Is the Cross-Selling Real After a Bank-Brokerage Merger?

Banks sometimes merge with brokerages in an effort to enhance cross-selling opportunities. But, after some mergers, banks have discovered that it is trickier to access brokerage customers than they had originally anticipated.

One reason for this--cultural differences notwithstanding--is that banks are fundamentally different in their approach to product creation and distribution, says Geraldine D. Leder, a consultant to financial services companies. "Supermarket delivery"--the way banks identify market segments and create a vast array of products to distribute through those segments--is the polar opposite of matching products with needs one client at a time to meet brokerage suitability standards. "That's the crux of the cross-setting challenge," says Leder, who is president of LederMark Communications, a Baltimore-base marketing strategy and communications consultant

Moreover, brokers often own their accounts in a way without parallel in banks. Since brokers develop their own clients and often keep them for life, it follows brokers are skeptical gatekeepers for any product introduction. They are fearful of putting at-risk their advisory stature with clients for the sake of proprietary product-pushing. "The key to cross-selling bank products through brokers ties in honoring broker-client relationships and providing the quality and type of products, service, compensation, and other components brokers require of those who want client says Leder, who is former director and manager of the Corporate & Executive Services Group at Deutsche Banc Alex. Brown.

She offers suggestions on ways that banks can facilitate better cross-selling opportunities through brokers.

Approach it with a senior-level commitment. Executive management sets the tone for establishing a cross-selling culture. Developing a cross-selling infrastructure requires a re-engineering of sales delivery.

Centralize relationship management. Clients often deal with a firm because of their relationship manager. Clients may want all contact centralized through that manager. One approach: Separate the broker-based sales process from bank-based service delivery.

Give proper training. Brokers will be comfortable selling some bank products and referring other inquiries to the bank-product specialist. If a broker is selling, then in-depth training is required, in-branch or at sales meetings. Some bank-brokerage mergers have had success with in-branch road shows that introduce brokers to a range of products.

Use technology to track prospects. The most professional companies coordinate prospect contact. An intranet-based restricted list enables anyone within the bank to determine if a company is being pursued. One bank-brokerage has added a system for logging in referrals for banking services, with the promise of a 24-hour response from hand-picked bank representatives.

Review compensation. The level and timing of compensation are critical. As a rule, bank employees' salary-bonus compensation engenders a more measured approach to completing transactions and disbursing payment than the norm for brokers. Brokers are used to being paid in the same month they present a product to their client. The liaison must manage their expectations about the length of the sales cycle for each bank product (e.g., 90 days until a mortgage application is submitted, approved and settled).

Improve communications. Initially following some mergers, enterprising brokers are straining the capacity of bank product managers, who were often too busy processing business to return calls of casual inquiry. One solution is to create a one-stop liaison who communicates with brokers about capabilities, suitability, lead time and compensation.

Develop protocols to codify the process. Written rules and protocols will maintain the integrity of the cross-selling process. Policies may codify everything from response time to dispute resolution.

"Winning over every broker isn't likely," says Leder, "but by creating a process that respects relationships, selects attractive products, simplifies the sales process, and ensures quality service and prompt payment, cross-selling can significantly leverage a merger."