Bank brokerages can offer advisors a great way to build their businesses, but it can come at a price.
In a relatively flat market and an uber-competitive business development environment, it is increasingly hard to find reliable ways to accelerate growth. Yet, there’s one area that offers an advisor a built-in growth mechanism and that’s the land of bank brokerages.
Whether an advisor is assigned to a single bank branch, several branches, or a corporate office, the connection between bankers and advisors provides a built-in referral source and the number one way for an advisor to fast-track his business. I have witnessed many talented advisors struggle in the wirehouse world, unable to grow their books to a meaningful asset level, who were able to ultimately expand their production exponentially after moving to a bank brokerage unit.
A bank advisor’s business development role goes from solely marketing to prospective end-clients to developing strong relationships with commercial, mortgage and private bankers, branch managers and other centers of influence within the bank so that those folks will get comfortable referring prized clients.
While a move to a bank’s wealth management unit may be a great way for an advisor to build his business, there are some potential pitfalls to be aware of:
- Bank assets tend to be “stickier” to the bank, so an advisor that has built his book on referrals from others within the bank may find that when it comes time to leave the nest, it is much harder to do so with his book intact.
- Any firms recruiting bank brokers know that their books are typically less portable than traditional advisors, so their businesses will often be discounted when being considered for recruitment. Further, recruiting managers at traditional firms are almost always suspect of a bank advisor’s ability to prospect for new business, presuming that the advisor was completely reliant on the bank for referrals. While this may not be true, it does mean that when being recruited, an advisor has to work harder to prove his worth.
- Banks are notoriously more bureaucratic than traditional wealth management firms and so their advisors often complain of having less control, entrepreneurial freedom, and feeling more limited.
- The community in a bank can be easy to outgrow as an advisor crosses that million-dollar threshold in terms of annual production, and begins to service an increasingly higher net worth client base. These top-of-the-food-chain advisors often seek like-minded advisors with whom they can exchange ideas; when most of their colleagues are managing much smaller books of business, thought leaders and trailblazers will be much harder to find.
- Though the notion of growth via referrals is the main appeal for joining a bank’s wealth management unit, some of the time (depending upon the bank and the market), those referrals are few and far between…and the advisor is, therefore, left having to build his business as he would in any other environment.
Outgrowing your space: What happens when you have no room to grow?
Consider an advisor named “Sally”. She graduated from college in 2001 and began her career in wealth management immediately afterwards as a rookie advisor for a well-respected commercial bank.
For more than a decade, she loved her job, her colleagues, how much she learned and how much her business had grown (to almost $500 million in client assets as of last year). But, as Sally began to service a more sophisticated and high net worth client base with the average net worth in the $3-10 million range, she knew that these discerning folks were looking to her for more creativity, an open architecture set of investment and lending solutions, and better technology. And, as the #1 advisor in her organization, there weren’t many other advisors that she could look to who had similar success or even the growth mindset to better serve clients.
As a result, Sally left the bank earlier this year and is literally knocking the cover off the ball at a wirehouse firm. She reported that the biggest motivation for changing jerseys was the realization that 100% of the new business she brought in during the last 5 years she was with the bank had not come from the bank itself but as a result of her own efforts and referrals from her loyal clients and centers of influence.
The bank had been giving her access to its platform, but not much else. While the new firm took some convincing that her book was definitively tied to her and that she was capable of continuing to grow it outside the confines of the bank, Sally was ultimately paid an aggressive transition package and moved more than 95% of her book. She has already landed two multi-million dollar clients and has been given additional sales support to help her drive momentum.
Bank advisors who have become more self-sustaining (that is, less reliant on the bank for referrals) often seek more flexibility in running their business and servicing their clients. It’s at this point that they feel that the cons of working for a bank outweigh the pros. That’s not necessarily a bad thing; it tells us that in most cases, being a bank advisor served as the springboard it was meant to, accelerating growth in ways that would not have been possible in any other environment. As long as the advisor is aware of the potential pitfalls associated with this as a career strategy, it’s a great way to get from point A to point B.
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