FOSTERING MENTORSHIP IN LBE PROGRAMS
HINGES ON FINANCIAL INCENTIVES, TEAM GOALS
Technology Update
Gina Lauer

Gina Lauer writes the Technology column for Bank Insurance & Securities Marketing. She can be reached at glauer@bisanet.org.

STRAIGHT-THROUGH PROCESSING for annuities is happening—well, for the m S FINANCIAL INSTITUTIONS continue to roll out or revamp platform or licensed bank employee (LBE) programs, they find the success of those programs often lies in training and mentoring. And that precarious role of mentor/coach often rests on the shoulders of the financial consultant or advisor.

Studies have shown that in banks where a financial consultant mentors LBEs, the productivity of those platform reps is higher than in branches where the financial consultants (FCs) don't train or mentor.

While it makes sense to enlist financial consultants to mentor and nurture platform reps, reinforcing that relationship often requires monetary incentives, planned interaction, mutual goals and even consequences. Industry consultants and platform program managers generally agree that to win the FC's support of an LBE program, there must be compensation involved.

"Just about every LBE program you'll see has some sort of an override function built in that compensates the dedicated reps for business the [licensed] bankers do," says Bruce Stava, senior vice president, First Brokerage America, LLC, who has extensive experience with LBE programs at various financial institutions. He currently has 30 FCs and about 150 LBEs in the First Brokerage program, but he has been involved in managing platform programs with as many as 1,400 LBEs.

At First Brokerage, 50 percent of the GDC (gross dealer concession) generated by the LBE goes into the associated FC's grid. But in return, the FCs help "earn" that override by coaching and mentoring the LBEs they are associated with in a branch or region, Stava says.

"In different programs, anywhere from nothing to 100 percent of the revenue credit from the LBE goes into the FC's grid," he says. "A lot of that has to do with the levels of the FC payout grids…and it varies from program to program."

Patti Branco, president of PB Management Solutions and a consultant on platform programs and investment program development, agrees that mentoring programs aren't likely to work without financial incentive for the FCs.

"I think if there was nothing monetary in it for most FCs, it would be few and far between that took it upon themselves [to mentor] just because they're nice people. They're very self-absorbed. They're sales people. They're on commission most of the time," she says.

As a program manager in the late 1990s at First Nationwide Bank and Cal Fed, Branco knew it was important for FCs to "be in the game" with LBEs. Therefore, FCs were expected to bring in at least 30 percent of total 'team' production. (A team might consist of an FC and three LBEs.) For example, if monthly GDC was $60,000, the FC should have produced at least $18,000 or he or she would not get credit for the total amount on his/her grid.

Minimum production levels

'Just about every LBE program you'll see has some sort of an override function built in that compensates the dedicated reps for business the [licensed] bankers do.'

—Bruce Stave, First Brokerage America

Victor Pulizzano, director of retail investments at Susquehanna Bancshares (Lititz, PA), a bank company with $13 billion in assets, says Susquehanna's investments program relies on FCs to mentor LBEs. "And, of course, they're compensated for that."

In addition, Susquehanna has minimum production levels for both FCs and LBEs. "In fact, the FCs are not compensated on any of the LBE revenue unless they hit a minimum personal production [level]," he adds.

That arrangement fosters a good mentorship on the part of the FC. "And they have a lot of incentives to coach them (LBEs)," Pulizanno says.

Susquehanna's program has a roster of close to 25 FCs and about 70 LBEs. "A lot of those did come from the last merger with Community Banks, Inc., in November of last year." The LBEs sell fixed annuities and life insurance. "We just added term life this last year," Pulizzano says.

But financial rewards for mentorship aren't the only answer to building a successful platform program. LBE programs need to incorporate other incentives, interaction and team goals to keep them viable. Branco cites "structure and simplicity" and "team and training." The two S's and two T's.

The importance of structure

Structure, she says, helps encourage better coaching. This means meeting one-on-one every week with each LBE. If a FC is responsible for several LBEs, they can meet for breakfast or meet after work for pizza in a small group setting. Or, Branco says, meet for 10 minutes with each one personally on a different day of the week.

"Ask them how it's going, what are you struggling with, what are you most proud of, what have your experiences been like, how do you feel about profiling people. Really make sure that they have a comfort level and that they're doing the right thing," Branco says.

In addition, Branco encourages communication between the FC and each LBE a couple of times a week in the form of an e-mail or phone call. That way the LBE doesn't feel abandoned and the FC has an opportunity to pick up on potential problems or weaknesses.

"What I like the LBE to feel is there are definitely eyes and ears on them…" she says.

Simplicity folds together process and product, Branco says. "In other words, you want to possibly limit how much they can handle… up to $50,000, up to $100,000."

The LBE's product line should be simple as well. Limit the number of fund families and/or number of annuity and other insurance products. "That way their learning curve is smaller; they're not going to have to learn everything," she says.

A team approach is also critical. "I can't tell you how important it is that the FC makes those LBEs feel like they're part of an investment team," Branco says.

Creating a learning process that helps LBEs understand customer suitability, risk tolerance and how to make investment recommendations comes from strong communication, regular meetings, and fostering a team feeling. For instance, when a wholesaler comes in for a morning meeting with branch staff or to take an FC to lunch, the LBE should be included, too.

Finally, training can come in the form of wholesalers, in-house trainers or managers and scheduled sales or training meetings. "At least quarterly you need to get these folks together and discuss different issues… and brainstorm," Branco says.

Making contact each week

At Susquehanna, FCs are supposed to have weekly contact with their LBEs. "It doesn't have to be face-to-face. Our geography doesn't allow that in a lot of cases. But they do have to have contact each week with the LBEs. It could be a 10- or 15-minute call. It could be a skill-building session, such as outbound calls, and those types of things," Pulizzano says.

He also relies on the proactive efforts of Craig Caplan, Susquehanna's LBE program manager, who is also a regional sales manager. "He does a lot of hands-on training, a lot of skill-building sessions, a lot of conference calls monthly," Pulizzano adds.

"We have a lot of mandatory meetings just for the LBEs every year, so we're active in keeping them on track," he says.

Quarterly meetings are held for members of Susquehanna Wealth Strategies, as well as bank management, FCs, and even top-producing LBEs. "We really strive to make our quarterly meetings very eventful, very meaty, full of resources," Pulizzano says.

'Some of our best FCs tend to be some of our better coaches… You wouldn't think that.'

—Victor Pulizzano, Susquehanna Bancshares

FCs get tips, listen to success stories, and hear how others are working with LBEs. "That's where the FCs pick up a lot of their mentoring, coaching and LBE skills as well," he says.

Like Branco, Pulizzano emphasizes the importance of teamwork in the success of the program. While he admits the term "teamwork" may sound clichéd, "it's really key with us."

"That's one of the reasons why we get the FCs involved in mentoring. That's why we tie their compensation together. That's why we give them additional incentives. That's why we share success stories… The method behind the madness is that we want them to be good team members, and that works to a great degree," Pulizzano explains.

Even the top producers take the mentoring role seriously. "Among the ranks of the (FC) leaders, some of our best FCs tend to be some of our better coaches. That turns out to be kind of interesting, because you wouldn't think that," says Pulizzano.

Often the higher producing advisors are thought to be those who keep to themselves and who do not care about others' successes.

"But our folks do. I think we've set up a really good chemistry between the FCs, LBEs and the branches," says Pulizzano.

Quarterly workshops at Wachovia

At Wachovia Securities, training is an integral part of keeping a large platform program operating smoothly and with consistency. Both financial advisors (FAs) and LBEs, who are called financial specialists, go through comprehensive company-sponsored training programs. An advisor usually works with between two to four financial specialists (LBEs) in a mentoring capacity.

"We do quarterly workshops," says Frank Consalo, regional president for the MidAtlantic, Investment Services Group (ISG), Wachovia Securities. But mentoring is done on a largely individual basis. "We provide the tools and the technology, and the advisor takes that and works with the LBEs to develop a relationship… kind of a business partnership where they're responsible for becoming better, more adept at profiling, uncovering opportunities and trying to learn how to deepen existing client relationships," Consalo says.

Wachovia Securities has created a "template" that is followed by the advisor and financial specialist, and as part of a formal training program each LBE is responsible for setting up and sitting in on six joint appointments with his/her assigned financial advisor.

The training and education at Wachovia Securities is "very well-hued." It's been a process now for close to 15 years. We try to enhance it and improve on it every year," Consalo says.

In the last year, the number of LBEs with Wachovia has grown from about 3,000 to close to 4,000. The number of advisors is close to 1,700—"the most we've ever had," says Consalo. The LBEs are Series 6 and licensed for insurance, although some do have a Series 7. "If they reach certain parameters, they can become a senior financial specialist," he says. "They primarily refer affluent clients to financial advisors, but they can sell a limited array of mutual funds and fixed annuities."

Setting goals

Another component that Wachovia Securities has incorporated into its LBE program is to set a goal for advisors regarding referrals back to the financial specialists. "They have a number that they are responsible for on an annual basis for referrals back to their bank partners (the LBEs)," Consalo says.

Not only does this help strengthen the relationship between advisor/LBE, but the advisor also benefits from compensation for these referrals. "They can be paid through their grid, and they can also earn deferred comp," Consalo says. "So there's a real win there in terms of the relationship with our retail bank partners from the advisor perspective."

'Probably our most successful advisors come out of the LBE programs,' says Wachovia's Consalo, who estimates that 40 to 50 LBEs make that transition annually.'

The mentoring and training programs at Wachovia appear to be paying off in terms of retaining financial advisors as well. "Our attrition has been less than 1.6 percent for the last year. For the last several years, it's been less than 3 percent."

That retention trend is showing up at the LBE level, too. "We have definitely started to see a reduction in the attrition of the LBEs as well," he says.

Many agree that financial advisors are not necessarily natural mentors. "Many FCs are not trained or psychologically equipped for the mentor role," says Stava. "So how do we help them do that?"

Provide a game plan for the FC, he says, and let them know what's expected of them in their mentor/coach role. Include those expectations and several tools and ideas to help them. That could be sitting in on an LBE presentation, or letting an LBE sit and listen when the advisor is telemarketing, Stava says.

Formalizing the relationship between advisor and LBE—with buy-in from senior bank management, of course—helps catch potential breakdowns in communication. "In probably 88 percent of the bank programs that have LBEs out there, it is informal, it's not measured," Stava says.

To help keep the mentoring program on track and to help measure consequences, Stava has come up with a branch partnership agreement. "It provides a quarterly business plan template for an FC to use with their branch manager and their LBEs."

A team approach is critical. 'I can't tell you how important it is that the FC makes those LBEs feel like they're part of an investment team.'

—Patti Branco, PV Management Solutions

It's a one- to two-page template that spells out the goals of the team in terms of revenue and referrals by the branch, the LBE and the FC; outlines marketing efforts that will be done by each party; lists referral techniques and training; and provides a consistent way for brokerage and bank regional managers to evaluate each branch team's performance in each category.

"The advisor has to sit down with his branch manager and his LBEs and everybody has to sign off on it," Stava says.

When the job gets done, the advisor earns his override. But an advisor who is found delinquent in his coaching/mentoring activities will forfeit his/her LBE override for the next quarter. "That gets their attention," Stava says.

Monitoring the LBE team is an important ongoing process as well. At Susquehanna, LBEs are evaluated every six months. "The LBEs have a minimum production expectation, and we do remove people from the LBE program, too," Pulizzano says. "This last six months I think we removed about five or six from the LBE ranks."

But LBEs who are successful at their job often enjoy the side benefits of increased job satisfaction and consideration for promotions.

Developing a 'bench'

"A properly run LBE program provides a bench for developing future financial consultants, and there's no better FC than someone who's grown up through the farm team," says First Brokerage America's Stava. "Out of my 28 FCs, two of them have been internally promoted from LBE just in the last six months. They're both doing really well."

The same is true at Susquehanna. "We have three LBEs who have become successful financial consultants," notes Pulizzano.

The LBE program has been a useful recruiting tool at Wachovia Securities as well.

"Probably our most successful advisors come out of the LBE programs," Consalo says. He estimates that for the program's six regions, probably 40 to 50 financial specialists make that transition annually.

"They do very well. I think it's because they understand the systems and technology. They understand the process of the organization, the commitment to service; they really are dedicated," Consalo says.

Another factor that Consalo says has been beneficial to the program is that more advisors have been recruited to increase coverage in the branches.

"Having advisors responsible for fewer branches has enabled advisors to spend more time with their existing team instead of being so spread out," Consalo says. "By increasing our head count, it's improved the level of one-on-one communication with the advisor."

'A properly run LBE program provides a bench for developing future financial consultants. There's no better FC than someone who's grown up through the farm team,' says Stava.

It's clear that mentoring is critical to the operation of a successful platform program. But providing the right climate and chemistry in the workplace, and giving advisors appropriate tools, goals and financial incentives are an important part of the inter-relationship between branch, advisor and LBE.