Thanks to Chris Cassidy for highlighting the advantages of pursuing a financial advice career in a bank or credit union – access to the institution’s customers/members, the institution’s brand and marketing prowess, and the professional associations:
Four Reasons to Work as a Bank, Credit Union, or Insurance Advisor
In the interest of helping financial institutions attract and retain advisors, it is helpful to also point out the disadvantages of working in a bank or credit union. They include lower compensation, the secular decline in branch referrals, the inconstancy of bank management, and the insistence of the institution that it owns the customer.
Because of the advantages that Chris outlines, financial institutions have been able to pay their advisors less than other firms – about 5 percentage points of revenue at every level of production. Despite the tightening market for advisors, banks and credit unions have maintained an effective average payout rate of about 40% over the years.
Kehrer Group has chronicled the decline in branch referrals over the past decades:
Kehrer Highlighter: Branch Referral Flow Stabilizes, but Remains Low.
While banks and credit unions are working on supplemental prospecting support, access to the branch system’s customer/member base remains the foundation of delivering financial advice in banks and credit unions. We now see some eroding of the payout differential for top producers, but that is offset by a growing differential for bottom producers.
The commitment of top institutional management to their wealth management businesses fluctuates, from being all in on wealth as a core business to fear that wealth management cannibalizes low-cost deposits. Mergers and management changes are part of the problem – institutions seem to change managers and directions more often than some advisors change their shirts. Advisors want to be providing advice, not repapering their clients or reeducating their banking partners about how the securities business is different from banking.
But the fundamental issue for bank-based advisors is the institutional stance that the advisor doesn’t own the client, the institution does. This stance prohibits the advisor from creating personal wealth by building a practice. Hence the continuing allure of going independent, despite the advantages Chris outlined. We’ve seen movement on this issue as banks and credit unions have crafted sunsetting plans, enabling advisors to capture some of the wealth they’ve created. But we’d like to see acknowledgement by financial institutions at the outset of the bank-based advisor’s career journey that they are partners with the advisors in building that wealth.