Since Howard Hammond joined Fifth Third Securities four years ago as president and chief executive, his top priorities have been to hire advisers and management personnel and shift to a full-service, relationship-driven advisory model.
It's paying off — performance has improved over the past 18 months, with total revenue up 35% in 2010 from 2009. Previously, the Fifth Third Bancorp unit's investment program was primarily platform-driven and annuities made up 50% of sales. Now annuities (fixed and variable) make up 15% of sales, fixed income is 25%, insurance 15%, trails 14%, mutual funds 12%, managed money 10% and equities 9%.
"If you look at what we've tried to do over the last several years, converting from a platform-driven program to an adviser-driven program, it has made us a little different than most of our peers," Hammond said in a recent phone interview. "From the folks we've recruited to the product mix, the firm has changed dramatically over the last several years."
Instead of trying to sell a specific product to clients, Hammond said, Fifth Third advisers try to tailor their service to what customers want or need. Though many firms have suffered since the downturn as distrust has made it harder to recruit and retain clients, Fifth Third has poured its resources into training sales managers and recruiting strong talent. Sixty-six percent of the current sales force has been hired since the beginning of 2007, the firm said.
Last month, it beefed up its sales team, hiring Michelle Griffith from Citibank to run eastern Chicago; former BankWest Investment Services program manager Bradley Grubb to manage western Ohio; and Britt Woods, an ex-National City adviser, to oversee Tennessee and Georgia.
Conceptually, said Geoffrey Bobroff of Bobroff Consulting in East Greenwich, R.I., the relationship-driven model makes a lot of sense. "The firm thinks: I have storefronts and people on the platform so it should be straightforward. But in practical terms you can't really reach all of your customers. You have to segment your customers in a way based on the size of the relationship," Bobroff said.
Generational issues are part of the challenge. The boomer generation, Bobroff said, is inclined to use experts or look to others for help. So the boomers may be enticed by this relationship-driven model. "But we don't know how the Gen-Y or Gen-X generation will react from the product standpoint," he said. "And firms have to think about what segment of the client base they can realistically serve. Can you bring sufficient economics to bear so you can make money by trying to provide relationships and solutions-based service? No one has proven they can take that down market to a smaller asset base."
Hammond said the industry has done a poor job of explaining how valuable advisers are in helping people retire with dignity and plan for their futures. "We derailed ourselves a bit in 2010 and the only way to win that back is one client at a time," he said. That's what Fifth Third is trying to do. Since Jan. 1, it has opened 11,000 net new accounts, Hammond said, which is more than $830 million of net new assets.
What does the future hold? "We are going to try to build ourselves and continue to recruit great talent," Hammond said. "Will strategic [exchange traded funds] become a bigger part of the business a couple of years from now? Maybe. But more importantly the client, the firm and the individual employee need to win or you don't have a sustainable business model."