Get Serious About Retail
Perhaps you don’t have a retail
investment sales program. According to the article, only 1,809 banks
and thrifts, or 27 percent of all banks
and thrifts at year-end 2013, offered
investment sales. Why would nearly
three-quarters of banks opt out of a
core financial offering?
Because the road to success is littered with a trail of tears. My firm
measures profitability for our clients
by lines of business and products. In
2013, fee-based products added “
minus 12 percent” to the bottom line.
You read that correct; negative profits
means losses. Not very inspiring.
Banks judge their financial performance by, among other ratios, return
on average assets (ROA) and return on
average equity (ROE). Imagine the impact a profitable retail investment sales
program would have on these ratios.
If “return” is net income for the pro-
gram, and it adds no “average assets”
and requires little equity, retail invest-
ment sales can be a critical component
to your bank’s overall profitability. If
you do it right. And by doing it right,
I mean treating it with the resources,
personnel and promotion that you do
your branches or your core products.
Because, currently, most banks treat it
like a form of moonlighting.
A trusted source of
Our society is moving towards self-saving. The proportion of our population that works for 40 years for one
company and retires on a pension plus
Social Security is diminishing. Increasingly, the onus of retirement saving is
falling on the individuals’ shoulders.
Are they prepared for the burden? If
not, is there someone whom they trust
to guide them through the financial
So far, as an industry, most banks
are taking a flier on the opportunity
even though we may occupy a position of trust. The reasons may be
different—such as, it is outside of the
bank’s expertise, the bank does not
have the personnel or nobody makes
money at it.
A well-run program can deliver
profits. I checked a cross-section of
publicly traded broker-dealers and
they achieved an average pre-tax profit
of 17 percent in the second quarter.
Although overall, fee-based services
lose money, among the clients my firm
measures for profitability, I saw that
the pre-tax profit of the investment
arm of a cross-section of retail invest-
ment sales programs achieved a 22
percent pre-tax profit margin for the
same period. These are community
banks, making profits with little “A”
(as in ROA) and “E” (as in ROE), serv-
ing their customers with much needed
financial products and advice.
But successful execution of a profitable retail investment sales program
requires integration as a core bank offering. No longer can you put reps in
the corner behind a potted plant with
a conspicuous “Not Insured by FDIC”
sign and leave them to their own devices. It is a recipe for failure and disillusionment with your reps, who will
Instead, those reps must be part of
the fabric of serving your customers,
including marketing support to help
develop and grow their programs,
training support to help elevate their
skills, branch and lender support to
identify prospective customers, and
executive support to provide the vision and culture of a bank investment
sales program that cares for a more
significant part of your customers’
ABOUT THE AUTHOR
JEFF MARSICO, is
executive vice president
and a founding
shareholder at The
Kafafian Group, Inc., a
strategy, profitability, and advisory
firm specializing in community
financial institutions. Jeff is currently
a faculty member for the ABA School
of Bank Marketing and Management.
ACCORDING TO BANK INVESTMENT CONSULTANT MAGAZINE, the average production of a bank-based broker where the bank uses a third-party broker dealer was $297,028 per year for 2013. In spite of the productivity cited in the article, I don’t often see such numbers from
community bank retail investment sales. Do your reps achieve this?
Successful execution of a
profitable retail investment sales
program requires integration as
a core bank offering.