Learn From the Masters!

An Interview with Lorin McMurray, EVP and Program Manager of Guaranty Associates, Recipient of the 2005 Award of Excellence (Regional Bank Program) at the Bank Insurance and Securities Association’s 2006 National Conference.

LicensedBanker.com:  Tell us about your parent bank’s size and geography.
Lorin McMurray:  Guaranty operates 150 branches in Texas and California.  Assets are around $17 Billion, and deposits around $9 Billion.  Our average branch size is around $65 million in deposits.

LB:  You have a somewhat unique organizational structure in your investment program.  Tell us more about it.
LM:  We made a decision 17 years ago to run our program using only licensed bank employees, and today we have of team of over 300 Licensed Personal Bankers who are really doing a fantastic job both for us and for our customers.  Of the 320 PBs, about 200 have both Series 6/63 and insurance licenses, and the rest are insurance-licensed only.  As these insurance-only PBs demonstrate their abilities, they are encouraged to “graduate” to the next level of license.

LB:  Why don’t you use dedicated Financial Consultants in addition to your PBs?  That seems to be the model in most bank programs.
LM:  Our goal as a business is to a “low cost, low risk provider of financial products and services” to our customers.  We feel that our PBs are well equipped and trained to offer a menu of quality investment and insurance products, perhaps a somewhat smaller menu than at “dedicated” programs, but a menu that meets the needs of almost all of our customers very well.  In addition, the PB distribution model results in a substantially higher profit margin for our company, due to the efficiencies of “multi-tasking” bank employees.  Finally, I subscribe to the saying that “to catch more fish, you need to put more lines in the water”, and our PB model offers the efficiency of scale that allows us to effectively provide great coverage for all of our branches.

LB:  What kind of sales results have you been seeing?
LM:  Well, for 2005 we achieved $24 Million in revenue, and to show you how things are going this year, for March of this year we ended up with about $65 million in sales, with a little over half of that generated by fixed annuities, followed by variable annuities, mutual funds and life insurance.  According to Ken Kehrer’s report, we rank #3 in Investment Income Deposit Penetration against the top 50 banks and thrifts of all sizes.  This is an important metric for me, and shows me that our PBs are really doing an effective job in servicing their branch customers.

LB:  In general terms, how are your PBs paid for their sales?
LM:  In addition to their very competitive bank salary, and payment for sales of traditional bank products, PBs are on an annual grid that rewards increasing levels of total sales volumes with correspondingly higher payouts ranging from 34 to 100 basis points.  It is important to note that we are “product neutral” in our plan, with each type of investment or insurance product considered equally in a PB’s total.  This removes the temptation for a PB to perhaps rely more heavily on higher commission products than they should, and provides a level playing field for all parties.

LB:  Are bank branch managers also compensated for PB sales?
LM:  Yes they definitely are-the manner depending on whether or not they hold appropriate licenses.  In addition, every manager is stack ranked, and as you know, the desire of salespeople to be on top of the list cannot be underestimated!

LB:  One of the troublesome trends we notice among platform programs is a high level of turnover-often averaging over 30% per year.  This obviously is a real drag on a program’s performance.  How do you manage turnover among your PBs?
LM:  I’m glad you asked that question.  I know that turnover is often significant in other programs, and I’m very proud to say that within our top 100 PBs we average less than 10% turnover per year.  One of the main reasons for this is that our folks are really making a good living, and as we tell them, becoming licensed to sell investments is “the best part time job you’ll ever have”!  All this being said, we are always on the lookout for good PB candidates, preferably already licensed, and don’t forget that you promised a link in this article where any interested candidate can click to get more information on working with us!

LB:  You’re right, so here it is:  lorin.mcmurray@guarantygroup.com

LB:  How do you provide sales management for your PB’s investment activities?
LM:  I have a management team that includes 2 Sales Directors and 11 Investment Sales Managers.  It is important to note that our sales managers correlate to managers on the retail bank side, and they work very closely together.  Having a local sales manager who can identify issues early on is absolutely critical to our program’s success.

LB:  This has really been an interesting conversation. Do have a few thoughts to summarize how you’ve achieved all your success?
LM:  Well obviously it’s thanks to all of our great employees and our management team.  Our program has been in place for 17 years, but in the past 5 years we have really started to take off.  I think that there are 3 things we did that contributed to this:

1. We changed our compensation plan for PBs to our current model, giving them the opportunity to earn a great living;
2. We increased our sales management team to provide quality local managers for all of our PBs;
3. We re-invigorated our partnership with the Bank.

LB:  To finish, how about giving us your Top 2 Ideas for other managers to consider on how to create an award-winning investment program?
LM:  Sure.  First and foremost, strive for more licensed bankers with strong local management and the right compensation plan.  As Steve Levitt mentions in his current book Freakonomics,  “it’s all about the incentives”!  Second, it is absolutely critical for success that you have strong support from all levels of bank management.  Without this level of support an investment program is doomed to mediocrity.

LB:  Thanks Lorin, and we’re anxious to see how you are going to top your 2005 performance this year!