According to the white paper, the average financial institution investment services unit deploys one advisor for every 16,188 client households, generating per household revenue of $23.83 for the institution. But banks could do far better simply by reducing the size of advisors’ territories, the report found. For example, banks that assigned less than 7,762 households per advisor generated $84.64 in revenue.
The analytics validates what many in the industry have long believed to be true “in the gut,” said Catherine Bonneau, president and CEO of PrimeVest, in an interview. The research called out the fact that “across the industry, there’s room for improvement,” she said. The research concludes that the ideal coverage ratio is 7,762 households per advisor, which is almost half the industry average. In other words, banks and credit unions would need almost twice the number of their current advisors to maximize their revenue.
Bonneau said that the direction of the findings was not a surprise. What was surprising, however, was the degree to which the advisor-to-client ratio needed adjustment.
To be sure, those changes won’t be easy to implement. Existing advisors often view new hires as potential rivals encroaching on their turf, according to the report. “Many of them [advisors] see the number of branches or clients assigned them as their opportunity and naturally view reducing the size of their territories as hurting them in the wallet,” the white paper notes.
But PrimeVest maintains that shrinking territories does not adversely impact advisors’ production in a big way, unless they have unusually large territories covering more than 19,232 households.
Advisors will find that they “don’t have the bandwidth to cover 19,000 households,” Bonneau said. “Over time, [advisors] will see the merits of cutting back their territories,” she added. The paper says that advantages include the ability to spend more time with each client and attracting more of their investment and insurance business. Advisors also would spend less time traveling from branch to branch and more time building rapport with the staff in their branches, all of which leads to more referrals for the bank, the report pointed out.
The report, titled "Optimizing the Advisor-to-Client Ratio,"is the second in PrimeVest's "Guide to Growth" series. To download the report, click here.