The Art of the Cross Sell

Posted on October 25, 2016 · Posted in Newsletters

 “Our approach to cross-sell is needs-based as some customers will benefit from more products, and some may need fewer.” — Wells Fargo Annual Report 2015

Really?  Wells Fargo has been one of the top financial stories of the third quarter as they were fined 185 million dollars and fired 5,300 employees for creating (and charging clients for) 2 million fictitious accounts in order to meet sales quotas.  Cross selling is the holy grail of banking.  If they can convince you to add a credit card or a mortgage to your checking and savings accounts, then they can increase their “share of your wallet.”  Although Wells was probably the king of the cross sell, with nearly six products per customer, most of the big banks were not far behind.  Bank of America upped the ante a decade ago through their acquisitions of US Trust and Merrill Lynch.  Further, many of the large brokerage firms offer a full suite of banking products.

In Morgan Stanley’s presentation to investors last June (available on their website), they highlighted that they have increased the number of clients with mortgages by 60% in the past two years.  Why is this so important?  It increases their revenue but more importantly, it makes it more difficult for a client to leave.

The part of the story grabbing the biggest headlines is the 2 million fictional accounts set up to meet quotas and qualify for bonuses.   The more interesting, but less sensational and not necessarily illegal, part of this story is how pervasive the tactic is and that many banks and brokerage firms incentivize their salespeople (“financial advisors”) to sell to their clients products that they neither need nor want.

This highlights the enormous difference between “financial advisors” at the big banks and brokerage firms and fiduciary financial advisors at independent Registered Investment Advisory firms like SFA.  The quotes above are intentional as “financial advisors” at these types of businesses are SALESPEOPLE as the scandal has so clearly illuminated.  To be clear, we do not cross sell, use proprietary products or accept third party compensation of any kind.