For Banks Selling To The Affluent: Advanced Agents Or Financial Advisors?
After years of trying to sell life insurance to the mass market, banks are now finding success in selling to the emerging affluent and the wealthy. The 2000/2001 Kehrer-LIMRA Bank Life Sales Benchmarking Study confirms that banks are having more success selling life insurance to trust, private banking and commercial customers than to retail customers.
At the same time, banks are debating what is the most effective system for delivering life insurance to emerging affluent and wealthy customers. Should they hire advanced producers? Or should they use an existing system that is already paying for itself–the financial advisors who sell mutual funds and annuities?
At first blush, the data suggest that the advanced agents are the delivery system of choice. The average advanced agent produces $147,052 a year in annual gross sales commission revenue, 18 times the average production of a financial advisor selling life insurance. (The total annual gross production of the average financial advisor, including mutual fund and annuity sales, was $290,940 last year.)
However, choosing to sell insurance through the most productive agents may not be in the banks best interest. Instead, a bank should choose delivery methods that generate the most profit for the size of the banks customer base.
Our Bank Life Sales Benchmarking Study examined customer penetration by computing the life revenue produced per bank customer household. It is appropriate to measure the relative success of bank life/health sales by comparing customer penetration because, for the most part, banks and credit unions are trying to capture the insurance business of their existing customers rather than the population at large.
Revenue penetration of customer households also enables us to compare the success of life/health marketing efforts at different size banks, comparing the banks pound for pound, as it were. We would expect, say, Bank One to sell more life insurance than Dime Savings, because Bank One has nine times as many customers. But the Dime might actually have better customer penetration.
Banks that sell life insurance through advanced agents produce $1.18 in new annual life sales revenue per bank customer household, two-thirds more than banks that sell life through financial advisors. But the penetration gap is substantially narrower than the productivity gap. That is because banks have so many more financial advisors than advanced agents.
A typical bank employs one financial advisor for every $911 million in assets, but only one advanced agent for every $16.9 billion in assets. Thus, the typical bank has 19 times as many financial advisors as advanced agents. The low life productivity of the financial advisors adds up to substantial aggregate production, because there are so many more of them.
