Bank Investment Consultant
Chuck Mausbach, an executive vice president at Frandsen Financial Corp. in Arden Hills, Minn., almost blew it when he first had to manage his team's investment production goal.
The company's management had set an annual gross dealer commission target of $90,000 for his branch. And as a branch manager, Mr. Mausbach had to get his team — one financial consultant, two licensed bankers, two customer service reps, and two loan officers — on board.
Since reaching the $90,000 goal did not seem too difficult, Mr. Mausbach did not pay much attention to it for the first quarter. But by the second quarter he realized that if his branch did not meet its goal by yearend, he would be stuck at home while successful branch managers enjoyed a Caribbean cruise.
Mr. Mausbach had to catch up fast. To motivate his employees, he promised them a $750 bonus each if they hit the branch target for the first two quarters.
He guided by asking each team member to make a list of customers who had individual retirement accounts at Frandsen and to figure out how many of those customers they had to meet with to make the revenue target.
Left to their own devices, the team lowballed the amount of business they needed to conduct, he said, so Mr. Mausbach challenged them to increase their figure by 7%. By doing this, he got his branch staff to adopt Frandsen's target as their own. It was tight, but the team met its goal with a few days to spare.
Ten years later Mr. Mausbach runs Frandsen's new investment initiative, but his branch remains a microcosm for his institutionwide strategy. He has rallied his staff around the company's investment targets 12 times. The technique remains the same — take the corporate goal, analyze the resources, communicate with staff members about what to expect and how they can meet their part of the goal, and keep on top of them.
"Get them to write down what they need to do," he said. "Track performance, and hold rah rah meetings."
Mr. Mausbach's early experience reflects what most program managers go through at the start of each fiscal year. Setting production goals for advisers can be complicated — targets must be challenging but not terrifying, and managers have to get their advisers' support to hit the goals. Program managers must balance adviser's ability to produce with corporate aspirations.
There are different ways for managers to get their advisers on board.
Lou Mastropietro, the program director at Astoria Federal Savings Bank in Lake Success, N.Y., said he involves financial consultants at the very start of the process.
He addresses each of his team member's performance records over the year and discusses how specific territorial factors may have affected their results. Mr. Mastropietro considers the number of appointments an adviser has made, the adviser's closing ratio, and the average revenue per sale.
"The only factor that has the potential to be fluffed is the number of appointments, which is self-proclaimed by the advisers," he said. "But taken together, these are the drivers of an adviser's potential for success."
By breaking it down, the task becomes less daunting, he said. For example, an adviser who wants to make $300,000 on a grid that pays out 40% would have to produce $750,000 of annual revenue. To make the goal less intimidating, the program manager could break it down into a smaller weekly sum of $14,423, he said; if this seems too high, managers can work through the adviser's book and territory to identify opportunities to find assets, such as contacts made through community groups, accountants, and lawyers.
Program managers also can support advisers through training.
The $1.3 billion-asset Redwood Credit Union in Santa Rosa, Calif., which has four financial consultants, says it actively promotes the certified financial planner designation, which can help advisers recognize untapped product opportunities, notably in life insurance.
Michael Gradl, Redwood's vice president of investment services, anticipates that all his advisers will hold the designation by next year. The credit union, which pays for the training course, expects the resulting increase in advisers' production to make up for the cost.
Though advisers want to make more money, managers say they should be prepared for some resistance when they present advisers with higher production goals.
"It would be Pollyannaish of me to say the conversation always goes famously," Mr. Mastropietro said. "But if the manager gives the adviser plenty of opportunity to have input, and the manager has some ideas of how to help, the plan goes over fairly well."
Unless there has been a glaring omission in the goal-setting process, advisers are pretty much expected to hit the new goal.
Jeff Russo, vice president and financial services manager at S&T Bank in Indiana, Pa., said he prepares for meetings by running his seven advisers' numbers through a spreadsheet to analyze how far current production is from the goal.
"I know my number going into a meeting with an adviser, and if the adviser thinks the goal is not realistic, then we'll evaluate why not," he said. "I'll include their overall productivity, their product mix, and where I think they can make increases. If their business has grown over the past two years, you have a pretty good idea what they can do for you."
Mr. Russo said he has limited patience for those who cannot or will not get with the program.
"It's difficult when an adviser becomes complacent," he said. "I've had that conversation a lot throughout my career. Advisers who don't rise to the challenge shouldn't be there in the first place. I don't want to have to micromanage anybody. If you're constantly having that same conversation with an adviser, it's time to help them find a new career."
Managers say they also have to consider the size of the branch, the local banker's experience, and the demographics of the territory, because it is easier for brokers in major hubs with the most customers to hit their goals than for advisers trekking between rural branches.
Karen Culver, senior vice president of investments at MidAmerica Investment Services in Downers Grove, Ill., said she looks at the demographics of each representative's territory, the experience of the rep, and the branch staff in the territory to determine appropriate goals for growth. She also evaluates the integration of its banking and investments, the rep's past performance, the number of branches they cover, and the type of business they write.
"Average growth was 12% for our program" last year, "but setting an overall percentage is too simplistic," she said.
Commonly advisers with large, well-established books are not likely to increase their business more than 5% or 7% a year. Newer reps have more room for rapid growth. By projecting individual production from past performance, Ms. Culver said, she can map out how much extra business she needs from each rep.
If a goal is impractically high, managers said, they have to tell executives that. "If management's directive is impossible, the program manager has to either explain that to meet those goals the program will need more advisers, or the bank will have to initiate some sort of program to help advisers attain a deeper penetration of the bank's retail client base," Mr. Gradl said.
If executives offers no assistance, he said, the only solution is to build on the investment program's current plan to hit the revenue goal. He suggested tweaking the program with additional marketing, or expanding the product suite to include things that have not been sold much through the program — usually life insurance, which reps are reluctant to sell because of its complexity and drawn-out sales process.
"There's no magic bullet," Mr. Gradl said. "Either you add more staff or you add areas of opportunity."
However, managers say executives usually do not set outrageous goals, but they will base expected growth on historical performance. Especially at the start of an initiative, executives are more likely to lowball the target figures to get the new effort off to a strong start, managers say.
Mr. Mausbach said Frandsen just began a revamped program, and to help ensure that it would be a success, the plan involved retail branch managers and officers.
"We looked at GDC per deposits in each branch," he said. "In the first year the bar is set pretty low — $400 per $1 million in deposits."
