09.27.18

Branch Referrals Down 31 Percent Last Year

by: Tim Kehrer, Kehrer Bielan Research & Consulting and Mike Sause, AMS

The continuing decline in branch traffic and accelerating branch closings are taking a toll on the bank and credit union investment services business. Kehrer Bielan surveys found that branch staff in financial institutions referred only 1 percent of its client households to investment advisors during 2017, down from 1.5 percent the previous year.

A decade ago, financial institutions often referred more than 2 percent of their clients to their financial advisors. While referrals have been thinning out, last year they dropped precipitously. And this year, the FDIC reported another increase in branch closings.

The decline in referrals threatens to undermine a competitive advantage that financial institutions have enjoyed versus other sources of financial advice. A steady source of branch referrals has helped banks and credit unions recruit and retain advisors, pay them a smaller share of the revenue they produce and post higher profit margins than many retail securities brokerage firms.

Banks and credit unions need to supplement branch referrals with other sources of leads for their advisors, including mining client databases and linking prospecting by investment call centers and digital platforms with their across-the-desk advisors.

They also need to partner with firms that can help them resuscitate their branch referral operations, obtaining more referrals from fewer branch customers.