Analysis: Brokers miffed as banks seek cross sales

By Joseph A. Giannone

NEW YORK (Reuters) - Banks keen to grow revenue want their brokerage arms to pitch more loans and credit cards to clients, a plan resented by financial advisers.

Bank of America Corp <BAC.N> and Wells Fargo & Co <WFC.N>, which are among several banks that also own brokerages, have promoted "cross-selling" bank products to advisory clients as a key strategy for plumping up profits. Wells Fargo brokers, for example, are encouraged to promote retirement services, mortgages and other accounts.

The strategy, however, continues to meet resistance.

Many advisers say there is little financial incentive for them to hawk bank products, while some worry the practice could hurt their relationship with clients.

"A financial adviser at an investment firm doesn't want to be told what to do. Period," said Timothy White, a recruiter at Kaye/Bassman International in Dallas. "Advisers also understand the client doesn't want to be sold anything."

Cross-selling initiatives, though hardly new, gained some attention in early September when BofA dismissed wealth management boss Sallie Krawcheck and placed Merrill's 16,000 brokers under the watch of a career commercial banker.

The shake-up was partly driven by Krawcheck's resistance to more aggressive cross-selling efforts, brokers said. Her departure fueled worries that without her advocacy, BofA would turn financial advisers into a sales arm for the bank.


Banks are being squeezed by a sluggish economy and post-crisis regulation to rein in lucrative sources of fee income. Financial houses could lose $12 billion next year just from caps on debit-card and overdraft fees, according to Javelin Strategy and Research.

In the wake of the 2008 financial crisis, commercial banks consolidated their control of the brokerage industry. Many advisers, especially those whose careers were built at independent firms like Merrill Lynch or A.G. Edwards & Sons, still bristle at the idea of working for a big bank.

Thousands of brokers avoid the problem altogether, by fleeing in recent years to become registered investment advisers (RIAs) or to join smaller, regional firms that are independent of banks.

Indeed, some advisers say even if cross selling is more financially lucrative, it isn't worth it because of the risk of alienating clients. Steering an investor to the mortgage department, or to open a credit card account, can backfire if that customer has a poor experience.

Referrals to a bank's lenders might be rejected, too.

"You don't want to lose a relationship. The bank might screw it up," said New York recruiter Michael Kelly, citing broker clients he says are strongly opposed to cross-selling. "I'm not sure it's a good thing to introduce clients around."

Several current and former Merrill advisers also contend there's little need to sell BofA's products. Merrill pioneered a cash management account with checking in 1977 and has long offered charge cards, debit cards and portfolio-backed loans.

"What does BofA have to offer our clients? Financing and checking," said Brian Amidei, a Palm Desert, Calif., adviser who led two partners and five other team members away from Merrill to join start-up brokerage HighTower Advisors in May. "We already had checking accounts."


Merrill spokeswoman Selena Morris said the firm's advisors get no financial incentive to make referrals or sell loans and banking accounts. Sales are driven instead by client needs, she said, which can then boost satisfaction.

Wells Fargo Advisors spokesman Tony Mattera said the third-largest U.S. brokerage does not set sales goals or mandates, but that advisers are compensated for referrals. Offering loans, trust services and deposit accounts can strengthen client relationships, he said.

Bank executives say internal referrals can also benefit advisers as wealthy corporate and investment bank clients can also be steered toward brokers.

Some industry watchers believe banks might get better results with stronger incentives for advisers.

"Banks need to put together a compensation plan that rewards bank advisors and promotes the achievements of advisors who leverage internal partners," Aite Group senior analyst Sophie Schmitt said. A recent Aite survey of brokers found that more than one-third of respondents did not generate any revenue from internal referrals.

To be sure, not all advisers are opposed to cross-selling, and many believe that marrying wealth management with banking services is attractive to investors and financially rewarding for their own practices.

A valued customer may call from a car dealership seeking a better auto loan rate, while another calling from the airport may need to transfer money between accounts, said Nadia Allaudin, a Merrill broker in Los Angeles for 12 years.

"I've never been asked to sell something at this firm. All the opportunities I'm seeing within my practice come from clients asking, 'Can you do this for me?'"

Ultimately, brokers insist their intent is to preserve business relationships built over years and even decades.

"The relationship is not based on the bull logo; it's based on the adviser," said Robert Black, a former broker at Merrill, Donaldson Lufkin & Jenrette and Alex Brown & Sons who last year launched Baltimore wealth management boutique, Harbor Investment Advisory.

"If you don't feel right about a product," Black said, "you shouldn't be forced to sell it."

(Reporting by Joseph A. Giannone. Editing by Jennifer Merritt and Bernadette Baum.)