Regions Bank's Vistas Are Broad and Deep

Cover Story - Autumn 2010 | By Andrew Singer

James Nonnengard, President, Regions Investment Services

The LBEs sell traditional fixed and immediate annuities—but not variable annuities. They also sell term life insurance, debt cancellation products, and single premium whole life insurance (SPWL). The last is used primarily for wealth transfer.

Even though 700 of the 2,600 LBEs have securities licenses, no Financial Service Specialist sells securities. Securities-licensed LBEs refer clients instead to brokers at Morgan Keegan (Memphis, TN), the bank's broker/dealer affiliate (acquired by parent Regions Financial Corporation in 2001), and the LBEs share in the compensation. “It's easier to refer and let the experts handle them,” explains Nonnengard.

‘We really focus on the mass market,’ says Nonnengard, who notes that 88 percent of his clients have an annual income of less than $75,000.

Put another way: The Financial Service Specialists focus on the bank's ‘savers.’ They talk to customers about financial protection and savings, principally. Morgan Keegan concentrates on ‘investors.’

Nonnengard emphasizes that the 2,600 LBEs are employees of the consumer bank—“they are not my employees.” He manages and trains them, teaching them to recognize clients’ needs, and in this he is assisted by 20 sales directors who are more directly responsible for training, licensing, and recruiting the platform bankers.

Regions Bank writes some 1,000 term life insurance applications a month.

Nonnengard reports to Curren Coco, the head of Regions Insurance Group. (Regions Financial possesses the nation's third largest bank-owned insurance agency—behind only Wells Fargo and BB&T.) He does not report to Morgan Keegan, the B /D—and he has no dedicated Series 7 sales reps working under him.

LBEs are taught to profile bank customers—to make inquires about a customer's funds, making distinctions among “money for now,” “money for later” (where a tax-deferral instrument, such as a fixed annuity might be an appropriate investment), and “money for never” (where single premium whole life insurance might be used for wealth transfer purposes).

Nearly $30 million in annuity revenues in 2009

The program appears to be reaping some success. Regions Bank reported $29.36 million in annuity revenues in 2009 (this does not include Morgan Keegan), up from $26.54 million in 2008. This was in a year when most large bank investment programs suffered annuity revenue declines.

About 75 percent of revenues are traditional fixed annuities (including immediate annuities, a type of fixed annuity, which account for about 20 percent of the annuity share).

Yes, annuity rates are low, notes Nonnengard, particularly if compared with rates five or six years ago; but compared with current saving rates, the CD-annuity rate gap is more like historic norms. And it is that difference—between the five-year Treasury rate and the five-year rate for a CD-type annuity—that is often critical when it comes to annuity sales.

Nonnengard's four top fixed-annuity carriers are Mutual of Omaha, Symetra, Great American, and Protective Life. It is a relatively short list, but it is better to keep things simple for platform bankers.

With regard to immediate annuities (sometimes called income annuities), New York Life “is the best in that space,” reports Nonnengard, who adds that that company also provides much useful branch training.

Immediate annuity sales, in fact, are 10 times what they were several years ago, says Nonnengard. (See story on immediate annuities on page 16 of this issue.)

Life insurance

Life insurance (term life and SPWL) accounts for about 25 percent of program revenues. Great West, a long-time supplier, is the bank 's leading term life insurance underwriter. In the SPWL arena, Regions uses Liberty Mutual, Great West, and Symetra.

SPWL sales have tripled over the last two years, and this year's SPWL total is double last year's, says Nonnengard.

SPWL generates more revenues than term life. In large part, that is because it is a higher ticket item. The typical term life sale generates about $200 in annual revenue, says Nonnengard, compared with $1,500 for the average whole life sale. That said, Regions writes 1,000 term life insurance applications a month.

The products target different customer types. The typical annuity customer is 64 years of age, compared with about 35 for the average term-life insurance customer. They typical SPWL customer, by comparison, who is using the product mostly for wealth transfer, is 71 years of age. Again, this is money that will never be used and is to be passed on to children or grandchildren. But sometimes SPWL candidates have second thoughts: “I may need this money,” they say. Fortunately, the flexible SPWL policies written today provide an exit from the product if really necessary.

The average annuity ticket is $38,000. The average SPWL ticket is $55,000.

The financial crisis has had a big impact on consumer psychology, Nonnengard suggests. Financial safety and protection are now “front of mind” for everyone, but especially for the mass market customer.

Regions Bank reported $29.36 million in annuity revenues in 2009, up from $26.54 million in 2008.

Last year brought him one of “the most humbling experiences” in his 27 years in the financial services industry. He received a letter from a woman whose 24-year-old son had been killed in a motorcycle accident. Months before the accident, her son had purchased a term life insurance policy at Regions Bank. The mother used the proceeds to pay off the son's debts and establish a $50,000 scholarship in her son's name. In the letter, she thanked Nonnengard for selling her son the life insurance policy.

Personal lines and Medicare supplement products

Nonnengard's sales directors also train LBEs in personal lines insurance, and the LBEs refer prospects to Regions Insurance Group.

“Earlier this year, Regions Insurance opened an Insurance Agent Call Center in Kokomo, Indiana. Personal lines insurance requests through Regions Bank branches are routed through the new call center. Personal lines of insurance available through bank branches include homeowners, renters, automobile, recreational vehicles, motorcycles, watercraft and a full range of specialty insurance products for personal insurance needs” (press release, 8/31/10).

They've also done LBE training in Medicare Supplement insurance. The bank knows exactly how many of its customers will be turning 65 next year, and Regions views this as an opportunity to talk to them about their health plans, in particular Medicare Supplement coverage, which is guaranteed issue.

Half of Nonnengard's Financial Service Specialists have health insurance licenses, but, again, they do not sell the product. When they recognize a need, they refer clients to insurance agents at Regions Insurance Group. The health insurance product is more complicated than annuities and SPWL and, again, better handled by experts, in the bank's view.

Referring to the private bank

Even though most people who walk into a Regions branch lobbies are decidedly “mass market,” sometimes affluent customers appear. These are referred to the private bank (which is part of Regions Bank, although the head of private banking reports to the head of Morgan Keegan—it's a bit complicated), or to Morgan Keegan, whose advisors sometimes have branch assignments and sell variable annuities and mutual funds, among other products.

The general idea here is to get affluent clients (again, more than $100,000 in annual income or $500,000 in net worth) into the private bank, where a relationship manager can bring to bear “the full power and breadth of the bank,” says Nonnengard. That relationship manager could then hand the affluent customer over to a Morgan Keegan financial advisor—or someone else (e.g., a trust officer).

When potential private bank candidates walk into a Regions Bank lobby, LBEs are trained to ask questions that might reveal a) occupation (e.g., small business owner, doctors, attorneys—all potential candidates), b) amount of income or the money they are bringing into the bank, c) amount of money on deposit. The LBE then might say, “Can I have a person (from the private bank) meet you at the bank?” They do not go into details about private bank products, however.

As for hiring new sales directors, ‘The quality of applicants is probably as good as it's ever been.’

Not all platform bankers at Regions Bank are licensed. If bankers have licenses when they are hired, they are “in” the program right away. If not, however, there is a waiting period; they have to be approved by the consumer bank.

LBEs have sales goals they must reach to maintain their licenses, although these goals are often more “nominal” than real, Nonnengard concedes. But they do have to have conversations (”mini-quests”) with clients. Ninety-six percent of the LBEs have sold an annuity or a life insurance policy in the course of the year.

Of those 2,600 LBEs, Nonnengard might lose 10 percent a year. They could leave the bank. They could be promoted. Whatever the case, they have to be replaced.

Sales directors

Financial Service Specialists “are expected to know more” than LBEs at other banks, says Nonnengard, and that's what his 20 sales directors focus on every day as they drive from branch to branch. (“Their office is their car.”)

The sales directors “really come from all over.” Some were platform trainers at legacy banks. Others have been hired from competitors like Wachovia. Some were Morgan Keegan financial advisors. Some were former insurance agents.

Looking at investments and insurance in its totality—the platform program, Morgan Keegan, the private bank, Regions Insurance Group—‘There's enough work for all of us.’

It's a different experience to talk to LBEs than it is to talk to financial advisors. The sales directors know when the LBEs are busy, when things are slower in their branches—and they make sure they show up during slack times.

As for hiring new sales directors, “The quality of applicants is probably as good as it's ever been,” says Nonnengard. He recently had two openings, one in Florida, one in Texas. He received 60 resumes. Of the two he finally selected, one had worked earlier at Wachovia, the other had trained platform bankers at Banco Popular.

The economic times have hit the banking industry hard, and “it's humbling,” admits Nonnengard. Many reps and sales managers have been displaced or have had their incomes cut and are looking to change positions.

Looking ahead, Regulation E could have a positive impact on bank-sold life insurance. Banks will want to supplement the income they will lose with Reg E (i.e., the new bank overdraft debit provisions that took effect on July 1, 2010), which by some estimates may lop off 10 percent to 20 percent from banks’ fee income stream. Institutions will look for more fee income opportunities, which “could be favorable to life insurance,” says Nonnengard.

‘Nothing has changed’

In the end, “It's all about Regions’ customers—so we become more valuable to them”—and so they don't have to go to an insurance company or an outside brokerage firm to get their insurance coverage or buy an immediate annuity.

“Nothing has changed. It comes down to developing a good partnership with the consumer bank, and also leadership from the top of the bank.

“It made a lot of sense” to develop the LBE program, says Nonnengard. If the bank looks at investments and insurance in its totality—the platform program, Morgan Keegan, the private bank, Regions Insurance Group, etc.—“There's enough work for all of us.”

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