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INSIGHTS
Bank Broker/Dealer Advisor Headcount Slipped Last Year; Coverage of the Opportunity is Thinning Out
from the 7/5/2018 issue of BISA Portfolio Weekly
By Tim Kehrer, Kehrer Bielan Research & Consulting and Marc Vosen, Midwood Financial

Although the typical advisor in a bank-owned broker/dealer produced more revenue last year than the prior year, there were slightly fewer of them working in bank branches and second-story offices. That was one of the key findings in this year’s Kehrer Bielan Bank Broker/Dealer Survey, released this month.
 
The number of bank B/D-affiliated advisors was down only 0.3 percent, but the opportunity they have to capture assets grew substantially. The large banks that own their own B/D are capturing a disproportionate number of U.S. households and their deposits. That means that advisor coverage of the opportunity is thinning out.
 
One measure of advisor coverage is how many advisors a bank deploys relative to the bank’s consumer deposits. In 2017, bank B/Ds had one advisor for every $247 million in deposits, up from $188 million the previous year. A small decline in advisor headcount combined with a surge in bank deposit growth resulted in a 24 percent decline in coverage.



Faced with a shrinking recruiting pool of advisors and skepticism by some bank executives about adding to headcount, bank B/Ds are moving in the wrong direction. Kehrer Bielan research has demonstrated that the typical bank can optimize the tradeoff between revenue and broker productivity with one advisor for every $125–$150 million in consumer deposits. By not having the optimal number of advisors, a bank is underachieving its revenue opportunity. However, that is only half the issue. As our industry moves to a fiduciary standard, will there be enough financial advisors to properly service customers? Customers need to be segmented, and several service models need to be developed to properly optimize both care and revenue.
 
The 2017–2018 Kehrer Bielan Bank Broker/Dealer Survey covered 29 of the 32 largest bank-owned B/Ds, which collectively employ 7,861 financial advisors. This year’s survey was sponsored by Midwood Financial.