With increasing frequency, private bankers are asking their colleagues in the branches to share their customers - and they're paying some big money for the referrals.

Chemical Banking Corp. earlier this year revamped its referral program with an aggressive reward plan. An employee who successfully refers a client that buys a noncredit service from the private bank pocket 10% of the first year's estimated annual revenues.

If Chemical is named executor of an estate valued at $10 million, the employee reaps $1,000. (If the client is 70 years or older, the award is doubled.)

New trust accounts bring referral bonuses ranging from $500 for a trust account valued at up to $10 million to $750 for trusts over that amount. Referrals that result in the opening of traditional deposit and credit relationships with the private bank brings awards ranging from $250 to $1,000.

"We are keenly aware from experience that personal referrals from friendly sources are the single most effective boosts to the sales effort," division head John T. Fogarty wrote in an internal memo about the program. "While the competition engages in many similar incentive practices, we intend to demonstrate that the Chemical approach will outperform the rest."

The program appears to be working.

"We generate probably 75% of our new business activity as a result of referrals," said Thomas J. Letarte, a managing director in charge of sales, marketing, and planning at Chemical's private bank.

Referral compensation programs are not new to banks, but they often meet resistance, Managers in other parts of the company are loath to refer good customers who may develop new loyalties. As a result, many private banking executives are adding an extra incentive to get retail and middle-market bankers to send customers their way.

Fleet Investment Services now returns 20% of the first-year advisory fees that it earns from a wealthy customer who is referred to the division. "We'll pay more than $1 million in referral incentives this year," said Rick Jones, president of Fleet Financial Corp.'s trust and investment management division.

Cross-Selling at Marine Midland

In recognizing its marketing to wealthy clients, Buffalo-based Marine Midland Banks Inc. recently retooled its internal systems to improve referrals, and increased compensation. It also trained more than 200 employees to cross-sell investment products.

Chemical caps the awards it doles out for referrals at $15.000. Fleet has no limit, though Mr. Jones said he is considering imposing maximum payouts next year. He recently handed about $17,000 to one employee who helped the company land a large institutional investment management relationship. Fleet typically earns back its payout within two years of a new client relationship, Mr. Jones said.

David Ross Palmer, a New York-based consultant who specialized in private banking, said the Chemical plan is "probably on the aggressive side." He added that Chemical and other institutions still must convince branch managers that they and their minions will be properly rewarded for referrals.

"One of the major efforts that people are involved in and should be involved in is an intensive review of the efficiency of their internal referral policy," he said.

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