Financial institutions that enlist advisers from their brokerage units to source business for their trust and investment managers enjoy greater growth in assets under management, a new study showed.
Data collected from 21 bank trust, investment management and private banking businesses found the amount of business sourced by advisers was 18% on average and overall, impacted the overall asset growth and new revenue in those firms, according to "Benchmarking Bank Wealth Management Services: Alternative Sales Models," a study from research firm Kehrer Saltzman & Associates.
On average, the firms studied produced about $20 million in assets per full-time person working on business development, and $150,000 in new first-year revenue per full-time equivalent, said Jim Duca, who directs the wealth management consulting practice at Kehrer Saltzman in Charlotte, N.C.
Firms that relied only on trust administrators and portfolio managers to acquire new clients had higher asset sales productivity, but combingint that with business development officers produced more new revenue per FTE.
Each month, at least 5% to 10% of referrals to Navy Federal Trust Services comes from advisers, said Stephen Newlin, senior trust officer at the division of the $55 billion Navy Federal Credit Union in Vienna, Va.
"It goes both ways. Business flows in both directions. In the trust department, we hear about things we can't provide like long-term care; that's when we bring in the advisers," said Newlin. "If a member is below the minimum balance then we connect families with brokerage services."
Navy Federal was one of the first to sign on with the Tampa, Fla.-based MEMBERS Trust Co. when the nation's only nationally chartered, credit union-owned trust company launched in 2004. Since then, Navy Federal Trust Services has amassed more than $100 million in assets under management and has an annual growth rate of 16% to 17%, Newlin said.
Unlike some bank and other advisory firms that require clients to have at least $1 million in assets before they can use trust service programs, Navy Federal's minimum is $150,000, according to Newlin.
That collaborative partnership among trust officers, advisers and the brokerage unit has likely helped Navy Federal Trust Services to build future revenue streams. Newlin said some members who named the division in their wills 10 years ago to handle their estate plans are now working with trust officers to handle their deceased parents' estates. He estimates that the trust division has at least $500 million in trust and estate planning for the future.
Financial institutions that supplement traditional sources of new business with the advisers in the brokerage unit reported cost of those sales that was 9% less than those that do not include advisers in the business development mix, said Kenneth Kehrer, a principal at Kehrer Saltzman.
The cost of sales through BDOs was substantially less than business obtained through trust administrators and portfolio managers, Kehrer noted. Overall, the firms in the LPL Financial-sponsored survey acquired $173 in new assets and $1.09 in new first-year revenue per dollar of acquisition cost, he added.
MEMBERS Trust ended 2013 with slightly over $1.5 billion in trust assets under management, said Richard DeNapoli, vice president of trust and investments. Working with CUNA Brokerage Services Inc., the broker-dealer affiliate of CUNA Mutual Group, the trust company serves nearly 50 credit unions nationwide.
It is estimated that $30 trillion will be transferred to Gen X and Gen Y from baby boomers during the next 30 to 40 years, making it an even larger wealth transfer than prior generations, according to CBSI, citing data from Accenture's "The 'Great' Wealth Transfer" 2012 white paper.
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