Depressed Economy May Be Good News For Bank Reps

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The current economy may have put many financial advisors in the doldrums, but it seems to be blowing favorably toward banks, experts say.

The point for bank reps to remember is to be keenly aware of what their customers needs are, says Gregory D. Vacca, first vice president of CalFed Investments, a subsidiary of California Federal Bank, Sacramento.

For some products widely sold in banks, such as variable universal life, sales have clearly declined, Vacca notes. But reps who know who their customers are should be able to find alternatives.

Despite the economic climate, some of the banks broker dealers did 20% to 30% better than the previous year.

By concentrating on products that are suitable to their typical customers needs, CalFed’s financial advisors have been able to keep insurance sales growing.

For investments, CalFeds typical customer is someone in his 60s. For checking, the average customer age is 46, Vacca says.

“Whatever the type of customer, were working to deliver what they tell us they want,” Vacca notes.

Among investment-oriented customers, the banks reps give long term care insurance a major marketing thrust, because there is much demand among seniors for that type of product.

But the bank has also developed sales programs aimed at boosting insurance sales to traditional checking-account customers.

CalFed platform reps recently began trying, with some success, to convince new checking-account customers to buy term policies as an add-on sale.

Platform reps emphasize to new checking customers the convenience of automatic withdrawals from their accounts to pay for the low-cost life insurance. If a customer seems interested, the rep then directs her to the banks investment desk, where a licensed rep helps make the necessary arrangements.

“This is the first move into term for CalFed,” notes Vacca.

CalFed did more than $40 million in single premium, variable and LTC insurance last year, Vacca says.

CalFed is a thrift looking to transform itself into a commercial bank. In that spirit, it is encouraging its financial reps to go after pensions and other products for small business, says Vacca.

The bank employs what Vacca calls a hybrid bank-insurance sales system, with about 900 platform people making initial contacts and 100 dedicated financial reps handling the followup.

Brad Powell, president of Jackson National Life Insurance Company’s Institutional Marketing Group, Lansing, Mich., says many bank reps have taken advantage of the fact that CD rates are depressed by encouraging customers to buy fixed annuities.

For their part, annuity manufacturers like Jackson are ready to support those efforts. “We try to have products for all seasons,” says Powell.

Whereas investors in its annuities were about evenly divided between fixed and variable products in 2000, last year there was a stampede into fixed products.

“That was in a year where our annuity business went from under $1 billion to over $1.5 billion. So bank customers are clearly searching for higher-yielding alternatives to CDs.”

Warren Brown, senior vice president of the insurance services group for FISI-Madison Financial, in Brentwood, Tenn. agrees that some aspects of the depressed economy give bank financial reps a good track to run on.

“Banks had the largest deposit increase in 15 years in the second half of 2000 and the first half of 2001,” Brown says, citing FDIC data showing an 8.1% increase in deposits in that period.

“There is a lot of uncertainty. If banks have more customers and have more people returning who had gone elsewhere with their money, it makes sense to be offering additional products.

“In this time of uncertainty, people are looking to banks. Take advantage of that,” he advises.

Powell of Jackson National says one of the main things his company is emphasizing with bank reps is the need to stay in touch with clients.

“Theres a tendency among some reps to avoid customer contact during trying times,” Powell says. “To get customer to stick, youre better off keeping them advised, doing seminars on investing for them and preaching asset allocation and diversification.

“Make sure theyre aware of whats going on with their investments, and keep them educated on their alternatives,” he advises.


Reproduced from National Underwriter Life & Health/Financial Services Edition, February 18, 2002. Copyright 2002 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.


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