IBERIABANK'S FIXED ANNUITIES BRIGHTEN UP THE DAY

Feature Article - Spring 2009 | By Andrew Singer

THE ECONOMIC CRISIS has cast a pall over the banking industry, but bright spots shine through. Bank brokerage programs that are tightly focused on fixed annuities appear to be faring relatively well.

IberiaBank is a case in point. The Louisiana bank's parent, IberiaBank Corporation (assets: $5.6 billion), achieved some distinction recently for being the first bank to announce it would return TARP money to the United States government.

Meanwhile, its retail investments program has generated some of the highest annuity penetration ratios among U.S. banks. In 2008, it reported $4.25 million in annuity fees and commissions on a deposit base of $2.84 billion for a ratio of 0.15 percent. This was second among 224 operating U.S. banks that had at least $1 billion in assets and some annuity sales, according to the Bank Insurance Market Research Group.

Yes, the program is selling more fixed annuities than usual, affirms Vance A. Richard, vice president and program manager of Iberia Financial Services (Lafayette, LA).They now account for about 65 percent of program revenues. By comparison, variable annuities generate only 10 percent of revenues and mutual funds, 5 percent. (Sales of these latter two products have suffered from the slumping stock market.) Advisory business and trail commissions account for about 5 percent of revenues with the balance in individual stock and bonds.

'We are growing'

Richard is reluctant to provide specific projections for 2009, but he says "we are growing." His group is adding sales staff. "We expect our same store sales to hold the line, but expect overall growth through new store sales," said Richard in a recent interview.

Richard has nine senior reps, soon to grow to 10, and six junior brokers, a number that will also increase shortly. He also has 50 licensed bank employees (LBEs) who sell fixed annuities only. All senior reps have Series 7 licenses, and most have Series 65/66 licenses that enable them to sell fee-based products. An uptick in merger activity in Louisiana's bank market in recent years has made it relatively easy to pick off experienced sales personnel from other banks, says Richard. The vast majority of Iberia's brokers—if not all—have had previous bank experience. Richard sees "lots of hiring opportunities" in the current environment.

Iberia is relatively stable compared with other financial institutions—it generated net income of $50 million in 2008, a year in which many banks lost money—and is viewed as a "safe harbor in a storm" by many reps and their clients. This helps both in recruiting and retaining personnel, says Richard.

One element of success has been the program's smooth interface with the retail bank. The retail branch system is, after all, "our bread and butter," says Richard. Reps are encouraged to be the first arrivals in the branch in the morning and the last to leave at night. They make the coffee, fetch the donuts, and do whatever it takes to win the trust of the retail branch people. Senior brokers typically work between five to seven branches each.

How to build trust in the branches ? 'Do the best thing for the client 100 percent of the time and provide feedback for each referral.'

—Vance Richard, Iberia Financial Services

IberiaBank's market presidents typically leave it to the branch managers to decide how much they are going to work with the brokers, so it behooves reps to build confidence wherever possible. How to do this? "Do the best thing for the client 100 percent of the time," answers Richard, "and provide feedback for each referral."

Regarding the latter, bankers want to know what happened to a client when they are referred to the retail investments unit. Richard's group makes a practice of communicating such information promptly through e-mail and phone calls.

A junior broker program

Iberia initiated its junior broker program in late 2004, assigning a junior broker to one of its top New Orleans producers. To qualify today for a junior broker, senior reps must do $40,000 a month in GDC (gross dealer concession) for six consecutive months.

The junior brokers learn the ropes while senior brokers raise their productivity, usually 20-25 percent in the first year and 40-45 percent by the end of the second year. The junior broker is expected to fill up the senior broker's calendar, setting up customer appointments and working with the branches on referrals, among other matters.

During a junior broker's first year with Iberia, he/she is expected to get a life and health insurance license enabling that rep to sell fixed annuities; the junior broker is also expected to have a Series 6 license by the end of year one in order to sell mutual funds. In the second year, the junior broker typically gets a Series 7 license. A Series 7 license is required to be promoted to senior broker.

Iberia recently hired a junior broker from within the bank, its first. Mostly, though, it recruits junior brokers from other bank investment programs and bank call centers. Some, too, have been hired directly out of college.

Fixed annuities now account for about 65 percent of program revenues. Variable annuities generate only 10 percent and mutual funds, 5 percent.

Junior brokers who have worked previously in bank call centers often work out particularly well since they already have some experience selling.

Tough times

Richard was asked about changes in the program as a result of the straitened economic circumstances generally. "You have to work harder, be more proactive, reach out to clients," says Richard.

A client may have lost his job. His spouse may have lost her job. Home values may have declined. The value of a client's 401(k) plan may have plunged. All these can be viewed as reasons to conduct a financial review.

If a client has lost a job, you want to ask: How do things stand with liquidity now? How does your retirement account stand?

Obviously, many clients are not in a good position to buy financial products, and a broker can't expect to reap large commissions. Not immediately, anyway. But these are times "to play good defense," suggests Richard, and in the future there may be "offensive" opportunities with these same grateful clients.

Moreover, even though many clients have been brought in for a review of their accounts—and not to generate income—some reps have found assets anyway. They may be assets brought over from another bank. Usually that bank's brokers have not been in touch with the client. "We've seen a lot of that," says Richard. A client says, "I'm not hearing from that advisor and I will bring that account over."

Looking ahead, Iberia has done little so far with life insurance, but Richard sees "opportunity going forward" in this area, particularly with universal life insurance for wealth transfer purposes and also long-term care health insurance. Although Iberia doesn't set product targets, Richard would like to increase the fee business, though that requires profiling clients appropriately.

As noted, fixed annuities have been attractive lately as a safe place to park assets, but Richard's brokers have also had some success with equity-linked CDs, also viewed as a relatively safe investment in volatile times.

Arriving in 1995

Richard came to Iberia 1995 as one of only two reps in the investments program. Iberia at that time was an S&L. It is now a commercial bank.

The retail investments program remained "under the radar," however, until late 2003/early 2004, recounts Richard, who by then was program manager. At that time his reporting relationship changed. He and his new boss, the market president for New Orleans—a senior bank executive—agreed to up that ante, to "play to win" with regard to brokerage. They made some personnel changes, hired several top producers from other banks, and generally raised expectations with regard to Iberia's sales reps. In November 2007, Iberia began working with Essex National Securities, the third party marketing firm.

Reps were encouraged to become more proactive in terms of generating referrals and getting in front of clients, whether through working lists or collaborating closely with branch managers and other branch personnel. Production goals were raised.

"Hiring an exceptional team, both on the sales and administrative side" is critical to success, says Richard. The other key element is support from senior bank management.

If deposit-base penetration rates are any gauge, Iberia appears to have succeeded on both counts.

Andrew Singer is editor-in-chief and publisher of Bank Insurance & Securities Marketing magazine. He can be reached at asinger@bisanet.org