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Banking on Clients

No overhead and access to top-shelf clients are two reasons advisors move to banks.

By Deborah Salter Green

J. Brian Pusateri CLU, ChFC, used to run his own financial services firm. Now he works in a bank, and he’s happy about it. Pusateri, from Greenville, S.C., a 14-year Million Dollar Round Table (MDRT) member with six Court of the Table and four Top of the Table honors (and a member of NAIFA-Greenville), has been in the financial services industry for nearly 25 years. As an independent agent, he started his career in Ohio, and has spent the last 12 years in Florida.

About five years ago, he got an interesting phone call. A headhunting firm, representing one of the United State’s largest banking chains, was hiring experienced financial advisors. The firm hired 19 advisors, all MDRT Top of the Table members.

Pusateri was intrigued by the lack of overhead costs to himself and, of course, the access to top-echelon clients.

Pusateri, who for some time had been wary of banks and large investment firms encroaching on clients through their new financial planning and insurance sales divisions, became one of the 19.

The move, however, proved frustrating. “I came from an entrepreneurial environment,” Pusateri says. “I was used to running my own firm, making my own decisions and working with a certain amount of freedom. Very large banks, however, are almost as bureaucratic as a government organization. My advice to other advisors is: If you’re used to working in an entrepreneurial environment, don’t go to the biggest banks … an entrepreneurial spirit and bureaucracy are not a good match.”

Within two years, this bank had lost most of their Top of the Table advisors. Pusateri left after a year and a half. “The very biggest banks don’t succeed with high-level advisors because a banker is generally put in charge of the insurance division,” Pusateri says. “A banker is not trained in insurance, and doesn’t understand it or how it needs to be run. A banker is trained to want immediate return on investment, which just doesn’t work with insurance.”

Top-shelf clients
Although working for such a large bank wasn’t right for him, Pusateri was intrigued by the lack of overhead costs to himself and, of course, the access to top-echelon clients. He looked for a way to get those advantages with the advantage of running his department his way.

The answer was mid-sized banks.

The key for Pusateri was to find a bank that was not large enough to have an unmovable bureaucracy, but still large enough to offer him the client base he wanted. He found mid-sized banks, with a net worth of approximately $11 million to $12 million, to be just right.

“I approached a mid-sized bank in my area,” he says. “They’d been thinking about insurance, but hadn’t done anything about it yet. During my interview, I told the CEO, ‘I’ll take this under one condition, you look me in the eye and say, “I don’t know anything about insurance.’"

The CEO went for this arrangement, agreeing that he and the rest of the bank would “keep their hands off the insurance agent.” This is a key concept, Pusateri says, because advisors need to have the freedom to do their jobs to efficiently generate income for the bank.

An important part of gaining this freedom is making sure the bank management understands what a reasonable amount of production from one agent is. “At first, bankers typically expect a minimum of two to three times Top of the Table production from one agent,” Pusateri says. “This is because the average banker does not understand how our industry works, or how to work in it. You must explain that these are unrealistic expectations.”

One way to do this is to educate the bankers about MDRT. Explain that MDRT requires member to achieve production that only 1 percent of advisors throughout the world achieve. Presented in this light, bank management may rethink their initial production requirements.

Creating a partnership
Once you’ve made a deal, it’s important to get off on the right foot with your banking colleagues, because their clients are our clients, and they control your access to these clients.

The commercial lender is key here. “For instance,” says Pusateri, “my ideal client is the owner of a medium- to small-sized business. The person referring this owner to me is the commercial lender, or, to be specific, the banker in charge of this account.

“If this person does not trust me, he will be extremely reluctant to entrust me with his clients. And you can’t blame him. After all, if I do a poor job, the client will come back to the lender and say, ‘Why’d you set me up with this guy? I hate him.’ A bad relationship between the client and me reflects badly on the lender. Make him look good. A positive relationship is great for the lender. I make the client happy, and the client is happy with the lender for recommending me. Often, the client will call the lender and thank him for recommending me. Now the lender is happy and wants to put all his clients in front of me,” Pusateri says. “Bottom line: Take good care of the clients, but also take good care of your banker or lender. If you do this, your referrals will take care of themselves.”

Once enlisting the trust and cooperation of his lenders, Pusateri made sure they knew his “ideal client,” a small-business owner with a net worth of $10 million or more.

No overhead
One of the biggest advantages of working in a mid-sized bank is that there are no overhead costs for the advisor.

Those with their own firms know how much overhead can eat into your profit, Pusateri says. His deal with the bank gives him 40 percent out of every commission. The bank keeps 60 percent, but out of that 60 percent, they are responsible for all overhead costs. Pusateri’s 40 percent is pure profit.

“Here’s a simple formula for determining if this type of business relationship is economically right for you,” he says. “Figure out how much you’ve got, in your own firm, after you’ve paid all the overhead costs and expenses. If it’s less than the 40 percent you can make from the bank, go for the bank job. If it’s the same or more, stay where you are.”

For Pusateri, the move has been more than worth it.

This article originally appeared with the title “Banking Alliance Allows Advisor to Eliminate Overhead” in the May-June issue of MDRT’s Round the Table magazine. Used with permission. All rights reserved.


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