Growing number of advisors selling bank products

By Kate McCaffery | October 3, 2005 | Last updated on October 3, 2005
3 min read

(October 3, 2005) It’s no secret that banks are emerging as a real competitive force in the arena of investment fund sales. But it’s not necessarily advisors working in the bank channel who are driving that growth.

The latest study from Credo Consulting, entitled Winning in the Advisor Ranks — Balancing the Art & Science of Success for Canadian Asset Management Firms, found that the average investment fund assets of bank and insurance companies being handled by IDA and MFDA advisors has grown four times faster than the rate of independent firms in the last two years. These growth rates do not include assets being held with the firm’s proprietary or related sales forces or bank brokerage advisors.

“We were really interested to see how well the banks were doing in the IDA channel and not necessarily with their own related brokerage groups,” says Credo’s Cynthia Enns.

Bank and insurance firms are also experiencing greater productivity than independent firms. Banking and insurance companies are generating $63 million in gross sales per team member, compared to $49 million generated by independent players.

The study examines the need for independent firms to understand the more sophisticated ways advisors can use segmentation to make better sales and marketing decisions. Enns says companies also need to consider how they use internal wholesalers and technology in determining how to better serve advisors.

At the same time, she says marketing success is not necessarily the end result of how much companies spend, but of their understanding, contributions and ability to manage the costs of execution.

“Independent firms have to be smarter about it and they need to look at profitability as opposed to just looking at gross and net sales. They really need to take the shotgun approach and find out what they’re really good at. Figure out their core competencies because the banks have some certain advantages that they bring that the independents are having a really tough time measuring up against,” says Enns.

In this highly-charged atmosphere of competition, she says independent firms need to work harder on branding. At the same time, where bank and insurance firms have aggressive and motivated teams in the workforce, independent firms have at least 10 years of relationship building experience under their belts and need to focus on maintaining those relationships.

“I don’t think the banks and insurance companies are going to completely take over what’s going on out there. I don’t think the banks are going to own it for a long time, but they are definitely a real competitor in the advisor channel where people would have laughed at that idea five years ago,” says Enns. She says the banks “are definitely going carve away at [the independent firm’s] market share, but I think there’s still a lot to be said for the traction that the independent firms have from building relationships.”

At the same time, she says it will be interesting to see how bank-owned firms handle their branding in the future. “There’s a certain comfort in brand,” she says. “That’s where their complacency might be — in assuming that their strategies will work because of their brand. If an independent firm can get a share of mind in the advisor, they can keep that.”

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Kate McCaffery