Sunday, 27 of May of 2018

Happy Birthday Bank Brokerage

This is a big year for bank brokerage.  While it’s difficult to authenticate the official birth certificate, most industry veterans agree 2012 marks the thirtieth year of banks’ move into “nontraditional deposit products”.


Happy Birthday Bank Brokerage

And, like most birthdays, it’s an apropos time to reflect upon the past and look toward the future.  For me, these have been extremely rewarding years, full of growth, challenge and promise.  During these three decades, bank-based brokerage provided me with countless opportunities to get to know and help others, while making a good living in the process.  


Yet, the timing of our industry’s birth impresses me as both an odd and opportunistic.


In 1982, unemployment was 10.8 percent, the country was running the largest deficit in history (projected $80 billion), inflation was over 14 percent and interest rates were in the high double digits.  Banks failures reached a post-depression record at 42 and the Dow Jones Industrial Average fell from over 1,000 points in the prior year to 776 (until the Reagan Bull took off on my birthday, in August 1982).


Yet, even in the face of such significant headwinds, Dan McConnell of INVEST, John Robison of UVEST and Alan Blank of PAMCO decided to capitalize on the loosening grip of Glass Stegall (through the passage of the Garn-St. Germain Depository Institutions Act) by doing the unthinkable -putting voracious deposit-gobbling brokers in bank lobbies.


It’s an understatement to say that in early days we were the subject of considerable ridicule.  Most bankers looked on with disdain, hoping we were but a flash in the pan, while traditional brokers guffawed when characterizing the new upstarts.  Endless chatter over disintermediation of deposits echoed around the C Suite, while Trust Officers looked condescendingly over their spectacles with few worries this nascent folly would put a dent into their long-established bastion.


While E.F. Hutton was talking, Smith Barney was making money the old fashioned way, and Merrill remained bullish on America (way before the E-Trade baby), the bank brokerage industry plodded along, navigating its way through a maze of regulatory ambiguities and infighting (think Interagency Statement on the Retail Sales of Nondeposit Investment Products), ignoring the ongoing skepticism and chiding of their banking counterparts and deflecting growing contempt from Trust.


Fast forward several years and the only one listening to Hutton was Shearson Lehman (oops, did I say Lehman), Smith Barney, was experiencing a bit of an identity crisis (I mean Citibank/Citigroup/Citi or is it Morgan Stanley), while our friends at Merrill were absorbed by one of those banks they so enjoyed chiding.


Yes, the landscape has changed significantly and will continue to do so as we mature.  But somehow, we made it through our infancy and our awkward adolescence (sans bicycle helmets, scheduled play dates and trophies for losers).


But, alas, it is time to grow up.  We have to stop relying so much on our parents and start to give more back.  Our industry is mature now and needs to act accordingly.  It’s time to make our own way.  No more whining about referral entitlements, unengaged lenders, unresponsive executives and a lack of resources.  We’ve come along way toward creating competitive parity from those early pioneering days.  Yet, we risk all we have achieved, the lessons of our youth, if we turn a blind eye toward the new competitors; toward those arriviste boutiques and independents, who have clearly passed the crawling and walking stages and are beginning to run at an ever quickening pace.


So it is with found memories and boundless hope that I turn the page eager to see what the next thirty years brings.


And, as I blow out the candles, I leave you with my wishes for a bright future:

Best Wishes for the Next Thirty Years


  1. We put an end to our sibling rivalry with Trust (learn how here).
  2. We repay our parents through improved corporate contributions and build businesses, which truly stand on their own two feet (learn more here).
  3. We develop processes to provide our clients with a consistently positive and compelling experience (learn how here).
  4. We bury concerns over disintermediation (once and forever).
  5. We seek to understand our banking counterparts before seeking to be understood, referring as much business to them as they do to us.
  6. We upgrade the quality of our advisors, moving from glorified annuity and mutual fund sales people to professional guides and luminaries capable of solving complex financial needs.
  7. We remove artificial “lines in the sand” relative to market segmentation and client ownership and begin using affinity-based marketing techniques.
  8. We come to grips with variable-based compensation plans, and unlimited earnings potential.
  9. Bank executives take the time to truly learn how this business works and eschew the practice of thinking it is or has to be, akin to traditional banking.
  10. Bank executives trust their wealth management programs to manage the bank’s investment portfolio and their personal portfolios versus outsourcing these to competitors.
  11. The battle between the suitability and fiduciary standards ends, with an understanding there are many ways to do both the right and wrong things for/to clients.
  12. Our government gets its act together and removes the onerous, complex and business strangling regulation it has besieged upon us.
  13. We go beyond financial vital statistics and truly get to know our clients by understanding their relationship with money and others (learn how here).
  14. We incorporate techniques and processes into our platforms to close the gap between “investment” performance and “investor” performance (learn more here).
  15. We recognize social media and other new forms of communication will only increase at an exponentially quickening pace and, we must keep up, like it or not.
  16. That our fees are always transparent and evolve from an asset under management structure to one that pays for value-added service and advice.
  17. We not lose sight of new competitors, and their ways of doing business.
  18. We reduce bureaucracy and become early adopters of new strategies and tactics to remain relevant and competitive.
  19. We develop branding which distinguishes this channel as the preferred choice for clients.
  20. That banks once again regain the prominence they held with the public, and their wealth management arms not only survive the next several years, but also succeed beyond the wildest beliefs of both our critics and advocates.


If I were to roll these twenty wishes into one – it would be we realize doing business as usual will put us out of business.


We’d love to hear your comments and wishes.  Share them with us below.


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