When the wealth management arm of Countybank Trust Services of Greenwood, S.C., gets new business, it's most likely to come through a referral by a satisfied client.
Fred Murphy, senior vice president for wealth management at the Countybank Inc. unit, said such referrals account for as much as 70% of new investment business.
"The number has ticked up in the last couple of years as that has become more of a focus for us," said Mr. Murphy, whose wealth management program has $120 million of assets under management as of Dec. 31. "Our clients really prequalify referrals better than we do."
Countybank is not alone in focusing more on using current clients as a source of additional revenue.
According to a survey that was issued by Pershing LLC, last month, the most successful bank-owned brokerages companies are slightly more likely than less successful companies to mine their clientele for referrals for additional business.
Eighty eight percent of the "best practice" brokerages — those with the highest profit penetration per bank customer household — cross-sell to their current clients, according to the survey issued by the Jersey City, N.J. unit of Bank of New York Mellon Corp. that was produced by Kehrer-Limra of Princeton, N.J.
Just 79% of less successful brokerages follow that practice, according to the white paper.
Howard Hammond, a managing director of Fifth Third Securities Inc., said cross-selling to brokerage clients can involve analyzing and adjusting the investment mix in their portfolios.
Just as importantly, he said, it also means getting leads from clients who are happy enough with the unit's service to recommend it to friends.
"You're calling a client and saying, 'Give me three or four others,'" Mr. Hammond said.
As a result, the Fifth Third Bancorp investment unit's client base has grown 7% over the past year, he said.
Over the past year Fifth Third has been moving its investment operation, which has 800 representatives and $18.2 billion of assets under management, away from a platform-driven approach and toward a broker-driven one, Mr. Hammond said.
That shift has included an emphasis on bringing in brokers who are adept at generating additional revenue from current clients, he said. "We've been hiring folks with a wire house background who are used to working a book of business."
Fifth Third also has been focusing on fine-tuning its approach to cross-selling investment products, Mr. Hammond. For example, platform reps are being encouraged to categorize their clients in terms of assets.
Bank brokerages rely on more than repeated trips to the well for new business, of course.
The Kehrer-Limra survey found widespread agreement on the value of branch referral systems; 94% of all banks surveyed had such systems in place.
Clark Tucker, a senior vice president and the chief operating officer at Compass Bancshares Inc.'s brokerage unit, said most of his investment business comes in the form of bank customers and others who were referred from brokerage clients.
"Our partnership with the retail bank is really the lifeblood of our organization," he said.
The widest discrepancy between the thriving bank brokerages and others, according to the survey, lies in the area of branch merchandizing. Just 56% of best-practice brokerages said they use things like bank lobby posters and brochures to drum up business, compared with 73% of the other respondents.
Part of the reason for that discrepancy may be legal concerns. Like other community banks, Countybank uses a third-party marketer to help operate its brokerage business. In such cases, regulations require the name of the third party — in Countybank's case, Raymond James Financial Inc. — to be displayed prominently on the marketing materials.
"We don't want to so much advertise the fact that we are a Raymond James shop as we want to advertise that we are Countybanc Investment Services," Mr. Hammond said. "So we don't do that much merchandizing."
On the other hand, last week Fifth Third's investment unit started hanging posters in its bank branches as part of the unit's first merchandizing campaign touting its investment services. That campaign is part of a broader branding strategy.
"A lot of our clients are still unaware of the capabilities banks have from an investment perspective," Mr. Hammond said. "We're excited about making them aware."
