CEOs Who Get It; Does your CEO get it? It's an important question because C-suite support can make or break an investment program. Without it, referrals dry up, cross-sell gives way to territorial client hoarding and brokerage, as a business unit, withers on the vine.(Cover Story)(Company overview)

Byline: Howard J. Stock

It's hard to quantify the precise impact a CEO's action has on his or her bank, but there does seem to be a causal connection between a CEO's proactive interest in brokerage and the subsequent success of the program.

Kehrer-LIMRA's quarterly benchmarking study asked program managers about the stature their brokerage held within the bank, and by extension, with the CEO. Half of the program managers who responded "we're viewed as a major profit contributor to the bank," ran best-practice programs. These programs bring in the most revenue and are in the top quintile of program profitability. Just 17% of program managers who answered, "we are considered a strategic partner for the future," and 8% of managers who said their programs were "somewhat important" ran best-practice programs. None of the managers that said the bank didn't view brokerage as a core business had best-practices programs.

Bank brokerage contributes a relatively tiny amount to the bottom line-normally only 1% to 2% of revenue. (Last year, brokerage contributed an unprecedented 8.2% of average revenue because banks' normal profit centers were shot to hell.) For now the main business of banking-loans and deposits-remains far more profitable. Even so, savvy CEOs are throwing their full support into growing investment programs because they can see that brokerage contributes to a more productive corporate culture. Where CEOs get it, employees think of themselves as more than mere order-takers, but as important players in their clients' financial lives.

Program managers can use the bank's data to show CEOs that brokerage drives deposits-gathering. Tom Howe, president of Webster Bank's investment unit, says that most banks have a customer data group, so it's easy to examine how people who purchased investment products changed their deposit levels in the next one and two years. Mostly likely the data will show what Howe uncovered: Webster's investment program increased wallet share materially because its clients tended to have multiple product relationships with the bank. "You're twice as likely to grow deposits and one-third as likely to see some attrition," Howe says. "So the investment program definitely adds material value."

With this information, Howe successfully argued to top management that referrals to investment advisors are consistent with shareholder value. "Management has to believe the program isn't raping and pillaging the bank's low-cost deposit lifeblood," he says.

How does brokerage feed deposits? For one, advisors are much better than bankers at doing discovery and finding opportunities to provide client services. "Advisors find out where everything is," says Howe. "If your goal is just to open CDs, you don't have the need or the wherewithal to gather much data."

Outside statistics back up Howe's argument. According to Kehrer-LIMRA, best-practices brokerage programs contribute an average of $49.45 in revenue and $13.62 in profit per customer household, compared with $35.29 in revenue and $10.08 in profit for average programs.

With big names placing huge bets on major investment businesses-Bank of America buying Merrill and Wells Fargo snatching Wachovia from Citigroup-certain bank CEOs "see …