16 Aug Will that “Star” producer Stay a Star?
By Allan Starkie, Ph.D., Anthony R. Riotto, and Kenton Thompson. Starkie and Riotto were partners with the search firm of Riotto-Jones & Co., New York City at the time this was written (Starkie now with Knightsbridge Advisors, Inc.). Thompson was president of KeyCorp’s private bank unit at the time this was written, but since become president of private banking and wealth management at First Place Bank Warren, Ohio.
There are many factors that can make one broker’s “million dollar producer” just average elsewhere. The authors suggest a way to “translate production”
Less than three years ago simply trying to catch a snapshot of the growth of global private wealth was as illusive as photographing a speeding bullet. We tagged it at $27 trillion as it flashed by us — with a momentum that seemed unstoppable.
Leading the charge up the hill of exploding growth were the coveted new business developers — racing to capture assets for their respective firms. As greed turned to frenzy, the compensation of these sales stars ascended into even more surrealistic realms. We never really had the time to develop uniform criteria for measuring their absolute success, nor could we even compare their relative performance from one institution’s sales culture to another. We did not have the time and nobody seemed to care.
Then we hit the wall; or more accurately, like a herd of lemmings we collectively threw ourselves over it, into the abyss from which we are just beginning to emerge. We’ve had the time to reflect. For in the chaos that followed exponential growth, combined with unprecedented consolidation, we created, recruited, and enriched a sales force without really asking ourselves: Who are these people? And, which ones are really good?
It’s a complex question; yet the industry’s simplistic answer has been, “The Million Dollar Producers!” And so a vague de facto criteria emerged that no one has bothered to clarify. The problem in using a general revenue criterion as a proxy for measurable performance is that no two institutions provide an identical platform in which to compare performance; nor, an absolute gauge to measure results.
The single largest differentiator among the myriad of institutions is client ownership. Does the business development officer (BDO) keep the relationship; or does he turn it over to a relationship manager (RM)? If he turns it over, who receives credit for cross sales? Then come the questions regarding the products sold. Is the BDO credited with the sale of all products? Are his/her sales equally valued or given weighted credit based upon product type?
Solution is a matrix
Also, as open architecture (offering products from multiple sources) has become the ever-growing trend and future of the industry, does the BDO have access to outside managers and at what mark-up?
The answers to these questions are so varied that it is impossible to take the raw performance data of a BDO and directly extrapolate it to a new institution.
The cultural and linguistic barriers between institutions are enormous. To bridge these gaps we need to develop a multidimensional translator that takes the pertinent criteria and translates them into the context of the hiring company.
ranslates them into the context of the hiring company. In attempting to create such a translator, we began by surveying 30 top private client groups and divided them into the following categories:
- International money centers
- Trust/asset managed companies
- Regional banks
We discovered that all data relevant to assessing the success of their respective sales forces broke down into three categories, which we have named the 3 Ps:
By creating a comparative matrix of the pertinent information from these three categories, we are able to produce a means of interpreting past production in the context of the parameters of the hiring company and more accurately predict future performance.
Let’s look at each category in turn.
The primary differentiator in this category is client ownership. We found that virtually every international money center employed “the private banking model,” in which the private banker acts as both business development officer as well as relationship manager.
The majority of trust companies and almost all regional banks favor a client handoff. If a regional were analyzing the performance of a candidate sourced from an international money center it would then be essential to analyze the size of the book of business of the private banker — then dissect the non-recurring component of his annual revenues. A study would need to be conducted to determine how much time was spent on managing existing relationships as opposed to business development.
Next, an assessment must be made of the degree of backroom support, product support, and sales support offered by both the former as well as prospective institutions.
Finally, it is imperative to determine the sources of the new business as it relates to reliance on internal referrals versus an external network of intermediaries.
A large northeastern regional boasts a number of sales professionals with multi-million dollar annual production; yet, closer examination reveals that 80% of their clients resulted from internal referrals. How successful would these professionals be in a small asset-management firm without an extensive branch banking network or middle market lending capability?
It is first necessary to compare the lists of proprietary products between the two firms. Performance and variety must be analyzed, as well as the comprehensiveness of the product array.
Next, it is important to determine how sophisticated the former institution had been in developing open architecture. Additionally, it is important to divide the candidate’s production numbers into proprietary products versus outside managers. Obviously, the fees generated on the mark-up of outside managers are normally lower. As a result, the revenue numbers of any BDO are greatly influenced by the product mix.
Finally, a determination must be made as to the exact nature of the proprietary products sold and which ones were credited to the sales ledger. There are enormous differences industry-wide in allocating sales credit for loans, hedge funds, and derivatives.
The candidate must be evaluated to determine if he even possesses the correct personality predisposition to be successful in a sales role. In researching this component we worked very closely with an industrial psychologist named Dr. Martin Haygood. Dr. Haygood points out that within our sample group only 10% of all candidates possess the personality characteristics likely to result in good sales success, while 50% offer the personality type conducive to good relationship management. Statistically speaking it would be (.1) x (.5) or: one person out of twenty that could perform both jobs successfully! It is most likely the difficulty in identifying private bankers skilled at both selling and nurturing relationships that has resulted in the split ownership models that are so prevalent.
The best way to assess the type of personality fit you can expect from a candidate would be to have a qualified industrial psychologist perform a screening, focusing on an analysis of the five recurring dimensions to the core set of personality variables.
An analysis of the candidate in terms of personality, cognitive ability, and mental alertness can be performed in less than three hours. The goal is to answer: Can I accurately describe this person? Given these traits, how will he perform in the new job, within the specific company culture?
Implementing this structured analysis may seem daunting, but a disciplined analysis conducted on a very simple Excel table can truly rationalize past performance. It allows us to finally apply a quasi-quantitative methodology to a process that has been traditionally relegated to subjective assessment. BJ