How heavy is the turnover among banks' retail brokerage chiefs? Suffice it to say that the subject has become fodder for one-liners.
"Some of these banks are changing the heads of their broker-dealers faster than they change their shirts," said Kenneth Kehrer, an industry consultant.
But the musical-chairs phenomenon at bank brokerages is one that mutual fund suppliers who sell through banks can't take lightly.
For them, the parade of new faces can translate into less favorable pricing, lost sales, and even uncertainty about whether banks are committed to selling their funds.
Having dealt with rapid turnover virtually from the time banks started selling mutual funds a decade ago, some fund company executives simply consider it part of their job description. But they would clearly rather it weren't.
"You work so hard to build a solid relationship," said Michael Vessels, senior vice president and head of bank distribution for AIM Management Group Inc., one of the major fund sellers through banks. "It's hard to have that all change."
What can change?
In the worst-case scenario, a new brokerage president might decide to drop a fund family altogether from the bank's preferred provider list.
Or the executive, looking to boost profits, might demand more favorable revenue-sharing arrangements. He might push sales through wrap accounts, which are less profitable for vendors than traditional commission-based sales, or emphasize sales of the bank's proprietary funds over third-party funds.
Another possibility: A fund company that has swapped a sales training program for a place on the bank's preferred provider list might find itself asked to retrain the brokers to sell another kind of fund.
"As a vendor, you're willing to make profit concessions to be able to land the account," said Robert Flowers, a former brokerage chief at BankAmerica Corp., First Union Corp., and Banc One Corp. "You make the bet and then you don't see the return because you've spent all your money trying to bring the organization in."
The anxiety and general turmoil involved in leadership changes can put a dent in brokers' sales, as AIM's Mr. Vessels has learned.
"Change at the top of an organization always creates uncertainty with the reps," he said. "It's hard for them to be productive."
Constant reshuffling raises the fundamental question of how devoted a bank is to selling a vendor's products, said Maryann Bruce, the head of bank distribution for OppenheimerFunds.
"If it happens frequently, you start wondering what's the commitment to this part of the bank," she said. "Is it a core business?"
Brokerage chief is likely to remain a high-turnover job: Promotions and bank mergers play a role, but executives will continue to leave because of rocky marriages with their banks.
Banks are widely unhappy with their brokerage units' results, and brokerage chiefs feel increasingly constrained in a banking environment, industry watchers said.
Bank brokerage units have fallen far short of banks' robust expectations of a decade ago, when they were expected eventually to contribute 20% to 25% of their parents' bottom lines.
By 1996, their contribution to banks' net income averaged 4%, and a mere 1% at superregional banking companies, according to Kenneth Kehrer Associates, Princeton, N.J.
As a result, many banks are limiting their brokerage chiefs' power to make high-level decisions, Mr. Kehrer said. While 43% of bank brokerages were stand-alone units three years ago, just one-quarter of them enjoy that status now, he said.
In other words, bank brokerage chiefs are increasingly being told to report to the retail bank and share control over everything from how to compensate salespeople to which mutual funds to offer.
"Some people recruited to run these independent subsidiaries don't like that," he said.
Further frustrating brokerage heads is their units' continuing cultural clashes within the bank. Traditional bankers remain hesitant to hand over their customers to brokers, whom they regard with suspicion and, because they earn more, resentment, said James R. Eads, a former brokerage chief at Signet Banking Corp. and now head of Riggs National Corp.'s broker-dealer.
"Too often banks think, 'Gee whiz, why don't we build a little Merrill Lynch inside our bank?'" he said. "Then they get what they wished for, and they don't like it."
Consequently, some leave the industry to work for fund companies or to become consultants, where they can make even more money.
Many leave for other banks, lured by promises of more autonomy, said Paul Werlin, president of Human Capital Resources Inc., a recruitment firm in St. Petersburg, Fla.
"They are led to believe that this bank is different, that they are entrepreneurial and not risk-averse," he said. "But when push comes to shove, they're no different."
Some fund company executives play down the impact of the turnover at the top of bank brokerage units. In her eight years heading OppenheimerFunds' bank sales department, Ms. Bruce has seen numerous brokerage chiefs come and go-five at one bank alone.
"The list is endless," she said. "But day to day, where the business comes from is the reps in the field-rep turnover is more a concern to me than management turnover."
Henry Schulthesz, the head of bank distribution at Kemper Funds, said that because decision-making power for banks' fund sales has shifted above the brokerage level, turnover is less of a concern.
"The change in a broker-dealer head in and of itself does not change the relationship with the institution today," he said, adding that the bigger threat is bank mergers, wherein entire relationships can be scuttled.
But at the very least, the arrival of a new brokerage head requires a commitment of time and energy to get acquainted, fund company executives said.
"You have to start a new relationship with a new person," Ms. Bruce said.