JOHNSON BANK (Racine, WI) may not operate one of the. In 2012, Johnson Investment Services (JIS) 12 full-time financial

Transcription

1

2 JOHNSON BANK (Racine, WI) may not operate one of the nation s larger retail bank brokerage programs, but it surely runs one of the most productive. In 2012, Johnson Investment Services (JIS) 12 full-time financial advisors averaged $662,000 in gross dealer concession (GDC), among the nation s leaders in this benchmark. Nor was 2012 so exceptional. JIS, the retail investments unit of $3.2 (assets) Johnson Bank (Racine, WI), has been drawing high production from its full-time financial advisors (FAs) for years. In May, the program reached $1 billion in assets under management (defined here as client investments on the books, i.e., not necessarily managed money.) Nor is the program resting on its laurels. JIS wants to further boost its fee-based revenue component to 50 percent of total program revenues over the next four years. Johnson Investment Services is projecting about $7.5 million in business this year. Of that, about half a million will be fee-based, which is still well under 10 percent, but a big step up from the $50,000 total of Andrew Singer is editor-in-chief and publisher of Bank Insurance & Securities Marketing. He can be reached at asinger@bisanet.org. just a few years ago, notes Jack Nelson, senior vice president, Financial Advisors Sales Manager, JIS. Reaching 50 percent fee-based revenue by 2017 is a doable goal, he says. We re on our way, Nelson tells BISM. Advisors are getting In 2012, Johnson Investment Services 12 full-time financial advisors averaged $662,000 in gross dealer concession. adept at doing fee-based business. If they do succeed, it won t be too surprising. This is a program that seems to have found the proverbial secret sauce, according to Steve Dowden, CEO of INVEST Financial (Tampa, FL), the third-party marketing firm that has worked with Johnson Bank for more than 25 years. JIS has senior bank management support, good program management, strong partners both internal and external indeed, all the classic elements. Johnson has that and consistency, adds Dowden, who 10 Bank Insurance & Securities Marketing / Summer 2013

3 notes that the program s top producer, Rob Jacobsen, has been with Johnson Bank (and INVEST) for 27 years. A Harris Bank connection Two years ago, family-owned Johnson Bank restructured. It brought in Tom Bolger, one of Harris Bank s top Wisconsin executives, as CEO of Johnson Bank and Johnson Financial Group, the parent company. Peter X. Engel, a former Harris Bank and M&I Bank executive, was hired as executive vice president of consumer banking. Nelson, a 30-year financial services professional, followed in August He had worked with both Bolger and Engel in the past. Part of the restructuring plan was to better integrate investments within the bank. Historically, the bank investment business has been about winning referrals from the retail bank or asking, asking, asking, as notes Nelson. But here they were looking to develop a true partnership with retail, mortgage banking, personal banking, private banking, insurance, and so on. The idea was that everyone was to be focused on the client s needs. Thus, it might even be a mortgage officer who initially tells a bank client, We can also help you with investments. According to Nelson, the mortgage guy is just not talking about mortgages. For 20 years Nelson ran his own independent financial planning firm, Jack Nelson & Associates. From he was a district sales manager for BMO Harris Bank, based in Wisconsin, responsible for recruiting, training, and mentoring financial advisors in the bank channel environment. He holds the Certified Financial Planner and Certified Retirement Counselor designations. In all, that s not a bad background for building a fee-based business. Nelson adds that fee-based isn t for all customers. Some people may need only a single product, and it wouldn t be appropriate to impose a fee-based model on them. No retail investments program really wants to be 100 percent fee-based, he suggests. The product breakdown at JIS by dollar volume as of May 31, 2013, was as follows: trailers, 17%; mutual funds, 11%; unit investment trusts (UIT s), 32%; bonds, 5%; stocks, 4%; REITs, 10%; variable annuities, 11%; investment advisory, 7%; fixed annuities, 3%; insurance, less than 1%. That s a relatively high share of UITs (32 percent). UITs are particularly popular with Johnson s mass affluent clients, Nelson notes. It s an area that mimics advisory. In addition, real estate investment trusts (REITs), both publicly traded and non-traded, continue to generate interest, as well as some concern, given the regulatory scrutiny that some REITs have received lately. Finding new reps JIS has recruited advisors lately from a range of places, including other banks and wirehouses, as well as from other parts of Johnson Bank. The program s business partners, i.e., Johnson s private bankers, mortgage bankers, personal bankers, et. al., are often a good source of leads, too. An individual may impress a Johnson private banker at a party, say. Later the banker will tell Nelson about the individual. This person caught my eye Nelson worries that the industry is aging, however, and that its financial advisors, many in their 50s, are not always best suited to deal with younger clients. Nelson also has three pilot advisor candidates, all currently working as sales assistants to full-time advisors; they have great upside potential, in his view. All came from different parts of the bank: administration, banking, and mortgage banking. (JIS has no platform program, which some banks use to develop new sales talent.) They possess excellent interviewing skills, have developed a good affinity with clients, and make use of decent analytical skills. They are also in their 20s and 30s. Each has a lot of capacity to grow. Nelson has found other advisors by beating the bushes in the local community and from telling Johnson Bank s story. Johnson has all the key program elements, and consistency, says INVEST s Dowden, who notes that the program s top producer has been with the bank for 27 years. We re starting to get phone calls. Many view stockbrokers as hunters, but Nelson sees his financial advisors more like gatherers. They are gathering assets in the course of developing good client relationships. Because the investment program is relatively small, advisors can stand out more than they might at some larger institution those with 300 or 400 advisors, say. This has some appeal in the recruiting process. Do you want to be heard? Nelson asks candidates. Do you want to be noticed? That is possible at JIS. Nelson himself reports to Engel, the head of consumer banking, who in turn reports to the CEO Tom Bolger. Nelson, by this reckoning, is only two steps away from the CEO, and Johnson Bank is indeed a relatively flat organization, another potential attraction to a certain kind of advisor. Another plus, too, in Nelson s view is the bank s independent insurance agency, Johnson Insurance Services, the largest in Wisconsin. Among other things, it means Johnson Bank can offer its clients top-notch insurance services, says Nelson, which is important in a holistic approach with clients. Building the advisory business JIS s No. 1 growth area is advisory. As the unit s mutual fund sales have declined, the advisory business has increased almost on a one-to-one basis. We have no proprietary products, says Nelson. Our focus is on advisory, i.e., asking clients: Where are you going? What is stopping you from getting there? The financial planning process that they favor, or borrow from, is like an RFP (request for proposal), he explains. You begin by defining the specifications for the client. It s relatively easy to add investments to a portfolio. What s more difficult is explaining to the clients how these investments help them reach their financial objectives. In past years, investment reps were basically portfolio managers, observes Nelson. Now they act more like relationship managers. It is important to us that our clients understand our commitment to them is not transactional in nature, EVP Engel told us. CEO Tom Bolger, as noted, was formerly with Harris Bank, Summer 2013 / Bank Insurance & Securities Marketing 11

4 which focuses on financial planning. He decreed upon his arrival that Johnson would assume a planning stance toward its clients, and along these lines all bank areas brokerage, wealth management, private banking, insurance use the same planning software (Financial Profiles). The bank favors an interdisciplinary client approach whenever appropriate. Thus, when a business partner a mortgage officer, say refers a client to investments, what happens first is that the mortgage banker and financial advisor meet and compare notes about the client. What kind of mortgage does he have? Has he just moved to the area? What s his family like? And so on. The client shouldn t have to repeat the same information to the advisor that was earlier provided to the mortgage banker or personal banker. One fact-finding interview should be sufficient Keys to success: 1) Become an expert at developing great client relationships, and 2) find really good partners, like the institution s personal bankers and mortgage bankers. if all parties within the bank are communicating effectively. The second step is a meeting usually a joint meeting where the financial advisor and mortgage officer meet with the client. With a team approach, one often asks: Who is the lead relationship manager? Here it varies. The client might have a compelling need to refinance a mortgage while interest rates are low, say, so the mortgage banker could be the lead manager. It all depends on circumstances. Maybe the client never established a home equity loan but now needs one as a safety valve. The client could move over to the banking side. In some cases, the financial advisor is the relationship manager. Most banks recognize that interaction between internal partners is a critical element of a successful investments program, but execution is another issue, observes INVEST s Dowden. Johnson Bank executes well, in his view. Direction comes from the top. Senior management recognizes that the institution has multiple business lines, and it has told its managers and executives that we expect you to work together. Thus, Jack Nelson and his team may represent one of our business lines, but they view the client from a broader perspective to make sure we are helping them meet all their financial goals, says Engel. Johnson Bank, notes Dowden, is owned by an iconic family that has built businesses (like Johnson Wax, Pledge, Raid) that have stood the test of time. That continuity makes a difference. A client-based approach JIS approach differs from that of a typical bank brokerage, in Nelson s view. Among other things, the bank tends to minimize the use of the word investments. It s not a brokerage shop that he is running at Johnson Bank, Nelson says. It s an advisory shop. Or as Samuel C. (Sam) Johnson, fourth generation leader of SC Johnson, the family business, who founded Johnson Bank in a trailer more than 40 years ago, put it: We re concerned about the next quarter the next quarter century. Much depends on the client s time line. For example, is the client looking to go back to school and get a master s degree next year? Then it behooves Johnson to make sure she has enough cash on hand when that happens. In a client-focused approach, clients should always know why they own certain investments, emphasizes Nelson. Many compliance problems arise because clients don t understand the products they hold and don t know why they are holding them. They didn t know what problem we were solving. Why are they now in CDs that are paying almost no interest? Because it s your daughter s wedding next year, and you re going to need cash. (Sometimes clients have to be reminded.) Or, because you said you wanted to buy into your father s business. That s why they are holding cash. Make sure the client gets it, says Nelson. What about handing off high net worth clients? Johnson tries not to draw a line in the sand. It is always a collaborative effort. The bank realizes, too, that a client doesn t want to work with more than one advisor at a time. Hand offs can go both ways, says Nelson. Sometimes [the] trust [department] has a client who belongs in our wheelhouse. Some clients have more complex issues, and they really do belong in trust. Much of this is really common sense. If a client forms a tight bond with an advisor, to ask that client to change could be inappropriate, Nelson explains. As noted, Johnson Investment Services announced in May that it had reached $1 billion in assets under management. Breaking the billion-dollar mark is a tremendous accomplishment, said Nelson at the time. We can attribute this achievement to our client focus, financial planning approach and rigorous investment discipline. All of this is delivered by one of the best advisor teams in the industry, he added. Asked how they reached such a high AUM at least relative to their size Nelson told us that some advisors have worked in the same branch for 25 years and more so they have developed deep relationships with clients. Given the program s high productivity, Nelson was asked if they ever thought of forming their own broker/dealer. The world s become a fairly complex place, answers Nelson. Investment products can be complicated, and compliance rules and regulations are increasingly intricate. Ensuring best practices in an increasingly complex world can bring expense to a program, notes Nelson. At this point, our focus is on the client, on developing the client relationship, and he says they happen to have a good partner in INVEST. In March, Johnson Bank announced it had signed a new three-year contract with INVEST. Indeed, if they were to leave INVEST, adds Nelson, the cost of doing business with a client would go up. All this could change in the future, of course. But they would have to believe that they could excel be an A player in all these additional roles, e.g., compliance, technology, and so on. At present, all they want to be is a Grade A relationship manager. Continued on page Bank Insurance & Securities Marketing / Summer 2013

5 Johnson Bank Continued from page 12 The two keys Asked about the key to developing a successful program, Nelson recalls what he was told many years ago when he was clerking at a law firm. The firm s partner emeritus happened to maintain an office in proximity to the firm s four or five young law clerks. The partner emeritus would come to his office for only one or two days a month, but during that time he would do an amazing business, recalls Nelson. Sometimes the partner would talk to the clerks. In one of these conversations, Nelson asked the older partner: How do you get to be so successful? You can only really be successful in two things, answered the partner, and it is best to concentrate on those two things. First, make sure you re an expert at something, explained the older man. Second, be really good at selecting the other people on your team. That s what Nelson has tried to do with Johnson Investment In May, the program reached $1 billion in assets under management (i.e., client investments on the books, i.e., not necessarily managed money.) Services: 1) Become an expert at developing great client relationships, and 2) find really good partners, like the institution s personal bankers (internally) and its third-party marketing firm (externally). o Reprinted with permission of Bank Insurance & Securities Marketing magazine 34 Bank Insurance & Securities Marketing / Summer 2013