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Investments & Insurance | Advisory Services | Wealth Management | Retirement Income
BISAMAGAZINE
M&T’s PETER ELIOPOULOS:
BROKERAGE IS ‘PART OF
THE SOLUTION’
Quarter 2 2015
THE RECRUITING QUANDARY
2015 BISA ANNUAL CONVENTION
HIGHLIGHTS
M&T’s Chief Marketing Officer Peter Eliopoulos
Departments:
President’s Letter ..........................4
Compliance and Regulatory Watch .......................24
Technology ......................................28
Retirement Income .....................32
News Briefs ....................................36
Ad Index ............................................40
BISA Leadership Advisory Board .............................40
The Recruiting Quandaryby Andrew Singer
Table of ContentsQuarter 2 Volume 24 Number 2
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2015 BISA Annual Convention Highlights
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Investments & Insurance | Advisory Services | Wealth Management | Retirement Income
BISACover Story
M&T’s PETER ELIOPOULOS: BROKERAGE IS ‘PART OF THE SOLUTION’by Andrew SingerPhotographer: Scott Redinger-Libolt / Photo Coordinator: Ravitej Khalsa
BISA Magazine is now available in a new, streamlined digital format.
Visit BISA’s website www.bisanet.org to access the digital edition.
BISAMAGAZINE
4
www.bisanet.org
I am pleased to present the latest issue of BISA Magazine. Those of you that joined us at the 2015 BISA Annual Convention will be familiar with many of the convention speakers highlighted in this issue, including our cover story on keynote speaker Peter Eliopoulos, senior vice president and chief marketing officer at M&T Bank/Wilmington Trust. We are already building on this year’s convention success with plans for 2016. We will launch the call for session proposals in late summer, so please start thinking about which session ideas you want to submit.
At the convention, the BISA Board of Directors elected sev-eral new officers. Congratulations to our newly elected and re-elected officers: President-Elect Dan McCormack, Vice
President Frank Consalo, Vice President James Nonnengard, Secretary/Treasurer Thomas Howe and Assistant Secretary/Treasurer Bruce Hagemann. In late June, the board will hold its annual joint planning meeting with members of our Leader-ship Advisory Board. With its healthy financial position, BISA has the capability to explore new initiatives to increase member value.
One area that we have enhanced the past few years is member recognition. In ad-dition to our Circle of Excellence and Technology Innovation Awards, I’m excited to share that we are introducing a new award designed to honor an individual’s personal achievement and contributions to their depository institution, third-party marketer, manufacturer or service company. Nominees must work for a BISA-member organization and have attained a significant milestone, including promo-tion, anniversary or retirement. To learn more about the BISA Career Achievement Award and the nominating process, visit the BISA website at www.bisanet.org.
Lastly, we have several initiatives underway including looking at industry talent and diversification, growing our BISRA activities and expanding our reach with industry partners. More information will be available in the next issue.
As always, I encourage you to be engaged with BISA through our awards program, events, webinars and publications. Enjoy this issue, and I hope you have a memorable summer.
Sincerely,
Dan Overbey BISA President
Dan Overbey BISA President
BISA Rides Momentum from Annual Convention Success
PRESIDENT’S LETTER
BISA Magazine is published quarterly by the Bank Insurance & Securities Association.
BISA DIRECTORSMichael AndersonSecurities America
Rhomes AurFirst Tennessee Bank
Brett C. BowersMidFirst Investment Services
Bob ColeBank of Oklahoma Financial
Robert CorsarieFifth Third Securities
Scott DavisEssex National Securities, LLC
Scott DixonSunTrust Investment Services
Wesley EganWells Fargo Wealth Management
Jim FujinagaPrivate Wealth Alliance
Richard R. GuerriniPNC Investments
John HoustonRaymond James
Andy Kalbaugh LPL Financial Institution Services
Michael MiroballiBMO Harris Financial Advisors
Kevin MummauCUSO Financial Services, LP
Rebecca M. NelsonTech CU
Chris RadzomCommerce Brokerage Services
Vance RichardIberia Financial Services, LLC
LeAnn RummelCetera Financial Institutions
Bruce StavaFirst Brokerage America
Douglas C. WicksKinecta Financial Management Company
BISA OFFICERSDan OverbeyPresidentAtlantic Capital Advisors
Daniel J. McCormack President ElectU.S. Bancorp Investments, Inc.
Sam Guerrieri, Jr. Past PresidentM&T Bank, M&T Securities, Inc.
Frank A. Consalo Vice PresidentCiti Personal Wealth
James B. Nonnengard Vice PresidentRegions Investment Services, Inc.
Thomas N. Howe Secretary/TreasurerWebster Investment Services
Bruce A. Hagemann Asst. Secretary/TreasurerBBVA Securities, Inc.
BISA Magazine STAFFPUBLISHER Jeff Hartney
EDITOR-IN-CHIEFAndrew Singer
MANAGING EDITORDennis Coyle
CONTRIBUTING EDITORMarc Vosen
COPY EDITORGina Lauer
DESIGNSteve Biernacki
ADVERTISING SALESGina Valerio202.367.2343
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M&T’s Chief Marketing Officer Peter Eliopoulos
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BISA Magazine
When it comes to bank bro-kerage, Peter Eliopoulos of-fers a different perspective. As chief marketing officer (CMO) of M&T Bank/Wilm-
ington Trust Co. (Buffalo, N.Y.), he is able to take a bird’s-eye view of bank investments and insurance — to see where these nontraditional businesses fit into the general banking scheme of things.
Sales of investments and insurance to a bank’s retail and wealth customers, in fact, are criti-cally important, according to Eliopoulos.
By Andrew Singer
M&T’S PETER ELIOPOULOS: BROKERAGE IS ‘PART OF THE SOLUTION’
7
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Client profitability soars when an institution “dots the i’s,” as Eliopoulos puts it, i.e., selling insurance and/or investments — rising 78 percent (com-pared with bank customers alone1). Household tenure, “the percentage of customers that stay with us 15 years or longer,” is 63 percent greater with an investment and/or insurance.2 Attrition is 50 percent lower for “deposit plus investment and/or insurance” than for deposit customers only.3
This is especially critical today be-cause banks “are getting crushed by flat revenue and shrinking margins,” Eliopoulos told a gathering at the re-cent BISA 2015 Annual Convention in Hollywood, Fla.
Bank revenue has been flat for 19 quarters at U.S. banks. Return on tangible equity has been dropping for years. There is a pressing need for fee income. “Securities and insurance are part of the solution to the bank indus-try’s woes,” Eliopoulos said.
Eliopoulos has a somewhat atypi-cal background for a bank CMO. He worked for 10 years as a manage-ment consultant, including a stint at A.T. Kearney, and began his banking
career with Citibank in 1988, where he worked initially in the branches and was a star “referrer” to investments.
Selling investments and insurance to bank customers is often easier said than done, he acknowledged. Many bank customers are not even aware that their bank is selling insurance and securities. M&T discovered that only 7 to 8 percent of its customers knew it sold these products and services.
That’s why bank brokers need to forge partnerships with other parts of the organization. When Eliopoulos was hired at M&T eight years back, he recalls that his boss handed him the bank’s annual report and told him to talk with every person in the report (in the “officers” section, where the bank lists its 86 senior vice presidents and 12 executive vice presidents, among others) because they were all going to be his partners.
Something of this sort is needed with bank brokerage. Your financial advi-sors have to touch base with everyone in the branch system with whom they are likely to work with.
Part of a TeamPut another way, the financial consul-tant (FC) in the branch has to be part of a team, “not a tourist,” Eliopoulos told BISA Magazine in an interview subsequent to his annual convention keynote address. The FC has to say: “Mary [who works in the branch] is sick today, I’m going to help close the vault today…”
Along these lines, Eliopoulos’ M&T colleague, Sam Guerrieri, Jr., head of retail branch banking (and former BISA president), tells the bank’s FCs to think of the branch manager “as their best client and everyone else in the branch as the manager’s son and daughter.” They should be mindful, too, that “everything gets back to the parent” — i.e., the branch manager. If the branch opens at 8 a.m. but the FC shows up for work at 9 a.m., the branch manager will hear about it.
Banking as a CallingBanking has to be rooted in virtues and values, according to Eliopoulos.
Client profitability soars when an institution “dots the i’s,” as Peter Eliopoulos puts it, i.e., selling insurance and/or investments — rising 78 percent (compared with bank customers alone).
1 Source: M&T Bank (applies to M&T Bank alone, not banks generally)2 Ibid.3 Source: Novantas (based on a representative sample of banks surveyed by Novantas.)
BISA Magazine
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When he was a child growing up in Boston, he found himself listening in on some of the conversations taking place at the Brattle Square Flower & Fruit Shop, a local family business. From what he was able to overhear, the “banker” emerged as an important character. He was someone who could help. “To be a banker was to help people.”
Helping people needs to be part of the bank FC’s mandate. M&T Senior Financial Consultant Merri Carol Hall, for example, always asks her clients, “Do you have a will, do you have power of attorney (settled), do you have a healthcare proxy?” Big things need to get done. “It’s very rewarding when you change someone’s life,” Hall said during one of the bank’s marketing videos.
Then there is Paula, a licensed bank employee (LBE), who works in an M&T branch in East New York. A pipe layer who banked with M&T had been injured at work and received a big lump payout, something like $400,000 in compensation for the injuries that
had disabled him. “A lot of people in the bank come to Paula,” Eliopoulos explained, and ask: “What should I do?”
This pipe layer came to Paula with his $400,000.
“When Paula wakes up every morning, she does not say, ‘What product can I sell today,’” Eliopoulos said. Rather she says: “How can I help people today.”
Eliopoulos majored in comparative literature in college. As a marketer, he favors narrative — telling a story. A recent M&T ad campaign (or “brand communication program,” as Eliopou-los prefers to call such things), titled What’s Important to You, consists of a series of videos in which bank custom-ers talk about what’s really important to them. There is a vignette with land-scape business owner Chris Dambach, who tends several national cemeteries where U.S. war veterans are buried. Dambach speaks about what that means to him: “I may not put on a uni-form, but I get to serve every day.”
The answer to banks’ woes is not to be found in marketing more products and services to people — even if that has been the mantra of the past 50 to 60 years. “Not every need can be answered with a product or service,” Eliopoulos said.
In this regard, the economic crisis of 2007-2009 was a kind of awakening. The answer to bank industry struggles lies in solving people’s thorny financial problems.
It was also the belief of the founders of M&T Bank that a business should “help someone to do something,” Eliopoulos said at the BISA annual convention.
Develop Your BrandAlong these lines, it is crucial to de-velop your brand. “All banking is local at the end of the day,” Eliopoulos said, and that is reflected in the marketing approach he has taken at the bank.
When he arrived at M&T in 2007, he was immediately thrust into a market-
If your budget is cut, or if you don’t have much of a marketing budget to begin with, you can still do things by forging partnerships with some of your internal partners,” Guerrieri said.
Peter Eliopoulos with M&T SVP Sam Guerrieri, Jr. (right)
“
Bank revenue has been flat for 19 quarters at U.S. banks. Return on tangible equity has been dropping for years. There is a pressing need for fee income. “Securities and insurance are part of the solution to the bank industry’s woes,” Peter Eliopoulos said.
ing campaign — Banking Built for Baltimore — aimed at familiarizing residents of Maryland with the upstate New York-based bank. (M&T had just acquired Wilmington Trust Company.) As explained by the bank’s advertising agency, Crowley Webb:
When M&T Bank acquired the second-largest bank in Baltimore, no one in the Mid-Atlantic region had any idea what M&T was about. With first impressions being so important, M&T had to introduce itself in a positive, reassuring way to retain existing customers and attract new ones.
How did they do this? They settled on Wilmington Trust’s relationship with the Baltimore Ravens football team.
The Baltimore Ravens is one of the biggest brands in the Mid-Atlantic, so the bank made the smart decision to partner with the NFL franchise. After naming rights to their stadium were secured, M&T helped leverage this partnership by creating Banking Built for Baltimore – a checking bundle that included an exclusive Ravens Check Card and a Ravens-themed gift. We recruited Ravens players and used heavy traditional and non-traditional media to spread the word about this exciting promotion.
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The campaign was done for “brand reasons,” not for selling a specific product, Eliopoulos recalled. This was not typical. Indeed, at one point, Guer-rieri, the retail branch chief, called him. Did Eliopoulos have any data to support why the Baltimore “brand” marketing program would develop new business?
Only a short time in his new job, Elio-poulos had to answer, “No.”
There was a pause on the other end of the line. Then Guerrieri responded, “Let’s do it.”
“Sam took it on faith,” Eliopoulos said. “No data.”
The results were positive, though. M&T acquired 10,000 new checking accounts in the campaign’s first few weeks. Ac-cording to Crowley Webb, their efforts “created more than a billion [online] impressions so far.” Most important, the campaign “helped M&T Bank become a trusted household name in Baltimore.”
For Eliopoulos, it brought home the virtues of being a community bank. (He later learned that Crowley Webb, the Buffalo-based agency, had been sure that he would replace them with a slick New York City-based advertis-ing agency when he arrived in 2007.) Crowley Webb has been the bank’s agency for 28 years now, a long time in the advertising world.
Cutting BudgetsAs Eliopoulos made clear in his BISA annual convention keynote presentation, a CMO’s job isn’t all about spending money. Last year, he was forced to cut the marketing budget by $12 million.
M&T is a thrifty organization. “Cutting costs are like eating your vegetables,” as they say at the bank. Eliopoulos, too, sees virtue in cutting costs. It encourages resourcefulness. Is there a lesson here for FCs and brokerage program managers?
Branch chief Guerrieri thinks so: “We emphasize how to leverage partner-ships.” And this goes beyond the retail bank. “It’s broader than that. If your budget is cut, or if you don’t have much of a marketing budget to begin with, you can still do things by forging partnerships with some of your inter-nal partners,” Guerrieri said.
The bank’s What’s Important to You marketing campaign, launched during the NFL Super Bowl in February, did not require millions of dollars in TV advertising, for instance. It invited TV viewers to see “the rest of the story” online. There, they would find a series of simple, unscripted 30-second video vignettes featuring “real people” like Dambach and Evelyn Anderson, who likes to “put a smile on people’s faces and to take care of people.” People
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are invited to share their stories on the site: “Share what’s important in your life with our community.” The title of some of the contributions: “Driving cross-country,” “Growing the family business,” “Making every minute count,” “A bigger backyard” and “Seeing things through his eyes,” among others.
“Because we have to make every dollar count, we are not looking (necessarily) to spend more money, but to be more clever” in spending the dollars that are available, Eliopoulos said.
What about social media? Social media is just a tool, like advertising, Elio-poulos said. It doesn’t dominate his marketing conversations.
If Eliopoulos’ bank “partners” use tweeting to get out the message, “I’m OK with that.” He is not afraid of so-cial media. “What it’s not,” however, “is a religion.”
Eliopoulos does double duty as M&T’s director of Office of Customer Advo-cate. In this capacity, he handles doz-ens of customer complaints, many of which reach him through social media. Many of these are “very interesting” and helpful in improving services.
That said, many people use social media as a license to “critique and complain.” Separating important complaints from ordinary “letting off steam” exercises can require some discernment. Again, social media is sometimes a two-edged sword.
Two FamiliesToday, according to Eliopoulos, he has two families: his wife and kids and his M&T family. It took eight years to get to know that second family.
“At the end of the day, you can’t hope to win with only products and ser-vices,” said Eliopoulos, speaking about bank marketing generally. “You have to understand emotion. You are trying to solve an emotional problem. What’s on the client’s mind and what is the problem we’re trying to solve today?”
For example: Will I run out of money at the end of my life? Will I be able to send my son and daughter to college? “You have to start with the emotion,” he said. ▲
Andrew Singer is editor-in-chief of BISA Magazine. He has been writing about the financial services industry since 1985 and is the managing director of Singer Publications based
in New York City. He can be reached at [email protected].
You have to understand emotion. You are trying to solve an emotional problem. What’s on the client’s mind and what is the problem we’re trying to solve today?” Peter Eliopoulos said.
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By Andrew Singer
FEATURE STORY
The Recruiting Quandary
BISA Magazine
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It’s a huge problem.” Finding sales talent has always been a top five challenge, said Tony Cole, CEO, Anthony Cole Training Group, “but now it’s moving up the ladder.
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For some years now, we have heard about the looming challenge of attracting new financial advisor (FA) sales talent.
The words from a 2013 Cerulli study still ring true:
“As hiring efforts continue, it’s a well-known fact that there is a talent crisis looming, with many advisors starting to retire and fewer people entering the field. With an average retirement age of 68, Cerulli expects 8,600 advisors will potentially be leaving the profession each year for the next 13 years, reducing the workforce by 1.7 precent annually.1”
In the more narrowly focused field of bank brokerage, one sees some other trends. Consider some recent BISRA numbers: See Figure 1.
Escalating competition has led to unprecedented recruiting bonuses. At this point, the “winners” of competitive recruiting may actually be the ultimate losers because the high bonuses and payouts used to attract advisors may be causing permanent damage to the economics of the firm.
FEATURE STORY
The ranks of “platform reps,” or licensed bank employees (LBEs), has plunged from a high mark of almost 50,000 in 2005 to only 10,000 in 2013, according to BISRA.
Why is this of concern? Successful LBEs once were considered to be the bank brokerage industry’s “financial advisors in training.”
“What happened to our farm team?” asked Scott Stathis, BISRA’s former managing director, now director of a new startup, Opportunities Ahead. Yes, low interest rates have hurt fixed annuity sales, the staple of most LBE programs, and that is one key reason LBE numbers have dropped so pre-cipitously. Many banks, too, are fed up with the costs of licensing LBEs who don’t sell, understandably so.
Still, “What do you do to replace those potential FAs?” Stathis asked.
Talent is now getting more expensive due to short supply, and signing bo-
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1 Cerulli Quantitative Update, Advisor Metrics 2013, Understanding and Addressing a More Sophisticated Population, Cerulli Associates.
Advisors/Financial Consultants Platform Reps % Platform
Reps Registered
2000 13,900 25,000 33%
2002 15,000 44,800 56%
2004 16,500 47,700 52%
2005 16,100 49,400 61%
2006 14,750 36,814 55%
2007 15,240 37,930 47%
2008 16,225 35,725 67%
2009 15,730 38,000 53%
2010 16,322 30,000 33%
2011 19,700 26,000 63%
2012 16,000 17,000 65%
2013 15,000 10,000
FIGURE 1: Trends in Bank Brokerage Sales Forces*
*Rounded rep number estimates.
What happened to our farm team?
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nuses for successful reps are increas-ing as brokers/dealers continue to recruit talent from their competitors. Yet “stealing talent from each other is a zero-sum game,” Stathis said. It isn’t going to solve the industry’s finan-cial advisor shortfall. “New talent is needed now to develop the client base of the future,” he argued.
Recruiting is a Challenge“Recruiting is a challenge,” acknowl-edged Tom Hall, executive vice presi-dent, Wealth Management and The Private Bank, Seacoast National Bank, a commercial bank based in Stuart, Fla., with 44 offices and about $3 bil-lion in assets.
Seacoast recently acquired a bank that had no wealth or brokerage program at all, which meant they were starting from scratch in those acquired branch-es. It was seen as important to hire new financial advisors who were a good cultural fit with the bank, said Hall. FAs who have a collaborative mentality are the most successful salespeople in Hall’s experience. It took some work to do this, however, including fashioning a story that would make Seacoast attrac-tive to the would-be advisors. (More on this shortly.)
“I hear how difficult it is to find quality people,” Tony Cole, CEO, Anthony Cole Training Group, told BISA Magazine at the recent BISA 2015 Annual Convention in Hollywood, Fla. “It’s a huge problem.” Finding sales talent has always been a
top five challenge, he added, “but now it’s moving up the ladder.”
In bank brokerage, the first place many companies look to fill a new sales position is a competitor’s sales force, commented David Giertz, president of Nationwide’s NFS Distributors, Inc. A firm may hope to “pick off” one of its competitor’s successful wholesalers, for instance. By comparison, if you hire from within, you take on a certain risk. That person may not have the same experi-ence as an advisor trained and formerly employed by a wirehouse. The bank, to a certain extent, has to take a leap of faith.
A recent Pershing study presented the quandary in stark terms:
Escalating competition has led to unprecedented recruiting bonuses.
FEATURE STORY
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BISA Magazine
At this point, the “winners” of competitive recruiting may actually be the ultimate losers because the high bonuses and payouts used to attract advisors may be causing permanent damage to the economics of the firm.2
What is a bank to do? At Seacoast National Bank, as referenced above, “We spend a lot of time telling them our story,” Hall told BISA Magazine, and they can usually tell “if that [the bank’s] culture resonates or not” with the prospective advisor during an in-terview. At Seacoast “we prefer a bank background,” although recently they
hired two advisors with an independent brokerage background. They were a good cultural fit and are doing well.
What part of the bank’s story resonates with prospective advisors? In recent years, Seacoast has taken an events-based marketing approach in its retail bank. They now have given that approach a kind of “wealth overwash,” he explained. Special events in the past have included a fashion show and charity luncheon for bank clients in Palm Beach, Fla.; “Au-tumn in Manhattan,” in which Seacoast hosted “a New York experience” at the Carlyle Hotel that included a welcome reception in the Jacqueline Kennedy Onassis Suite as well as an evening with dinner and a show on Broadway; and a “Family Weekend Getaway” in Orlando at the Four Seasons Resort. All these were designed for wealthy bank clients.
Finding an Industry SolutionAccording to another 2013 Pershing study:
The industry faces an advisor shortage that will only grow more critical over time. Firms are losing more profession-als than they hire, and the gap between advisor supply and market demand will reach 237,000 in a decade.3
The talent shortage is “an industry problem that needs an industry solu-tion,” said Stathis, who notes that large national firms cut back on new advisor recruitment after the 2008 recession, and they now focus on recruiting from other firms. Meanwhile, the average age of all financial advisors is 51, and 43 percent are over 55. Only about 5 per-cent of advisors are younger than 30.
His group, Opportunities Ahead, is de-veloping a marketing campaign to draw college students into the brokerage industry, perhaps with some gamifica-tion techniques, like profiling a student and then matching that student’s profile
with the profile of a CEO in the finan-cial services industry — like the CEO of Fidelity or the CEO of PNC Bank. This “gets them thinking about the financial services industry,” Stathis said.
Opportunities Ahead is currently raising money for that initial marketing campaign aimed to “fill the top of the funnel” of potential new industry sales talent.
In the meantime, however, current pro-cesses could use some improvement, some argue. One key problem, accord-ing to Cole, is that banks are increas-ingly outsourcing their hiring.
“When companies decide to outsource the job, they also outsource responsi-bility,” Cole said. The outsourcing firm is often more intent on selling a given candidate to a bank than it is in really finding a top candidate, he suggested. “Many banks have been disappointed. They thought they would be getting a super star,” he added.
The solution: “Banks have to own this,” said Cole, and it’s got to be a team effort. Get all the key people together in one room, that is, all who have an opportunity to identify new possible salespeople, Cole suggested. The group should include representatives from human resources, wealth, investments, among others. The idea is to fill the pipeline. Who do you know? If you had 39 candidates originally in the pipeline, you might have 150 in a few weeks if you draw on all your internal resources.
Other people to talk with include: current employees, former employees, business associates, other community centers of interest and networking contacts. One under-utilized source of candidates: life insurance agen-cies. Sales turnover is relatively high among insurance salespeople and many are well trained (this was where Cole began in financial services.) Moreover, “One thing they’ve learned to do is make telephone calls,” Cole added.
2 From Pershing’s 2013 study, Pershing’s “REGENERATION – How Gen Y Could Revitalize the Industry.”3 Pershing 2013 study, Advisor of the Future II.
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Should you pay bonuses in order to recruit top producers? Don’t buy the book [of business], Cole said. “It never shows up.”
Along these lines, Pershing noted:
It is time to transform the industry’s recruiting model. Firms are com-peting for a dwindling supply of experienced advisors—invoking a “winner’s curse,” where skyrocketing recruiting incentives are compromis-ing economic viability. A new recruit-ing model that focuses on developing supply of younger talent is needed.4
No one has put a number on the cost of bad hires, but Cole is convinced that it is a “multi-million dollar” problem.
One thing that might help banks in this increasingly competitive struggle for
salespeople: identifying and qualifying potential clients for its would-be advi-sors. Advisors have been attracted by Seacoast’s analytics approach to mar-keting, according to Hall. By analyzing customer data — like zip codes — and overlaying it with other data, the bank can tell its advisors not only whether a new retail customer offers “wealth op-portunities” — i.e., they live in an afflu-ent neighborhood — but also whether they live in an area “where they [the B/D] have no competition at the local level,” i.e., where there are few advisors knocking on those customers’ doors.
The industry needs to improve two things, according to Stathis. First, recruiting from universities, i.e., millennials (more on this in the next issue of BISA Magazine when we talk about recruiting for diversity); second, creating a career map for advisors
once they go to work for a bank or brokerage firm.
David Macchia, founder and CEO of Wealth2k, Inc., agreed on the career map element. Whether hiring a candidate from outside the bank or within the bank, the idea, Macchia said, “is to draw a vision for them of a better life, a life that evolves.” No one wants a stagnant work experience. ▲
Editor’s note: The second part of this article, “Recruiting a More Diverse Work Force,” will appear in the next issue of BISA Magazine.
Andrew Singer is editor-in-chief of BISA Magazine. He has been writing about the financial services industry since 1985 and is the managing director of Singer Publications based
in New York City. He can be reached at [email protected].
Seacoast has taken an events-based marketing approach in its retail bank. They now have given that approach a kind of “wealth overwash,” Tom Hall explained.
4 Pershing’s 2013 ‘Regeneration’ study.
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2015 BISA Annual Convention Highlights
The 2015 BISA Annual Convention was an overwhelming success with record attendance. Highlights included: more than 70 speakers from within and outside the industry; growth in the exhibitors was 15 percent over the prior year and the BISA Thursday Night with Havana Nights and Pool Party was an incredible event. More than 750 attendees traveled to Hollywood, Fla., to gain insight from the education sessions, network with industry peers and make valuable connections in the exhibit hall. Enjoy the following pictures, which do not even come close to capturing the energy and excitement onsite.
Pamela Dawson, Russell Investments, Circle of Excellence recipient
Tom Howe, Webster Investment Services (left), Dean Borgh, Carey Financial LLC (right)
BISRA’s Betty Moon and Prudential’s Bob Mittel
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BISA Magazine
Keynote Speaker Tucker CarlsonPurvi Dave, Barclays (left); Todd Dilatush, Barclays (right)
Mike Mirrane (left), Pacific Life Insurance; Scott Dixon, SunTrust Bank (right)
Paula Nelson, Forethought Financial Group (Circle of Excellence Recipient), Jeff Hartney, Executive Director, BISA (right)
Ross Bernstein, Keynoter and AuthorLeft to right: Citibank’s Frank Consalo, Atlantic Capital Advisors (and BISA President) Dan Overbey, BISA Executive Director Jeff Hartney
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COMPLIANCE & REGULATORY WATCH
Broker-dealers are con-stantly reminded of the areas of risk that regula-tors want to review. These risk areas are no secret;
both the Financial Industry Regulatory Authority (FINRA) and the U.S. Securi-ties and Exchange Commission (SEC) issue a letter each year outlining their examination priorities.
The most common areas of regula-tory risk identified year after year by regulators have dealt with suitability and conflicts of interest. In addition, in the
past few years, regulators have indicated that they will place more focus on the review of branch offices rather than the main office of a firm.
Examinations of branch offices gener-ally include a review of areas relating to sales practices, operations and supervi-sion. Additional areas of focus depend on the approved business activities and products sold. When examining branch offices that are located on bank premis-es (bank branch offices), regulators tend to direct their examination efforts to the following specific areas.
Primary Concern with Bank BranchesThe regulators’ primary concern regarding broker-dealer activities occurring on bank premises is how securities products and services are sold. Confusion may arise when salespersons are not clear about how to communicate the features and risks of the securities products and services. Customers of the bank may be under the impression that a bank or savings product (e.g., certificates of deposit or CDs) is similar to a more complex investment product (e.g., a mutual fund) that has more risk. There is also concern that a customer may possibly view broker-dealer products sold within a bank to be safe or to be insured by the Federal Deposit Insurance Corporation (FDIC).
In order to address these concerns, FINRA established Rule 3160, which covers selling securities products at bank branch offices. The primary purpose of the rule is to ensure that there is a clear physical segregation between the bank and broker-dealer. The rule also requires that certain written disclosures be made to bank customers to distinguish bank products and services from those sold by the broker-dealer.
While Rule 3160 is specific regarding the physical separation and disclosures, guidance on concerns about selling is not as defined. Regulatory notices1 and also Regulation R touch on areas of concern. However, regulators may be looking for very specific sales practices when examining a bank branch office to identify unsuitable activities.
Compensation and ReferralsOne of the advantages for broker-dealers maintaining locations in bank
Expect More Focus on the Review of Branch OfficesBy Tammy Tam
1 See Notice to Members 97-89 as an example.
branch offices is the access to the bank’s referral network. Bank branch office relationships must be governed by a networking agreement defining the roles and compensation of each party. Regulators are reviewing the implementation of these agreements as they can lead to conflicts of interest and potentially unsuitable sales practices.
Compensation may be paid to bank employees for referrals made to the registered broker, incenting bank employees to make referrals regardless of the customer’s suitability. Situations where a referral was made just prior to a bank product coming due would be a red flag for regulators to investigate whether the customer ultimately was sold a suitable investment.
In addition to referrals from the bank to the registered broker, referrals from the broker to the bank may also be closely examined. In these situations, regulators want to ensure that the broker is not being compensated for referring an investor to the bank to obtain lines of credit or second mortgages where the funds are ultimately invested with the broker. Although the credit would be a loan product, this would be considered a securities strategy.2
In addition, Regulation R generally prohibits a bank employee from receiving incentive compensation based on a brokerage transaction. Regulation R does allow for a “nominal” cash fee for referrals and has other exceptions. As a result, networking arrangements will not only be reviewed by broker-dealer regulators; they will also be reviewed by the primary enforcers of bank regulations, which include the FDIC, the Consumer Financial Protection Bureau (CFPB) and the Office of the Comptroller of Currency (OCC).
Sales PracticesA suitability review of a transaction generally involves the comparison of the features of a product (especially risks) that is sold and the profile of the customer who purchased the product. When conducting a suitability review at a bank branch office, regulators may specifically select transactions based on the source of funds used to purchase the investment product. Transactions where a bank product may have been liquidated to fund the purchase of an investment product may be more likely to be selected for review. These types of transactions raise red flags as to whether the customer is purchasing an investment that may be too risky given his or her objectives and risk profile.
In addition, the broker-dealer needs to demonstrate that sufficient information was provided to customers for them to fully understand the features and risks of the product.
In the current interest rate environment, annuities are one of the more popular products sold at bank branch offices. Examiners and regulators are concerned that fixed annuities may be presented to bank customers as an alternative to CDs or bank interest-bearing products that are FDIC-insured. The sale of these securities to a bank customer, who is presumed to be less sophisticated, may be scrutinized for misrepresentation. In addition, the general perception is that the customer base of a bank tends to comprise senior individuals more predominantly. As a result, sales of annuities to senior investors may be targeted more often to confirm that the investments are suitable.
With the evolution of technology and regulators’ recent focus on cybersecurity, privacy of customer information is also at the forefront of regulatory discus-sions. Registered brokers may have access to bank customer information, especially when the bank is affili-ated with the broker-dealer. Computer network setups may be linked, or the server used within a bank office location may be shared. Registered representa-
Transactions where a bank product may have been liquidated to fund the purchase of an investment product may be more likely to be selected for review. These types of transactions raise red flags as to whether the customer is purchasing an investment that may be too risky given his or her objectives and risk profile.
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2 See Regulatory Notice 12-55, question number 10.
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COMPLIANCE & REGULATORY WATCH
tives should be sensitive to the need to keep customer information confidential and secure. Regulators often target their reviews toward registered representa-tives who have accessed bank customer information in order to solicit investors.
Information about bank customers is very valuable to a registered representa-tive. Representatives can identify leads by targeting customers carrying a large cash balance in their savings account that is available for investing. As long as representatives are servicing bank cus-tomers to meet the customers’ needs and can demonstrate this, FINRA and the SEC would not have any issues. Unfortunately, many representatives do not document their discussions with and decisions made for a bank customer. Therefore, it becomes harder to assure regulators that sales to bank customers were made in the customers’ best interests.
Documentation of Representative ActivitiesReferred bank customers should have sound, legitimate reasons based on facts and circumstances to use funds from their savings accounts to purchase a variable annuity. Unless these facts and circumstances are documented and presented to a regulator, there will be additional scrutiny of these transactions.
Customer notes are important for representatives to maintain because they provide documentation of the representative’s point of view. In a situation that involves a customer’s testimony versus a registered representative’s opinion, customer notes may assist the representative in recalling and demonstrating his or her understanding of a client’s financial situation at the time of an investment recommendation. This helps not only with regulatory examinations and inquiries but also with arbitrations.
Although Rule 3160 may require certain disclosures to be made by representatives to customers prior to the establishment of an account, it only requires that these disclosures be made orally. A registered representative should obtain written acknowledgement of these disclosures from a customer where possible.
Customer notes are important for representatives to maintain because they provide documentation of the representative’s point of view.
The unsuitable sales practices that have been noted here are not representative of all bank branch offices or registered representatives. Firms and representatives should keep in mind that broker-dealer examinations are generally conducted on a routine basis rather than for cause. This means regulators visiting a branch office are often not there because of a complaint or knowledge of unsuitable activities. However, it is also their primary duty to conduct reviews that may uncover red flags or indications of malfeasance.
Bank representatives should be aware of the possible red flags that regulators are focusing on and maintain documentation during the course of their business interactions to evidence that their activities are complying with the broker-dealers’ policies and procedures. Supervisors should also focus on potential red flags. As a last line of defense, compliance personnel should follow up on these red flags to confirm that bank customers are receiving suitable recommendations. ▲
Tammy Tam is a principal consultant at ACA Compliance Group.
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TECHNOLOGY
Mobile Apps in Bank Brokerage: Turning Remote Possibility Into Reality
The old relationship between invest-ment rep and technology was often adversarial: Boot up a computer in an office, find a secure network and then log into a variety of systems to finally get the information you needed. It was slow and inconvenient.
Mobile technology, though, is chang-ing that relationship. It’s now pull out your mobile device wherever you are and then click on an app that will let you quickly check your appointment schedule or emails and give you access to client information almost instantly.
This scenario explains why investment reps are joining the mobile revolution. IT departments at both third-party broker-dealers and financial institutions are working to keep pace with a tech-nology that delivers efficiency — and productivity — to a salesforce.
The soaring use of mobile devices is well documented. Nearly two-thirds of Americans own smartphones, up from 35 percent in the spring of 2011, according to findings from a study by the Pew Research Center in association with the John S. and James L. Knight Foundation. According to an April 2015 research report, “Smartphone owner-ship is especially high among younger Americans, as well as those with a relatively high income and education levels.” Another finding: 57 percent have used their smartphone to do on-line banking.
Among investors, the smartphone ownership rate is even higher. Invest-mentNews Research reported in July 2014 that “85 percent of investors own and use one [smartphone] regularly.” In fact, more survey-takers owned a smartphone than laptops, desktops or tablets, researchers reported.
Reps are Serving Multiple BranchesMobile apps are more frequently mak-ing the list of technology innovations recognized over the past several years by the Bank Insurance & Securities Association (BISA). Why are apps for investment reps at financial institutions a particular priority? For one thing, these reps often serve multiple branch-es in sprawling locations, so the ability to work on a mobile device saves time and frustrations.
That was the big impetus behind a mo-bile strategy for Essex National Securi-ties (ENSI), based in Napa, Calif. “Many [reps] were used to being able to pull out their smart devices to quickly check their schedule and emails,” explained Garth Howard, chief information officer at ENSI. “Why shouldn’t they also be able to do the same for their practices?”
By Gina Lauer
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The reps frequently move from one of-fice location to another, often covering six, seven or eight branches. They were frustrated by the time and number of steps it took to get onto computers at various sites before they could assess the information they needed, Howard said.
Essex National Securities’ ENSInet Mobile Rep (as well as its ENSInet Mutual Fund Brokerage Account Opening System) were two of the 2015 BISA innovative tech-nology award winners. Last year, CUSO Financial Services, LP/Sorrento Pacific Financial, LLC’s Mobile Scanning App was recognized, and this year CUSO/Sorrento’s BuildMyProfile received an award.
Growing Prominence in Bank BrokerageBISA Magazine talked with representa-tives from these two firms about their push into mobile technology and the growing prominence — and signifi-cance — of mobile apps in the bank brokerage arena. Both Essex National Securities and CFS/SPF have built in-house technology platforms that
continue to adapt and evolve with the mobile landscape.
Valorie Seyfert, CEO of CFS and SPF, said advisors in the financial institutions chan-nel have unique challenges — as well as unique opportunities. She, too, cites the difficulties in covering multiple branches in geographically remote locations. Ef-ficiency can be struggle. To make the most of their time, Seyfert said, advisors need to be sitting down with a client or member as frequently as possible, “advis-ing them on their financial status and not sitting in a car behind a windshield driving from place to place.”
Two factors have been driving the mobile strategy at CFS/SPF. The first: “Let’s find ways to utilize technology to be as efficient as possible,” Seyfert said. The other factor, she noted, is surveys are now showing that more investors are favoring online interaction and that “they want to have more access to these services through their mobile devices and interact with their advisors online.
“My vision was to deliver out the capabil-ities of being able to do everything from
start to finish in the process of working with a financial advisor through mobile technology and online,” she added.
The technology at CFS/SPF involves a six-step process, which include:
1. Prospecting and moves to
2. Client/prospect engagement to
3. Developing a customized financial plan to
4. Conducting the transaction to
5. Workflow — or the operational side of completing the transaction — and finally
6. Ongoing servicing.
In virtually every step in the process, mobile or online tools can be engaged by the advisor, client or both. For example, in the transaction step, clients can download and use the SendMyDocs app on their smartphone or tablet to securely capture an image and transmit it directly back to the broker/dealer where it is uploaded instantly into a client’s file or profile.
“Because we are…certified by the Secu-rities and Exchange Commission as an electronic recordkeeping firm, we don’t ever actually have to get a hard copy of that. The client can keep that hard copy original once they’ve transmitted that copy of that document to us and we’ve captured it,” Seyfert said.
Capturing Client Documentation RemotelyFinancial advisors have a similar app available to them. The CFS/SPF Mobile Scanning App lets advisors “remotely and securely capture client investment documentation such as new account forms, transfer forms, check copies and numerous others,” according to the firm’s literature. “The app then automati-cally uploads the information to dataVI-SION, the CFS/SPF web-based account management system.”
All the applications are available for both iOS and Android, added Seyfert.
One of the goals this year is to give clients viewing access to both home banking and investment accounts in one place. “We call it MyPortfolioView, and it’s a single sign-on into their home banking system,” Valorie Seyfert said.
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TECHNOLOGY
What about adoption rates for the tech-nology? Are advisors using the apps that are available?
The workflow step of the process was “probably the first thing in our history that we automated,” Seyfert said. Today, 100 percent of the financial advisors with CFS or SPF use the automated workflow because it’s mandatory. “They can’t submit business any other way.”
Still, not everyone immediately jumped on board. There was a “maturation process” that spanned five or six years, Seyfert explained. First, there were a few early adopters. Then a cost was attached to the use of manual processing; the use of electronic processing was free. “So we got more adoption because people were doing cost avoidance,” she said. Then the fee for manual processing went up, and commissions were paid out earlier for those using electronic processing. Finally, the last remaining holdouts were told they just couldn’t use a manual method anymore. “We knew we weren’t going to get them any other way,” Seyfert added.
Now she expects technology adoption to be a much smoother process because “people are already online and using online capabilities.” SendMyDocs is “get-ting greater and greater adoption,” she said. Currently it’s close to 30 percent. And an online advising tool — one that pulls data from a client’s file and puts it into a financial plan, which then can be delivered remotely and securely online to a client — is being used by 70 to 75 percent of advisors.
The expectations of customers are changing, Seyfert said. Gen X, Gen Y and even baby boomers have become much more “hands on.” They’ve reached the point where “they want to drive how and when and where they are going to get the services they want, and if you don’t have it available to them, then they’ll move on to the next person or the next company that does.”
What does CFS/SPF have in the works in the way of tech tools?
One of the goals this year is to give clients viewing access to both home
banking and investment accounts in one place. “We call it MyPortfolioView, and it’s a single sign-on into their home banking system.” Seyfert said that a mobile app for that aggregated account view is scheduled for release in the third quarter. CFS/SPF wants to match finan-cial institutions, step for step, in their online and mobile strategies, and contin-ue to meet their customers’ demands.
“The more seamless we can make the ex-change, whether it’s documents or com-munication or information or education, I think the more people are going to want that service from us,” Seyfert said.
Seyfert also mentions that an online an-nuity application is under development and expected for release in late May or early June. That application will include an electronic signature, “but the elec-tronic signature we’re developing will not require any special hardware,” she added.
Mobile Tech at ENSIHoward said the mobile strategy started about two to three years ago as smart-phones were startling to proliferate. “We said, ‘We’ve really got to get on board with this because we see reps using smartphones, everyone around us using smartphones.’ It’s an easier way to get to things quickly.”
The ENSInet Mobile Rep app was created based on specific requests from financial
reps. That is, they wanted to make access to their clients and sales fast, secure and easy. Through the app, client contact information, notes, documents, appoint-ments, meetings and portfolios can all be viewed and edited on a mobile device no matter where a rep happens to be. Reps can also use the app to communi-cate with the back office. For example, if an error or issue is found in submitted paperwork or client service requests, a rep will instantly be notified via their mo-bile device so that corrections can then be made. According to Howard, some of the more popular functions are the client “lookup,” back office notifications and the recent commission function that shows reps’ latest transactions.
The adoption rate of the app is 20 per-cent to 30 percent of dedicated registered reps, Howard noted. “That number may be somewhat low since some financial institutions restrict applications installed on company-provided devices.” ENSI is working to improve that adoption rate by adding more functionality to the app and by performing additional strict security and third-party reviews to assure finan-cial institutions that client information is secure on reps’ mobile devices.
Howard took a proactive approach when introducing new tech tools to banks by involving them during the product development phase. “I find it a
The reps frequently move from one office location to another, often covering six, seven or eight branches. They were frustrated by the time and number of steps it took to get onto computers at various sites before they could assess the information they needed, Howard said.
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RETIREMENT INCOME
There’s a silent killer of growth potential lurking to diminish your future success. It operates in a high-stakes market, one that represents the largest
business opportunity of our lifetimes. It thrives on uninformed customers. And unless its progress is arrested, the impact will be harsh and long-lasting. The dan-ger to bank brokerages is real because the implications of this slow, systematic destruction of business potential progress silently and permanently. And you won’t know you’ve lost until it’s too late.
Admittedly, I’m framing this warning in dramatic terms. But only because the point really can’t be over dramatized. The economic results of being on the wrong side of the phenomenon of retire-ment asset consolidation are simply that dire. This is why there may be no more important issue for bank brokerages than “getting it right” in retirement income.
The Silent Killer of Opportunity Quantifying the Economic Impact of Failing to ‘Get It Right’ in Retirement IncomeBy David Macchia
Money in MotionAsset consolidation is the money-mov-ing process that often unfolds when an investor reaches retirement. It’s a time when investors’ needs and concerns tend to undergo a shift. In some investor segments — such as “constrained” inves-tors, the $9 trillion segment composed of millions of retirees who are worried about not being able to meet their long-term essential expenses — the shift in financial priorities is dramatic. Retirees continue to be deeply concerned about return on investment (ROI), but not by the traditional definition. As retirees’ financial priorities move past asset accu-mulation in favor of generating secure, monthly income, it’s a new ROI — reli-ability of income — that better describes retirees’ top financial priority.
If you believe, like I do, that the skills most financial advisors possess are largely asset-accumulation focused, then
you will understand that the relation-ships between investors and their cur-rent advisors become quite fragile once the customer’s financial priority shifts to income. The client-advisor relationship, no matter how long-standing, can be easily upended by advisors who possess income-planning expertise.
In fact, it’s remarkably easy for income distribution experts to win 100 percent of household investment assets. I know whereof I speak. For the past 12 years, as the principal of Wealth2k, I’ve led the development of tools and insights that a fast-growing number of income planners embrace in order to win the high-stakes competition for retirement assets. It’s not a fair fight. The “Dear John” letter has taken on an additional meaning. It is now the conveyance of the news that the investor has broken up with his or her accumulation advisor(s). As the cadre of income planning experts ex-pands, so does the danger that the bank
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FIGURE 1: REVENUE LOST*
brokerage’s future revenue levels will never reach their full potential.
It’s important to understand that asset consolidation is a zero-sum game. Its effects cut across the entire food chain. Victory is total victory and defeat is absolute. This is why retirement income is a disruptive business. So disruptive, in fact, that incumbency can often be a disadvantage. Leaders of bank broker-ages should evaluate how financial advi-sors and licensed bankers are currently addressing customers’ retirement income needs and determine what, if any, course corrections are called for. Time does not favor bank brokerages in this assessment because the number of in-come planning experts being developed by competing channels expands daily.
Quantifying Lost OpportunityThe lack of awareness among bank cus-tomers of the bank brokerage’s services is a persistent problem that is signifi-cantly amplified by retirement income. While a bank’s customer numbers may range from tens-of-thousands to mil-lions, only a relatively small subset of customers are knowledgeable about or interact with the bank’s financial services arm. This is concerning, to be sure, but it’s a fact viewed by some as representing untapped prospects for future growth. I’d argue that this is correct…except for retirement income. To the extent that retirees and soon-to-be retirees are uninformed about the bank’s capacity to offer income plan-
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ning services, the outsized impact of lost financial opportunity is startling. This can be seen in an example that quantifies the loss of business potential that takes place when a comparatively miniscule number of customers have their retirement assets consolidated away by competing firms.
Let’s take this analysis down to the level of just 100 bank customers per year for 10 years, and then assess the lost finan-cial opportunity that the bank brokerage suffers over 10, 20 and 30 years.
Because the bank’s customers are unaware that the institution provides assistance with retirement income planning, each customer has his or her retirement assets consolidated away by a competing advisor. If I told you that the impact over 10 years is $36.8 mil-lion in lost revenue and $560 million in lost AUM, would you believe me? Well, let’s break it down using Wealth2k’s experience of $623,000 per consolida-tion. See Figure 1.
Simplification, Communications and Speed to SolutionThe previous example leaves no doubt about how much is at stake in retirement income. What is in doubt is how fast organizations will react to the threat posed by asset consolidation by competitors. It should never be forgotten that consolidation equally represents both a threat and an opportunity. I can’t stress enough that it’s a zero-sum game. The only unknowns are the names of the winners and losers. To be sure, those names will be revealed over time. In the meantime, organizations will be well-served by taking measures to equip financial advisors and licensed bankers with the tools they need to properly engage large numbers of customers about their retirement income concerns. Once the tools and training are in place, an aggressive, broad-based effort to promote the organization’s income planning services should be launched. This is the only way to preserve the full potential to win retirement assets.
At the 2015 BISA Annual Convention, I spoke about strategies bank brokerages can embrace to help them achieve success in retirement income. I stressed a few very important themes: simplicity, mitigating the key economic risks facing retirees, the importance of delivering a concise, easy-to-explain income plan document and the urgency to embrace digital communications.
Annual GDC Cumulative GDC Cumulative AUM
Year 1 $1,626,820 $1,626,820 $62,558,300
Year 5 $3,644,788 $12,588,970 $291,858,390
Year 10 $5,701,076 $36,810,070 $568,386,200
Year 20 $5,058,876 $84,665,160 $544,434,540
Year 30 $6,443,583 $140,479,330 $620,865,330
*Revenue lost is the cumulative financial impact of losing 100 clients to asset consolidation each year for 10 years.
As the cadre of income planning experts expands, so does the danger that the bank brokerage’s future revenue levels will never reach their full potential.
During the presentation, I showed a pho-tograph taken at Boston Logan Airport. The photo pictures four 60-something individuals, two married couples, who had just passed through the Transpor-tation Security Administration security check. Their first act after collecting their belongings? Each person has his or her head down staring into their smartphone.
I made the point that the people in the photo can be thought of as prototypi-cal best prospects for income planning. But they’re prospects who have “gone
digital.” And this only amplifies what is already a significant communications challenge. To the extent that we fail to reach our target customers with digital communications, especially around the retirement income topic, we risk losing the connection with them permanently.
Print brochures, therefore, can and should be supplemented with digital brochures. Multimedia educational presentations can be used to reach more customers more effectively and at less expense than traditional means.
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To the extent that we fail to reach our target customers with digital communications, especially around the retirement income topic, we risk losing the connection with them permanently.
It’s time for bank brokerages to get on board with their best customer pros-pects and also go digital. This can be accomplished by introducing digital sales and marketing presentations that galvanize customers’ interest and under-standing of the bank brokerage’s income planning services; “Retirees, we’re here; we’re ready and we’re capable!”
Each year, 3 million Americans turn age 65. Moving beyond accumulation, their priorities are shifting away from asset growth in favor of their deeper concerns for generating secure, monthly income. This shift is part of the reason retirement income security is shown by research studies to be Americans’ No. 1 financial concern.
The good news is that the silent killer of lost opportunity can be upended and turned into a massive financial win for bank brokerages. What’s required, how-ever, is a firm-wide, top-to-bottom effort to promote, educate and deliver simpli-fied and scalable retirement income planning services. Among the various channels, banks are best positioned to do this. But each day matters. Firms should move with Manhattan Project-like urgency — mindful of the impact should the bank brokerage end up on the wrong side of asset consolidation. ▲
David Macchia is founder and CEO of Wealth2k, Inc.
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NEWS BRIEFS
Spring Variable Annuity Prospectuses and Updates Are Here
In preparation for spring product releases, life insurers spend the first quarter posting new variable annuity contracts with the Securities and Exchange Commis-sion. The filings give some indication as to carriers’ thoughts on what the next big product might be. Filings have been trending downward since the fourth quarter last year, and that continued through the first quarter. It reflects the difficulties carriers face as interest rates remain low.
“A lot of changes have already been done on the product management side,” said John McCarthy, senior product manager of wealth management products at Morn-ingstar Inc. “At the same time, firms have pivoted into the investment-only variable annuity area. Many of those filings are done, and there isn’t much insurers can do on the living benefits side until interest rates rebound.”
Nevertheless, there are still a few notable releases out there. Voya is launching its PotentialPLUS annuity, which it describes as a “deferred combination vari-able, indexed and fixed annuity contract.” Earlier this week, Allianz announced it would add a pair of new investment options to new VA business and its in-force Allianz Vision and Connections variable annuities. Both choices protect clients from market volatility.
— InvestmentNews
Combination Annuity/Long-Term Care Sales Soar
While the costs of traditional long-term care (LTC) insurance have skyrocketed to prohibitively expensive levels, a new superstar LTC product has emerged — sales of combination annuity-LTC contracts are soaring, making this the next hot product trend to hit the markets. Carriers have expanded their offerings to include new product features and combinations that have caused sales to jump from just under $50 million in 2012 to a projected $500 million in 2014.
Combination annuity-LTC products have surged in popularity in recent years at least partially because LTC benefits that are paid out under an annuity product are received entirely tax-free, unlike a traditional standalone annuity where the payouts are partially taxable to the client. Because traditional long-term care insurance has become unrealis-tically expensive for many clients, the annuity-LTC option has emerged as a more reason-able alternative.
While the need for long-term care among clients will undoubtedly remain constant, the methods for funding this coverage are changing rapidly — and the tremendous growth in combination annuity-LTC sales shows that this type of product is now providing clients with an extremely attractive option.
— Think Advisor
A Silver Lining for Retirement Savers
The average fee charged by target date funds dropped to 0.65 percent this year, down 11 percent from 2011, according to a report released Tuesday by BrightScope. Total assets invested in target-date funds topped $700 billion last year after investors poured in a net $49 billion, up 8 percent from 2013, according to Morningstar. Average fees for the funds are falling as more investors overall move to low-cost index funds and policymakers focus on reducing investment fees for retirement savers. It helps that employers have been more willing to bring in fund options from multiple investment firms instead of just sticking with the funds offered by 401(k) plan record keepers, says Brooks Herman, head of data and research for BrightScope. As a result, the assets in so-called “proprietary” target-date assets fell to 50 percent in 2013 from 57 percent in 2010, according to BrightScope.
— Washington Post
Hybrid Annuities Revealed
Because a hybrid annuity uses a passive investment strategy, it will not mirror the exact return of the stock market index. However, the hybrid annuity can be a powerful financial tool that is designed to meet owners’ long-term retirement needs. Important benefits of the hybrid annuity are tax deferrals, principal protection, limited upside attached to an index option and potential to add contractual benefits for income, death and confinement care. A hybrid income annuity can help to address concerns with regard to other needs in addition to asset growth and retirement income, such as long-term care funding or wealth transfer to heirs, while still providing a secure income. On the down side, hybrid annuities are also known for their lack of transparent fees.
— Forbes
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NEWS BRIEFS
Annuities/LTC Combos More Than Double Sales
Annuities with long-term care (LTC) insurance benefit features sold nearly $320 million in total first year premium in 2013, according to new research conducted by Milliman and published by the Society of Actuaries. That is based on six such plans offered by five carriers. The $320 million total might seem like a drop in the bucket to those accustomed to seeing industry-wide an-nuity production in the billions of dol-lars. But this is for an annuity line that is still quite new. The 2013 figure is up from $44 million in 2012 (when just five plans were tracked), and from nearly $25 million (for the same five plans) in 2011, according to the research find-ings. When the researchers looked at the same five plans over all three years, the 2013 figure is still up noticeably — to $120 million — compared to the prior years studied.
— Insurance News Net
More Participants Contributing to 401(k) Plans; Auto Enrollment, Escalation on the Rise
Eighteen percent more participants contributed to 401(k) accounts last year than the year prior, according to a report by Bank of America Merrill Lynch based on its record-keeping data. About 64 percent more millennials started contributing to a 401(k) plan in 2014. The report also found that the number of client plans offering automatic enrollment reached 369 last year, up 8 percent from 2013, and that 234 clients used both auto enrollment and auto escalation last year, up 25 percent from 2013.
— Pensions & Investments
Millennial IRA Contributions Are Growing
In the past year, young investors have ramped up retirement savings, particularly into individual retirement accounts, according to new data from Fidelity Investments, the largest provider of IRA plans by assets. The percentage of millennials — those between ages 18 and 34 — making a contribution to their IRA was 26 percent higher in the first quarter of 2015 than during the same period a year ago, Fidelity data show. Overall the percentage of investors contributing to an IRA account also rose, but only by 7 percent. IRA contributions from the under-35 age group made up more than one-quarter of the total IRA contributions recorded by the firm. The majority of younger investors are allocating their assets in accounts that will potentially allow for decades of tax-free growth.
— CNBC.com
lot easier to reach out to them and say, ‘We’re rolling this out and we’d like you to take a look at it.”’
Howard said the mobile application rollout is still in the “very early” phases. “We’re just scratching the surface here,” he said. “We’d like to expand the scope of the mobile application to include both clients and programs managers.” Toward that end, there are two applications “in the hopper right now.” He said the plan is to release a client-facing app that can be white labeled for financial institutions that want to offer such a tool.
The firm is beta-testing an app that helps reps who work with a team (junior reps, assistants, etc.) to commu-nicate with each other via their mobile devices; for example, sending tasks or appointments and having the ability to pull up and prepare for meetings with
clients based on information a junior rep or assistant has uploaded.
There are several application features in the works this year, including:
• A team task and calendar management functions where sales teams can assign tasks and meetings to one another;
• The ability to scan and upload di-rectly to client records;
• Record voice memos as audio or for later transcription; and
• Referral management with the abil-ity to review, contact and qualify referrals from the application.
There is no “training” per se, involved in rolling out the mobile app. Instead, the focus is on educating reps on “this is what it [the app] can do.” But ease
of use is important, too. “We follow the Apple design guidelines very closely to make sure that the interactions are quick, intuitive and very straightfor-ward,” Howard said.
Clients are part of the driving force be-hind online and mobile communication or interaction. It’s not so much the reps who are frustrated with limits on how they can communicate, it’s the clients, Howard ob-served. Some clients will complain: “Why can’t I email this to you?” “Can’t I just text it to you?” “It’s more about making sure that the clients can interact with the reps the way they want,” Howard said.
Gina Lauer is a contribut-ing editor of BISA Maga-zine. She can be reached at [email protected].
Mobile Apps in Bank Brokerage, continued from page 30
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BISRA ............................ Inside Back Cover
www.bisra.com
CUNA .....................27, Digital Edition Banner
www.cunamutual.com/cbsi
Dividend Capital. ....................................... 39
www.dividendcapital.com
Docupace. ..................................................... 31
www.docupace.com
Eagle Life Insurance Co. ............. Inside Front Cover
www.eagle-lifeco.com
ENSI ................................................................ 17
www.ensinet.com
Great American Life Insurance Co. .............................................. 13
www.GreatAmericanAnnuityFI.com
Infinex ............................................................. 11
www.infinexgroup.com
Jackson National Life Insurance .......................... Back Cover
www.Elite-Access.com
LifeQuotes.com .......................................... 21
www.lifequotes.com
MetLife ........................................................... 35
www.metlife.com/shield
Raymond James ............................................5
www.realbrokerageatrj.com
Vantis Life Insurance Co. ..........................3
www.vantislife.com/ABLE
BISA Leadership Advisory Board
Frank Consalo, ChairmanCiti Personal Wealth
Keith BurgerAIG Financial Distributors
Randy GabrielsonAllianz Life Insurance Company
Jon ZalesAXA Distributors, Inc.
Dean BorghCarey Financial, LLC
LeAnn RummelCetera Financial Institutions
Kevin MummauCUSO Financial Services, LP
Tom PelloweDividend Capital
Scott DavisEssex National Securities, LLC
Mary Beth DvorakFirst Trust Portfolios
Brenda GemplerForethought Financial Distributors
Gina M. RiepelFranklin Square Capital Partners
Eric TaylorGenworth Financial
Scott BeshanyInCapital
Tori BullenJackson National Life Insurance Co.
Martin PowellLincoln Financial Distributors
Arthur OsmondLPL Financial Institution Services
Matt DiGangiMassMutual
Gerard NigroMetLife Investors
Amanda SmithNational Financial, a Fidelity Investments Company
Tom OlsonNational Life Group
Mark MerrittNationwide
Tim BonnacciNavian Capital
Andrew CapaccioNew York Life / MainStay Investments
Chris FunkOneAmerica - Care Solutions
Randy ReynoldsPershing, a BNY Mellon Company
Fred TecenoPIMCO
Steve BeckerPrincipal Financial Group
Michael KorthausProtective Life Insurance Co.
Wayne Chopus Prudential Annuities
Bob MittelPrudential Life
John HoustonRaymond James Financial Services
Nory GonzalezRealty Capital Securities, LLC
Michael AndersonSecurities America
Dave ByrnesSecurity Benefit Group
Chelle ChaseSymetra Financial
Tracy FraserTransAmerica
