Webster Bank's top 10 producers completed the first round of what they thought would be an excruciating task: cutting clients from their books of business. So far, they've shed one-third of their clients, and in two years they will be trimming more.
To everyone's surprise, the cutting turned out to be a relatively easy process, albeit with a few administrative snafus, according to John Olerio, director of Webster Investments.
"The reps for the most part were extremely cooperative," he said.
While the advisers were reluctant at first to drop clients, particularly those they'd known for decades, they eventually came around as they realized they wouldn't be able to continue servicing the one thousand-plus clients in their books.
"It certainly isn't going to be easy to say good-bye to some of them," Olerio said of the clients that would be reassigned to other financial consultants.
Despite their initial reservations, the advisers ultimately saw the move as the "right decision" not just for themselves and Webster but also for the client, according to Olerio. "The end client should be in a service model where they get the maximum amount of time from a financial professional for what they need," Olerio said.
GEARING UP FOR FIDUCIARY STANDARD
As the advisory industry gravitates to a fiduciary standard, banks such as Webster are adjusting their service models to ensure their wealth management businesses remain viable enterprises. Many are reassigning all but their most profitable clients to new advisers or funneling them into associate adviser or platform programs, call centers and even digital advice platforms.
The changes come as banks and their advisers prepare for a public that has come to expect a fiduciary standard of care, with or without the fiduciary rule, according to industry analysts. Advisers can no longer serve the large number of clients they once did because the fiduciary standard requires a greater time commitment to individual clients, they contend.
"There aren't enough hours in a day," said Steven Saltzman, a principal and owner of Saltzman Associates. "Every statistic that I've ever seen indicates that they're carrying way too many clients."
Because their time is limited, advisers are being asked by their management to help identify and redirect low-asset, less profitable clients to other service channels within the bank.
It all boils down to simple math, industry observers say, citing the fact that the typical adviser derives the bulk of his or her revenue from a relatively small percentage of clients.
Webster's top 10 advisers, for example, received 80% of their revenue from just 30% of their clients.
The sobering statistic helped Webster's management get its advisers onboard with the bank's "omni-channel distribution" strategy, Olerio said.
INITIAL RECOMMENDATION
The bank provided them with a workbook and an initial recommendation as to which clients they should relinquish. The advisers then had the opportunity to go through the bank's recommended cuts "client by client" and agree or disagree with the choices made. Webster gave them leeway provided they "met certain thresholds relative to how many they'd be giving up and how many they'd be retaining in this round," Olerio said.
The goal is to bring the average number of clients down from 1,500 to 500 over a two-year period and eventually down to 200.
To prepare them for the second round of cuts in two years, the advisers were assigned a junior broker who would help in servicing the clients in the streamlined books of business. The two would jointly manage the clients for the next two years, at which point the junior broker would take over the senior adviser's "C" and "D" clients.
That would leave the senior advisers with only their "A" and "B" clients, further shrinking their client base. The goal is to bring the average number of clients down from 1,500 to 500 over a two-year period and eventually down to 200, according to Olerio.
The initiative involves more than trimming clients from over-stuffed books of business. It also calls for the gradual transition of the advisers out of the branches and into corporate offices, opening space at branches for more junior advisers to benefit from referrals.
Webster's top 10 advisers now cover just two branches, down from five. Eventually, they won't be tied to a branch at all as they complete their transition to the so-called "second-story adviser" model.
As second-story advisers, they will work their books of business without referrals from the branches. They may either work "upstairs" or in a corporate office, but they may also wind up in a separate area of a single branch.
Regardless of where they're located, they will continue to be a vital part of Webster, according to Olerio. "They will still be representing the Webster brand and be very much engaged in all that is Webster," Olerio said.
