portion of their assets.

Don’t just sell the conversion, build the relationship. Also, don’t sell new advisors on access to the bank’s CD list. This is a surefire way to alienate older bankers.

4. Team Size

Often times banks will have a set ratio of reps to assets held by the bank. This may not be the most efficient use of resources.

Strive to achieve leverage and capacity from current reps and add reps once the current reps are maxed out in their ability to take on more business.

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5. Communication

One of the biggest – but fortunately, easily rectified – problems in the industry is the disconnect between banks and investment consultants. Investment consultants are often times not kept in the loop with the banks’ needs. There needs to be a good system of communication between the two parties in order to increase efficiency. For instance, if a bank needs more of a certain type of loan, they should make this clear to their investment consultants so that they can proactively work towards attaining that.

Brunett advocates getting a bank education saying that this will help vastly with communications, Getting a bank education positions you as one of the 'team' with greater understanding of where the pain points lie and what opportunities exist.

6. Tracking & Transparency

Tracking is crucial in this field. All numbers should be tracked to aggregate losses, gains and most importantly, the net income of the bank. Furthermore, everyone in the program should be made aware of these numbers.

Regardless of whether the numbers are good, bad or ugly, they should be transparent to everyone involved.

7. Time

Investment programs do not just take off overnight – as with everything, it takes time. If your investment program is relatively new, then set a timeframe in which you would like to achieve a desired result. Between 3 – 5 years is reasonable.

While Brunett is aware of the fact that investment programs take time to nurture and grow, he cautions, If the department is older than five years and still sputtering along, it’s time to take a fresh approach and reevaluate the program.