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Cross Selling Between Banks and Advisory Firms Not Panning Out

By SHUSTAK REYNOLDS & PARTNERS of Shustak Reynolds & Partners, P.C. posted on Sunday, September 11, 2011.

Over the past decade there was a mad dash for banks to snap up advisory firms, on the belief that there would be substantial cross selling opportunities for banks to sell advisory services and other financial products to their existing customer base, bringing in substantial revenues for the banks.

After suffering major revenue shortfalls from their mortgage and credit card operations, big U.S. banks are looking to their wealth management businesses to help pick up the slack. But to date, they aren’t getting as much traction as they expected from efforts to cross-sell investment products to their bank customers.

One-third of 75 bank financial advisers surveyed online by Aite Group LLC during the first quarter said they generated no revenue from internal referrals. Another third said internal referrals generated some revenue, but less than 25% of their previous 12-month total. Only a third of the respondents said internal referrals generated more than a quarter of their revenue, but many of those got much of their business from mass-market retail bank customers, who tend to be more time-consuming and less profitable.

Part of the problem could be the way banks reward advisers, and whether they promote a commission or fee-based business model, according to Aite’s report.

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