(For other news from Reuters Wealth Management Summit, click here)
* Bank-owned brokerages pushing loans to wealthy clients
* Strategy promises revenue unrelated to market performance
* Internecine battles, poor data barriers to success
By Jed Horowitz
NEW YORK, June 13 Scrambling to plug revenue
holes created by crackdowns on credit card fees and falling
brokerage commissions, big U.S. banks are pushing a strategy
they've tried with limited success in the past - cross-selling
They are inducing their stockbrokers to push mortgages,
other loans and insurance to wealthy investors, while pressuring
their lending officers to market investment products to
Executives at Reuters Global Wealth Management Summit last
week said cross-marketing is more important than ever before.
New regulations have limited banking fees and a lingering
distrust of the financial services industry has dented
When asked for his major strategic focus, Greg Fleming,
president of Morgan Stanley's wealth management division,
replied, "Banking and lending - one of our newest significant
More than half of Morgan Stanley's 16,000 brokers have
marketed loans to their clients, he said, and loan balances
should surge as the company builds its deposit base to fund
them. The investment bank converted to a commercial bank holding
company during the financial crisis, and expects to be among the
top 15 U.S. banks by deposits when it completes its acquisition
of Citigroup's Smith Barney brokerage.
At rival Merrill Lynch, which Bank of America
bought in 2009, more than half of the firm's almost 15,000
brokers have helped sell a mortgage this year, a bank
DON'T CALL THEM BROKERS
Many brokers say they are uncomfortable peddling unfamiliar
productsl; some actively resist. And one regulator said the
stories he hears about inducements to cross-sell some investment
products raises concern.
But brokerage executives insist that their strategies are
responsive to client needs. They cite internal studies showing
that wealthy clients want their stockbrokers to supplement
traditional investment sales with loans, insurance, estate
planning and investment banking referrals.
"Investment performance is way down on the list of things
that clients want," said Robert Mulholland, who oversees
management and strategy for the 7,000 or so brokers at UBS AG's
Wealth Management Americas division. "The harder thing
is to get (brokers) to want to sell them what they need."
Like other banks, UBS has moved top investment banking and
asset management executives into its wealth management division
to help build bridges across the global enterprise. Morgan
Stanley has deputized more than 150 private banking experts to
work with its brokers and moved its middle-market capital
markets business to the wealth management division.
(For a report on cross-selling at European private banks
At Wells Fargo & Co. investment assets referred to
the Wealth, Brokerage and Retirement division by bankers soared
25 percent in the first four months of 2013 from a year earlier,
said David Carroll, head of the division and its 15,000 brokers.
"It's a big number that we have not released," Carroll told
Reuters. "It's denominated in billions of dollars.
Measured by revenue, about 10 percent of the $1.2 billion
that Carroll's group generated in both 2011 and 2012 came from
internal referrals at Wells Fargo, the No. 4 U.S. bank by
Merrill Lynch's brokerage clients want cash management
services, loans and other products that advisers are promoting
to them, said John Thiel, Merrill's head of wealth management
"They say, 'Yeah, we'd rather do that with you," Thiel told
Reuters. "They can clear up problems with just one phone call."
To be sure, brokerage executives have good reason to be
enthusiastic because their pay is now tied more closely to the
success of all parts of the banks rather than just the success
of a single broker-dealer operation.
The renewed sales efforts make strategic sense, consultants
add, though they warn that cross-marketing remains a
near-Sisyphean challenge for banks.
"What you see today are pockets of excellence, but the
holistic engine of cross-marketing and selling is not really
working," said Sandra Nudelman, associate principal in the
banking practice at McKinsey & Co. "There really aren't any big
banks that are doing it well."
The problem is both organizational and cultural. Since the
financial crisis, wealth managers like to say that clients are
more loyal to advisers than the firms. Cross-selling, however,
has much more to do with the company's goals.
"Loans, 401(k)s, mortgages, cash management services and
services like trust and estates and farm and real estate
management all serve to cement the client to the firm at the
expense of the adviser," said Brad Hintz, a brokerage industry
analyst at Sandford C. Bernstein who once worked at Morgan
Stanley and Lehman Brothers. "Financial advisers know that their
personal linkage with a client is weakened as the relationship
becomes more institutional."
Few brokers have illusions about the new strategies.
"It makes the clients stickier, and sometimes it's a good
business practice to be able to offer them things you didn't
have before," said John Waszolek, a 39-year brokerage veteran
who has worked at Merrill, UBS and Morgan Stanley.
Waszolek, who now runs a team with some $20 million of
client assets at Raymond James & Associates in Scottsdale,
Arizona, said he understands what "headquarters" wants but the
challenge for brokers to "focus on offering only what your
Other veteran brokers said they resist cross-sales because
they don't want to "throw clients over the wall" to unknown
colleagues who may offer poor service or steal the referral.
A broker at a large bank-owned company said two clients
walked away from refinancing a mortgage because of long
processing delays. Another said he referred a client to an
outside bank that was offering better rates. A third said
referrals create headaches, like having to explain why his quote
might be higher than what lenders at the bank later offer.
These brokers spoke on condition of anonymity because they
are not authorized to speak to the press.
(For more summit stories see )
(Additional reporting by Peter Rudegeair and Ashley Lau;
Editing by Frank McGurty, Lauren Young and L Gevirtz)