Optimizing Advisor Branch Territories

Optimizing Advisor Branch Territories

 

Historically, when advisors joined a financial institution, they typically were assigned a “territory” of a few branches.  Early in their tenure, they were heavily dependent on branch referrals to build their practice, but as their client book and AUM ramped up, they no longer need as many referrals. One growth opportunity for the firm is to reduce the size of successful advisors’ territories and hire additional advisors to cover the open branches.

But what is the optimal branch territory for an advisor?  As financial institutions have closed and consolidated branches, are the number of branches or branch deposits still the most relevant metric to use for determining advisor territories?

In 2017, in a study sponsored by LPL, Kehrer Bielan estimated the branch deposits that maximized an advisor’s production based on the share of revenue that is derived from advisory business, controlling for other factors that affect the advisor’s production—client investable assets, AUM, deposit territory, wallet share, and advisor tenure.  These estimates were based on multivariate analysis of data on 1213 individual advisors in 118 LPL partner institutions.

Since that study, Kehrer Bielan has expanded that database to include 2,884 advisors from 162 institutions, including larger bank-owned broker dealers and banks and credit unions that partner with other third-party broker dealers.  And the data on the individual advisors has been broadened to include access to sales assistants, financial planning activity, whether the advisor is part of a team, and whether the advisor operates in a second story environment.

Kehrer Bielan is seeking a sponsor for research that revisits the question of the optimal size of an advisor’s territory. This research will:

  • Examine whether the number of households in a branch is a better measure of the advisor’s territory than branch deposits, given the outsized growth in deposits per household, and the spread of branch closures
  • Consider other objectives beyond maximizing gross revenue, e.g., growing AUM or advisory revenue
  • Take into account additional factors not available for the 2017 study
  • Provide guidance to investment services directors on how to target the optimum size of an advisor’s deposit territory based on multiple factors, not just advisory revenue
  • Be more representative of the broad financial institution financial advice community. 

Sponsorship fee:  $25,000