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Licensed Platform Reps

SuperUser Account posted on March 04, 2011

I was talking to our friend, recruiter Rick Rummage, the other day and he was commenting on a news story we did about Union Bank of California, which saw a steep increase in brokerage revenue last year as a result of referrals to its financial advisers from a beefed-up corps of licensed bankers.

The program uses licensed platform bankers strictly for referrals but licensing the banks and adding to their ranks created an increase in referral revenue of $1.5 million last year and CEO Steven Short expects that to rise to at least $6 million in 2011.

Rummage thinks it’s a no-brainer that banks with brokerage and platform programs should license bankers. “More banks do not have licensed bankers than have them,” he says. “Every bank should have them and license them.”

The cost of the training and the exam is easily quickly recouped by the increase in revenue to the program. This is especially important for banks—which would probably be all banks—that want to increase cross sell by engaging banking customers with investments. “Banks that have licensed LBEs make more money, in my unofficial study, the financial advisors who are at institutions with licensed LBEs make more money, says Rummage. “If you have five branches to cover and have a licensed LBE in each branch, you will get more business. Advisors don’t have enough time in the day to scan through all the clients in the branch who would be worth doing business with.” But bankers who are on the front lines facing those retail banking customers every day are naturally seeing who has enough in investable dollars to make good brokerage prospects.

The second key element is that bankers who are licensed and can significantly increase their income by making investment sales and referrals are going to be a lot more aggressive about referring potential clients to brokers. (Bankers who are licensed don’t have to abide by Reg R, which limits their take for referrals to $25.) “The more money you give the more motivated they are to do it. It also depends on how they structure the incentive.”

Union Bank uses platform reps to refer only, which prevents them from competing directly for any sales with the financial advisors. Most programs with platforms encourage LBEs to sell simple products. Which is better? That’s an issue for another time.

But data from Kehrer-LIMRA shows that while in 2008 hybrid programs, those with FAs working alongside platform reps, were only slightly ahead of broker-only programs in investment revenue per $1 million of retail deposits, 2009 data reverts to the previous norm, in which hybrid programs significantly outperform broker-only programs. Brokers who work in banks that do not have platform investment reps produced 9.5% percent less than financial consultants who worked alongside platform reps. For more on platform programs, take a look at “Platform Payoff,” our cover story from last May.

“This development may be the consequence of several banks asking their platform reps to refer customers to a financial consultant rather than making a sale personally.  Our research has found that a “refer-only” platform investment sales force tends to boost the sales productivity of the financial consultants,” Kehrer-LIMRA reports.