Banks are taking a new look at an old investment product sales strategy: training front-line branch employees to double as brokers.
The trend is most pronounced at large banks, which traditionally have hired full-time brokers to lead the investment sales charge.
Bank One Corp., for instance, recently licensed 500 front-line employees to sell products in its branches. This boosted to 2,500 its ranks of platform employees with series 6 brokerage licenses, which permit sales of a limited range of investment products, chiefly mutual funds.
Chase Manhattan Corp., Mellon Bank Corp., SouthTrust Corp., and Amsouth Bancorp. have also beefed up their series 6 work forces.
"One of the biggest trends in banking is training and licensing platform brokers," said Kenneth Kehrer, a principal of Kenneth Kehrer Associates in Princeton, N.J. He said 21 of the 27 largest banking companies in the country either use platform brokers or have regional test programs.
One motivation is the potential for fatter profits. Mr. Kehrer said a survey by his firm showed that because platform brokers command smaller commissions banks that use them to supplement their full-time brokers have profits 53% higher than banks that do not.
The move toward platform programs is a renewed effort by banks to harness the sales power of their branch employees.
Banks saw big promise in the platform sales approach in the early 1990s, when their investment sales programs were just taking off. Branch employees, they reasoned, had earned customers' trust, understood their financial needs, and knew where their assets lay. First Union Corp. set the pace in 1993, licensing 2,600 branch employees to sell investments in 1,300 branches.
But bankers soon discovered that the bulk of sales were generated by brokers who were dedicated full-time to selling mutual funds, annuities, stocks, and bonds. In the mid-1990s, there was a pronounced shift to hiring series 7-licensed brokers, whose credential allowed them to sell the full range of investment products.
Banks are not turning their backs on series 7 programs. Instead, they are trying to meld the two approaches.
Some are deploying series 7 brokers as coaches for platform sales representatives.
Bank One, for instance, assigns each series 6 employee a mentor from its full-service ranks. Together, they meet with investors, said Daniel R. Deegan, national sales manager for the company's brokerage arm.
Newly licensed branch employees observe as the series 7 brokers conduct meetings. More experienced ones run the meetings themselves but have a dedicated representative to rely on to answer questions.
Huntington Bancshares of Columbus, Ohio, initiated a mentor program for its platform bankers this summer as part of a push to achieve $1 billion of investment product sales next year.
Huntington trainees attend biweekly group meetings covering topics such as sales or customer profiling and check in regularly with their coaches by phone and in person for discussions, said Rob Comfort, senior managing director of the banking company's brokerage.
There has also been a proliferation of training courses run by third- party marketers and insurance companies outlining product features and sales strategies, Mr. Kehrer said. At many banks, mentors follow up to check progress and answer questions.
Training platform workers to aid the sales effort can yield fatter profit margins because platform reps earn commissions as low as 5% to 10% of sales, versus 30% to 40% for fully licensed professionals, Mr. Kehrer said.
Community First Bankshares of Fargo, N.D., saw an 81% jump in fixed annuity sales in the year ended March 31 after Jackson National Life Insurance Co. of Lansing, Mich., ran a training program for its employees. Nathan Brammer, a vice president who manages the bank's brokerage program, said sales of variable annuities and mutual funds also rose, though not as spectacularly.
Brad Rasmus, a senior vice president of financial services for the banking company, said the most important component of training was to get employees to address all a customer's needs. This encourages cross-selling, he said.
Though the concept appears simple, it is not always so, said Brad Powell, president of Jackson National's Atlanta-based institutional marketing group. Bank representatives do not always have a sales background, he said.
"Licensed employees typically have a lot of other duties," he said. Training ensures that they understand new products and how to sell them.
Selling has become a larger focus of Essex Corp.'s training programs. Since the New York-based third-party marketer began running classes for its clients in 1988, it has "homed in on the sales process," said Margaret Raupp, the vice president in charge of training.
"We've got it down to a science," she said. "We can tell people exactly what to say and what order to say it in." Essex does not expect people to follow a "script," though.
At Cal Fed Investments, the brokerage arm of California Federal Bank in San Francisco, platform brokers attend a four-day course run by Essex before they begin selling, said John LaSalle, the bank's senior vice president in charge of sales. Employees stay sharp by attending quarterly sales symposiums and through repeated contact with series 7 brokers.
The bank's investment product sales rose to $551 million in the first half of 1999, compared with $348 million a year earlier. Some of the increase is attributable to the integration of brokers from Glenfed Brokerage, which merged with Cal Fed in November. Mr. LaSalle said, though, that the increase also manifested the maturing of the training program, which was begun in April 1997.
"People licensed the year before are becoming fully productive," he said.
Increased productivity among platform employees also frees up dedicated brokers for larger sales. "On average our financial consultants have fewer sales a month, but the average ticket is substantially higher," Mr. LaSalle said.
In the end, the most important role of training programs may lie in simply getting more employees licensed to sell investment products. "A lot of it is sheer coverage," said Mr. Powell of Jackson National.
