When Banks Ignore Their Investment Programs

Register now

One constant in this industry is a certain disconnect between bank management and their advisory programs. In fact, here at KaneCarlton,  we find that bridging this gap is often a key initiative of our bank clients. 

Many of the solutions may seem obvious, yet a lack of disciplined implementation leads to continued disenchantment and frustration for bank executives and their boards.

One of the main reasons for this misalignment is not measuring this gap correctly, or even acknowledging that it exists. As usual, admitting a problem exists is the first step in resolving it for those advisors and managers willing to conduct an honest assessment as to how well you are achieving your boss’ goals.

This isn’t a new phenomenon, which makes it puzzling to think the groups have not better coalesced over the years. That’s not to say there has been no progress, but it’s perplexing why a lot of smart people on both sides have not been able to move further forward.

Four of the most frequent roots of the challenge we see are: cultural differences, lack of experience in each other’s business, reward systems and unaligned goals.

We offer here some remedies for each one, demonstrating the opportunities available once addressing them.


It is clear to us that many bank executives have little knowledge (most admitting such) and even less practical experience in wealth management. However, it is also obvious that advisors and managers are seldom tuned in to the challenges bank executives face and what is important to them.

Clear communication, even when the topic is unpleasant, is a cornerstone of any business situation. So advisors should take the time to thoroughly understand managements’ pain points and their goals. Find out exactly what they are trying to accomplish and what actions advance or encumber their  efforts.

Try to be part of their solution before lobbying for additional referrals and resources.

Misaligned goals create misplaced feelings of accomplishment. For instance, if you hit your revenue goal as an advisor or program manager, you probably feel you’re effectively doing your job. Yet your boss’ larger goal may be to increase non-interest income as a portion of overall net income of the bank. So while you feel a sense of accomplishment, if the bottom line profits do not follow, your boss feels frustrated. 


Once you determine how you can help your boss achieve his or her goal, it is absolutely critical you deliver. 

Backing this up with a written contract, a business plan or other agreement as to what you will accomplish, with you and your boss and other internal business partners signing the agreement, can go a long way in eliminating misaligned goals and poor communication.

Each time you deliver on your word, you make another deposit into the “trust” account. Each time you fail to deliver or use your word to gossip or diminish someone or something, you make a withdrawal. 


When talking to bankers about the differences between their world and that of advisors, I use a football/baseball analogy. Both are sports, but that is where the similarities end. Everything about them is different: the games, the seasons, the stadiums. The business aspects of each are certainly different: ticket prices, concession sales, merchandise, TV rights and so on. And the cultures, histories and lore are also markedly different. 

Similarly, while both banking and wealth management fall under the financial services moniker, that is where most of the similarities end. 

For executives to expect wealth management advisors to operate like bankers is akin to a coach taking a baseball out of a pitcher’s hand and replacing it with a football. 

Much of the reason bankers end up meddling with wealth management stems from their dissatisfaction with results. This is when things begin to unravel. The bank executive is frustrated with the overall contribution from wealth management and senior members of the team are grumbling about how much their wealth management peers earn. The executive management team often will try to apply the same strategies and tactics they use successfully in banking, which hurts the morale of the wealth management team. Advisors leave and hiring top talent becomes impossible. This should be a cautionary tale for banks, as we see this very scenario way too frequently. 


One key for bank executives in optimizing results in wealth management is to concede it is not their field of expertise. As such, they should seek expertise to help counsel, guide and direct the executive management team and board with business strategy and tactics. Not knowing what you don’t know can be fatal. 

Banks typically lean on the program manager or the head of wealth management to provide this expertise. Sometimes these managers have deep experience and knowledge and other times they are bankers handed the reins of a foreign business for which they have little or no practical experience. In either case, the objectivity of these individuals often comes into question. 

Scrutiny over perceived objectivity becomes particularly pronounced in the presence of high compensation and anemic profits. This is not a character indictment; as with even the most dedicated and honest individuals, human nature with its self-protection and biases creeps in.

Consider using consultants to help you reinforce your messages to senior management. Also, use your TPM or clearing broker to help reinforce the message and educate your bankers. Most TPMs will embrace on-site visits from the program manager and members of the executive team and/or board of directors. Seeing the support behind your local team can be very reassuring to executives who may not have a full understanding of the range of capabilities and resources available to you and your clients. 

These are for-profit businesses and as long as executives and boards see advisors earning substantial incomes while programs pass little of this along to the bank, the contention and dissatisfaction will likely continue. The good news is ROI in wealth management is typically favorable when compared with traditional banking, which is very capital intensive. 

This in large part is why banks are so interested in wealth management. Program managers should emphasize this by making ROI a key business metric. 

Finally, we urge our clients to review their “parent allocations’ frequently to ensure they are fair and realistic. Often, the wealth management business is unfairly burdened with allocations, which, if they ran an independent business, they would never take on. 

With these steps and the right mind-set, banks and their advisors can work as one.

Read more:

For reprint and licensing requests for this article, click here.
Practice management