In an age of heightened regulatory, consumer-group and congressional scrutiny, the mantra guiding banks' investment product marketing initiatives is resoundingly clear--an educated sale is the best sale.
But getting consumers and uninsured product reps to speak--and, most importantly, comprehend--the same language is another story. For bank-affiliated mutual fund and annuity salespeople, success and safety requires not only superior product knowledge, but a fluency in customer-needs assessment and compliance savvy.
Says Mark Emmons, vice president with Chicago-based Dearborn Financial Publishing, a firm which provides securities licensing and product training for several banking companies: "For the most part, those banking institutions that have stuck with investment product marketing understand that long-term success in the securities arena involves a commitment to education beyond an initial Series 6 or Series 7 registration training."
Merlin Gackle concurs. "Although investment representatives and managers obviously get instruction on products and services to obtain appropriate licenses, their education must be expanded to address the unique cultural challenges of marketing investment services within the bank environment," says Gackle, author of "Bankers as Brokers" and chairman and chief executive of Tampa, FL-based INVEST Financial Corp. INVEST, a major distributor of insurance and securities products through banks and thrifts, even has its own INVEST University to train salespeople.
"The foundation of educational programs should be long-term, needs-based relationships with customers," Gackle says.
Wasted words these are not. In order to comply with both the letter and the spirit of the Interagency Statement on the Retail Sale of Nondeposit Investment Products, released last year by the four federal banking regulators, financial institutions have been tweaking both introductory and ongoing training programs to dodge disclosure-related land mines during sales discussions.
Moreover, a smattering of law-suits, as well as editorial beatings in Consumer Reports, Money and other widely read publications in recent years, have sensitized bankers to the importance of meticulous training and documentation on nondeposit investment product disclosure, customer profiling and suitability analysis.
Regulators stress that banks' enhanced education programs are yielding results. "In the course of conducting reviews subsequent to the Interagency Statement, we're finding that banks are systematically improving nondeposit investment product marketing practices," says David Apgar, senior policy advisor to the Comptroller of the Currency in Washington. "And while examiners often outline a process to address deficiencies, it also appears that banks are making their own good-faith efforts toward self-correction."
Continuing Education Rules
Banking companies' progress couldn't have come at a better time. Earlier this year, the Securities and Exchange Commission adopted the Securities Industry/Regulatory Council on Continuing Education's requirements for National Association of Securities Dealer registrants. As of July 1, a prescribed continuing education program will become effective. It consists of two components--a "regulatory" element and a "firm" element.
Basically, the regulatory element applies to all NASD registrants, except those who have been registered for more than 10 years and have not been the subject of serious disciplinary action. It requires registrants to complete a 2 1/2-to-3-hour, computer-based training session consisting of seven modules: suitability; communications with the public; new and secondary offerings; business conduct; handling customer accounts; registration and reporting issues; and customer-account trade and settlement practices. Interestingly, the same session is used for all trainees, regardless of their registration and job function. Moreover, firms will receive group versus individual feedback on those undergoing training.
"The regulatory element is really an assessment, not a test," advises Paul Weisman, president of New York-based Securities Training Corp. "The purpose is to track representatives' knowledge, understanding and interpretation of rules, which, in turn, will help monitor a firm's compliance."
The second component--the firm element--applies to all NASD registrants who have customer contacts and their immediate supervisors, and unlike the regulatory element, grandfathering is not permitted. It requires firms to conduct an annual training needs assessment and to develop and deliver a written training plan. Training needs assessments and plan outlines must be completed by July 1, and delivery of the described training plans must begin by Jan. 1, 1996.
Firm training can be delivered by the firm or by consultants on its behalf, but plans must be filed with the NASD. Weisman recommends that training plans "address the firm's products, sales practices and regulatory issues, with particular emphasis on registered reps' specific job functions at the firm."
While bank broker-dealers are gearing up for the continuing education requirements, many insist they have been attentive all along to the importance of orienting new hires, as well as ongoing education programs.
Take Chase Manhattan Investment Services Inc. While CMIS tends to hire experienced representatives with a minimum Series 7 license, each new hire is required to participate in a three-day orientation that reviews the mission of CMIS, it's parent company Chase, organizational culture, product training and compliance training issues. What's more, CMIS has a stringent three-level program for its sales force in which salespeople are required to complete an intensive training module, with an extensive take-home test that generally requires several weeks to complete.
Because individuals learn differently, CMIS utilizes a variety of training tools ranging from computers to videos to more traditional offerings like lectures and workbooks, says J. Peter Benzie, CMIS president. "In our experience, some people are more visual learners, while others are more verbal learners," he says. "We don't believe that one medium works best with everyone."
Marquis Investments, a whollyowned subsidiary of First National Bank of Commerce, New Orleans, is also likely to hire experienced reps with at least a Series 7 license. Following an initial orientation, representatives are trained through a variety of techniques--personal computers, workbooks, meetings, bulletins, role-playing, coaching--on product, compliance, communications, and needs-assessment techniques.
Hi-Tech Element
"The overriding factor in all our ongoing education efforts is understanding the client's needs and developing an appropriate solution," says Dale Kaliszeski, Marquis Investments' president. "We are not in the business of making product recommendations."
Some bank broker-dealers' education efforts have a hi-tech cast. At First Chicago Investment Services Inc., sales managers are equipped with video cameras for role-playing and coaching purposes. "A good salesperson wants to have every competitive edge possible, and the camera doesn't lie," says Richard Davies, president of FCIS. "This training enables us to show our salespeople how to go through disclosures required by the Interagency Guidelines without scaring people, and how to turn that into a positive."
In addition to its various educational tools, Charlotte, NC-based First Union conducts a live monthly satellite broadcast for its First Union Brokerage Service representatives. "Content ranges from compliance issues to answering objections to sales call demonstrations to call-in questions," says Randy Darden, an executive with First Union Brokerage's training unit.
While the continuing education issue has become heightened by the upcoming Continuing Education implementation dates, training vendors and internal bank broker-dealer trainers stress that buyers of such services should be wary.
Experts say banks should look for longevity, check references, examine niche specialties and be wary of any training firm that requires a lot of up-front money. Moreover, experts recommend a tiered payment schedule based on satisfactory completion of performance criteria.
Says Dearborn's Emmons, "With what is occurring now with continuing education, some people see dollar signs and hang out a shingle without sufficient experience."
