Platform Investment Reps Under DoL

Throwing Baby Out with the Bathwater?

In the wake of the Department of Labor Rule on the Fiduciary Standard, many banks with licensed or registered client-facing banking staff are considering dropping their "platform banker programs."  These firms wonder how they will be able to implement the elements of a fiduciary standard with staff that turn over every 18 months on average, including ensuring that the investment advice offered is in the best interest of the customer, and providing an annual review of the client's investment.

But the firms with platform investment sales representatives enjoy significantly lower sales force expenses, which generally translates into higher profit margins.

Kehrer Bielan examined the sales force expenses of 17 banks and credit unions. On average, they spent 45% of their revenue on cash compensation to their financial advisors, sales assistants, and platform investment reps, if they deployed them. The firms that supplemented their Advisors with platform investment sales reps had sales force expenses that were an average of 4 percentage points less than the firms without platform reps.

For the most part, every dollar not spent on the sales force translates into an additional dollar of profit for the firm. For the typical bank investment services firm, with an average profit margin of 26%, the 4 percentage point reduction in sales force expenses improves profitability by 15%.

For many firms, shutting down their platform investment sales force will result in a major hit to their bottom line.  Kehrer Bielan is working with firms to develop approaches to maintain the advantages of their platform program and be DoL compliant. Contact us to see how your platform program compares to others.

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