Bank-affiliated brokerages have been big revenue earners for banks, especially since the financial crisis struck in 2008, but a new Aite Group study found that banks could and should be doing much more to boost revenues from cross-selling wealth management products to retail bank customers.

The financial services research group’s study discloses that not all bank-based financial advisors have bought into the benefits of leveraging internal partners and cross-selling non-investment solutions to bank customers.

Study author Sophie Schmitt, a senior analyst with Aite Group, wrote, “Bank advisors whose business is predominantly fee-based are not always the best partners, and the best cross-sellers and partners are not always the most successful financial advisors.” “Successful advisors must be convinced of the benefits of working with internal partners in order to generate more business,” she added.

Looking at 16 of the 50 largest U.S. banks, Schmitt found that as of the end of 2010, only half had established initiatives aimed at deepening relations with their mass affluent customers as one of their CEO’s top five priorities.

At the same time, she reports that very few banks have achieved more than a 25% cross-sell ratio with that mass-affluent customer base, leaving them with a “significant opportunity to capture the investment assets” of those customers.

More broadly, the report found that U.S. banks have only captured 5% of retail investment assets held at brokerage firms and registered investment advisors. Just doubling that figure to 10% would add between $3.5 billion and $5 billion to those banks’ top lines.

Surveying 75 bank financial advisors, the Aite study found that more than one-third said they didn’t generate any revenue from internal partner referrals at their banks.  Furthermore, of those advisors who said they were leveraging referrals, a third said they generated less than a quarter of their annual revenues from those referrals during 2010.   Another third of the group said they received more than 25% of their revenues from referrals during the year.

Among those advisors who reported receiving significant income from bank referrals, it appears that 70% of those referrals come from the retail bank operation, with only 6% coming from the private banking units and 7% from small business and commercial banking.

Schmitt writes that “Banks could realize a boost in their investment assets by enhancing partnerships between these two organizations, particularly with the small-business bank.”

In terms of products, the study found that bank-based advisors who did not leverage referrals from their banks generated most of their revenue from recurring assets under management (AUM) fees, while those who earned significant revenue from referrals did more commission-based business, selling annuities, 401(k) plans and one-time consulting fees.

Looking into why so many advisors were not cross-selling, the Aite study found that only half of those surveyed said that they received any monetary compensation for bank product referrals.

To boost cross-selling the Aite study offers these suggestions:

-- Banks and brokerages should modify the existing compensation to reward advisors who rely on referrals and cross-selling in their business, drawing on the experience of those financial advisors who have achieved part of their success through working with internal banking partners.

-- Brokerage leaders should promote the achievements of successful advisors who leverage internal partners and have a diversified business model.

-- Banks need to demonstrate to advisors the advantages of working with internal partners.



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