Bank Brokers Increase Fee-Based Sales

More bank brokers are selling fee-based products, but those sales are not boosting bank revenues, according to a study.

A study of 47 depository institutions published this week by the Bank Insurance Market Research Group found that brokers at nearly half (48%) of banks were compensated on a fee-based schedule (as opposed to commission) for at least some investment product sales. Last year, only 36% of banks reported the sale of fee-based products like mutual fund wrap accounts in their retail brokerage units, according to a release from the research firm.

Yet despite the increase in fee-based sales, fee-based product activity typically accounted for only 6% of total program revenues at the banks—showing no increase over earlier studies, the release said.

“Banks would like to boost advisory product sales, but they still trail wirehouses and other investment product providers by a wide margin,” said Andrew Singer, author of the study, in the release.

The study of bank brokerage compensation also found that bank brokers average a new high mark of $115,573 in annual compensation, up from $105,892 in 2007. Program managers earned $219,468, up from $210,198.

“This year’s study suggests a growing competition for reps among banks,” Singer said. But with that said, turnover was lower than in recent studies: 79% of banks reported annual broker turnover at 10% or less, the firm said.

The leading cause of turnover at 35% of institutions was “reps leaving to join other bank programs.’ In past studies, “dismissal of sales reps” was the leading cause of turnover by a wide margin.



The 2008 Bank Brokerage Compensation Study, conducted in collaboration with the Bank Insurance & Securities Association (BISA), is available for purchase here.