What Making Wine Can Teach Us About the Financial Advice Business
To celebrate over 40 years of thought leadership, Kehrer Group is revisiting some of its landmark studies and insights, and we’re asking some members of the financial advice community to provide their take on the impact of the work.
This from Bob Carr, formerly an investment services director at Commerce Bank and then Central Bank:
The Kehrer data really helped me early in my career, as I could see where my group needed to improve. How to get advisors to work in a branch and bank structure. How to give referrals back to the branch changed things for many programs. As I matured over the years the study groups became the most important as the Kehrer team would identify areas that would make our industry better. Particularly identifying ways to better integrate within the bank, better ways to improve staffing and in later years integrate better within a trust or money management structure. And the networking was a real opportunity to learn from my peers.
I believe this report and analysis helped to launch the success and growth that our entire industry enjoys today. Thank you Ken and team, for all you have done and continue to provide us, as financial institution leaders today!
What Making Wine Can Teach Us About the Financial Advice Business
BISA Portfolio, Bank Insurance and Securities Association, Chicago, IL: Nov. 15, 2018.
I recently had the opportunity to spend some time with a son-in-law who is studying wine making in Spain, and was struck by how much of what he is learning is applicable to financial institutions trying to create a sustainable business meeting the investments services needs of their clients. Here is a taste:
It takes time to be productive. When a vineyard is planted, it doesn’t yield sufficient quality grapes to make wine for a couple of years, but then the quantity and quality of wine improves year after year. Sound familiar? Kehrer Group research on advisor tenure shows us that advisors are slow to ramp up when they first arrive in their assigned branches, but experience a growth spurt during the third and fourth years, and then increase their production, year after year on average.
It takes an investment. When a vigneron plants a vine, the vineyard’s profit margin takes a hit, just like what happens to a financial institution when it hires an advisor. But if the vigneron didn’t plant new vines, the vineyard would eventually run out of grapes and not make any profit.
Less is more. Vignerons don’t want the vines to produce a lot of grapes. They prune the vines, don’t irrigate, remove clusters of grapes, etc. The grapes that make it through harvest to pressing are richer and more valuable than a bumper crop. Financial institutions already have learned this lesson, realizing that most of their advisors are trying to serve too many clients. Those advisors can’t spend enough quality time with each client to become the client’s trusted financial advisor. So financial institutions are trying various ways of pruning advisors’ clients to rightsize their books.
Don’t be in a hurry to turn the vines into a cash cow. The winemaker gives away samples of the new vintages to critics, tastemakers, and distributors, attends wine fairs trying to win awards, sponsors wine dinners, etc. The winemaker is trying to build market share. Once the brand is established in the market, the vineyard can begin to enjoy the fruits of profits. Haven’t financial institutions been premature in asking their investment services units to become profit contributors, when their investment advice brand is still weak and their market share is thin?
There are more examples, and I’ll be pleased to share them with you—over a glass of wine.
About Kehrer Group Highlighters
The Kehrer Group Highlighters package some of our most important findings, insights, and commentary into bite-size, digestible articles. We make the Highlighters available for free to the entire financial advice community—a small gesture of appreciation for a community that has done so much to support our work.
About Kehrer Group
Kehrer Group is the bank and credit union financial advice community’s trusted partner for original thought leadership, insight based on data, and strategies that drive success. Kehrer Group’s legacy of research and analysis has advanced the delivery of investment services in banks and credit unions and shaped the industry into what it is today. Kehrer Group’s principals meld the wisdom gained from its long history in the industry with cutting-edge analytics, data that is robust and diverse, and a deep understanding of the key drivers of performance.
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