Wachovia Corp. has gotten about halfway to its goal for extra referral revenue in its investment services business since its client partnership program was begun four years ago, executives say.
The campaign brought in more than $300 million of additional revenue last year, according to Mary Mack, who as Wachovia's client partnership director, focuses on easing customers' movement across channels within the bank. In an interview last fall, chief executive officer Ken Thompson said additional revenue attributable to the partnership platform would be $600 million to $800 million by 2007.
The $300 million total was double the $145 million tallied in 2004, and Ms. Mack said the additional revenue total this year is expected to top $500 million.
The program combines incentives, rigorous measurement, and CEO-level support to help overcome the resistance to referring investment clients to colleagues in other departments who are better suited to serve their needs.
"It is a challenge to make sure the client is served in the right channel and that the employee who identifies that opportunity is encouraged to get them to the right channel, even if it means giving them up," said Ms. Mack.
Wachovia is one of the more successful among financial services companies in getting business units to relinquish control of customer relationships, said Matt Schott, a senior analyst at TowerGroup, the MasterCard International research unit in Needham, Mass.
"For people managing different lines of business, their primary goal is going to be to grow and manage that business and increase its bottom line," said Mr. Schott. "It is a challenge to integrate into their goals some level of cooperation across the businesses."
The sooner banks confront this challenge, the better, he said: As baby boomers build and then draw down their retirement nest eggs, it will be vital to hand them off smoothly to affiliated business units tiered to their evolving customer categories.
Matching customers with the appropriate bank representative will not only support the finding of additional services that suit the client but also better match the revenue produced from that client with the compensation the bank pays its employee, he said.
"It will be very beneficial for the industry to start saying, 'How can we better optimize this?', " Mr. Schott said.
Wachovia, which has more than $306 billion of assets under management or administration, serves investors through retail, brokerage, or wealth management units, depending on their wealth levels.
The company has arranged for business units to share revenue when a customer is referred, Ms. Mack said, and has honed an incentive program to motivate referrals.
"If it's a financial adviser, and we determine that their client needs more complexity, then we compensate that broker for moving the client," said Joe Coyne, a senior vice president and the director of strategic support services in Wachovia's retirement and investment products group.
In addition, three times a year the bank awards several hundred shares of restricted stock to reward those best at making referrals.
But incentives are only part of the solution, Ms. Mack said. Statistics showing how many referral opportunities employees identify and pass along are integrated into the overall objectives for the three line-of-business leaders, creating a "layering on of expectation that that's part of the responsibility," she said.
What's more, CEO Thompson reviews the investment-client-referral and revenue metrics every 60 days with the three line-of-business leaders, Mr. Coyne said. And regional leadership teams that cross lines of business meet at least monthly to do the same, he said.
Wachovia's focus is not just on moving clients up to higher service tiers, however. Its wealth managers, for instance, also are rewarded for referring clients to branch bankers.
"We learned pretty early on that it's got to be a two-way street," said Mr. Coyne.
When this happens, customer retention improves, he said, and the depth of the relationship improves.
"These channels are built to serve specific situations," he said. "When you have a client that doesn't match a channel, they are not being served as well as they should be."
Wachovia handles with care the shifting of clients, aiming to create a "warm transition," particularly for downward moves, Ms. Mack said. "You do it client by client," she said. "We talk to them about what the benefits are, and we ensure that every client is touched by a person."
Before this occurs, bank executives confirm with the banker assigned to the client that a move is warranted. They explore whether assets currently held outside the bank could be brought in, for instance, to let a customer stay in the wealth management area, she said.
"We're not willy-nilly about who we" move, she said. "And if there's extreme client sensitivity, we don't transfer them."
Wachovia said it has retained 99% of the customers it transfers, and it attributes this to the careful way it makes transfers. In addition, it notes that the assets these customers hold at the bank have grown 21%, on average, in the 18 months after a move, as they work more closely with a new representative and shift more money into the bank.
