Small dealers need to understand the full scope of their client base if they want to succeed in today’s competitive market, said Michael Ball, senior managing director at Richmond, Va.-based BB&T Scott and Stringfellow, who spoke at the Investment Industry Association of Canada’s Small and Independent Dealer Symposium in Toronto earlier this week.
“We thought we had the traditional metrics on our advisors but we didn’t have a deep enough dive to really understand what was driving their business,” said Ball. “Which in turn drives our business as an overall firm.”
After hiring an analyst to take a closer look into the brokerage books at his firm, as well as at each individual broker’s client roster, Ball discovered that not only was the firm “giving business away with equity discounting,” it also had too many accounts per advisor and too many small accounts. As well, 48% of the accounts were stagnant, meaning they produced less than $150 a year in revenue.
Ball decided that instead of eliminating all stagnant accounts, he would move those accounts from senior level advisors to a group of younger brokers. He set up a training division and found the new advisors were more than eager to establish client relationships in the industry regardless of book size.
“You have to sit down and have the discussion with your top advisors and ask them the hard questions,” said Ball. “Do they need 150 accounts that aren’t generating revenue? What is it doing to their psyche? What is it doing to their team? These are usually the clients that are making the advisor run around searching for dividend cheques but not contributing any other assets”
The younger advisors were able rebuild connections with these clients as well as begin to generate revenue, while top producers were able to refocus their energy elsewhere, said Ball.
“Our advisors were putting their arms around this big population of clients and not really knowing what part of that population was driving their business so we had to take a timeout and reevaluate,” added Ball. “It was a lot of homework and a lot of statistical analysis but what we learned along the way was critical to us changing the way we did business.”