Skip navigation

Branch Managers Matter, Especially In Novice Training

In all financial advisory sales forces—from stockbrokers to insurance agents to financial advisors and planners—trainee or “novice” producers go through an early career phase of three to four years, during which they learn the business, build a clientele and prove to themselves and to their employer that they are ready for a challenging but rewarding career.

In all financial advisory sales forces—from stockbrokers to insurance agents to financial advisors and planners—trainee or “novice” producers go through an early career phase of three to four years, during which they learn the business, build a clientele and prove to themselves and to their employer that they are ready for a challenging but rewarding career.

In this early phase of the producer’s career, there is significant turnover. Fourth-year retention rates (the percentage of trainees from a new class who survive until the fourth-year) are typically in the range of 15 to 25 percent for well-run firms. In other words, 75 to 85 percent of a trainee class terminate in years one, two or three, either voluntarily or “counseled out” by their supervisors. This turnover obviously represents a tremendous waste of resources by the company and a personal failure for the financial advisor who drops out.

Understanding what determines the success or failure of a trainee is a critical issue for sales force management. In our experience, the key factors are:

  • the intrinsic quality (ability, motivation and background) of the trainee;
  • the quality of the supervisor who mentors him or her during the early phase of the career; and,
  • the quality of the firm (franchise, brand, support offered to producers).

As outlined in the article “Measuring Broker Performance” by Andre Cappon, published in Registered Rep.’s February 2002 issue, we at The CBM Group discovered that we can anticipate the performance of a producer based on his or her performance in the first six to 12 months with the firm. We calculate the “caliber” of the producer as the ratio of his production relative to the average production of his trainee class or peer group. This caliber remains relatively stable throughout the producer’s career. In other words, a producer who generates twice as much as his class average, and who thus has a caliber of 2, will continue to generate twice as much of the class average in subsequent years.
We thus have a metric that can be calculated early in the producer’s career and that accurately measures the intrinsic potential of a trainee.

Furthermore, we developed a scoring model which allows us to predict, fairly accurately, the caliber of a recruit based on his background, including factors such as age, education, previous profession, previous employers, the recruit’s track record of achievement in his previous career and his psychometric profile, measured through an online psychological test. We call this the “background score.”

In some recent work, we have also developed a caliber metric for supervisors (branch office managers, sales managers or “district managers”). We define supervisor as a person directly responsible for training, developing and coaching trainees. The supervisor may have other responsibilities, be they managerial (running an office) or personal production, but his primary one is to be trainer or coach.

This supervisor caliber metric takes into account the overall results achieved by a supervisor in this primary responsibility. The metric incorporates the number of producers, who were successfully trained and retained, as well as the quality or caliber of these producers. Both of these are measured over a reasonable period of time, at a minimum one year, preferably longer.

We developed this supervisor caliber in the context of a European financial advisory sales force of some 6,000 advisors, of which about 1,000 were in supervisory / managerial roles.

After calculating both the producer caliber and the supervisor caliber, we “cross-tabulated” the data, in order to explore and analyze the supervisor-trainee relationships.

We asked ourselves several questions:
Does a superior supervisor improve the quality of the producers he/she coaches?
Can a superior supervisor “save” a laggard producer?
Does a weak supervisor “sink” an average or superior producer?

In our study, trainees were classified into 3 categories (superior or top quartile, average or middle two quartiles and weak or bottom quartile) on the basis of their “background score” (calculated during the recruiting process), which usually predicts caliber reasonably well. Supervisors were similarly classified based on their composite supervisor caliber, calculated over a period of three years. Not surprisingly, all trainees do better when supervised by a better coach.

High-potential trainees, when matched with a superior supervisor achieve truly spectacular results. The same high-potential trainees, when coached by weak trainers, will end up as mediocre producers, most likely disappointed and looking to jump ship.
Average trainees improve when coached by better trainees, but the impact is only moderate. Weak trainees become weak producers, pretty much across the board. However, a superior trainer can bring them to slightly below average.

We separately investigated the producer turnover in their first year. We noted that retention rates are systematically better for superior supervisors. While average 1-year retention across the board is in the range of 50 to 60 percent, it reaches up to 75 to 80 percent for superior trainees/superior supervisors. For weak trainees/weak supervisors, 1-year retention can go as low as 5 percent.

We conclude that superior supervisors exert highly positive influence over all trainees: The coach makes the athlete, even though the athlete must have the basic skills and ability. When superior trainees are coached by superior trainers, the results are truly amazing.

The management implications of the analysis are fairly clear: Since both superior trainees and superior supervisors are scarce resources, it makes most sense to match them in order to achieve truly superior results.

Whenever we have weak supervisors, we endanger their trainees. It would be much better to avoid putting these weak trainers in coaching positions since they are not going to achieve much anyway and may in fact create damage. The sad fact in many sales forces is that there are too many incompetent supervisors.

For firms that are trying to upgrade their sales forces across the board, the key is to build up the cadre of competent supervisors. As the old saying goes, an army is only as good as its sergeants.

For firms that are trying to create elite platforms, the first step is to find the best raw material (recruits), identify the best coaches and then put them together to achieve excellence. Recruits can be screened using background and psychometric scores; superior supervisors can be identified based on the supervisor caliber. Using these tools in combination and effectively will set the basis for creating a culture of excellence.

*The authors are Registered Rep. columnists and principals of The CBM Group, Inc., a New York-based industry conultancy.

Hide comments


  • Allowed HTML tags: <em> <strong> <blockquote> <br> <p>

Plain text

  • No HTML tags allowed.
  • Web page addresses and e-mail addresses turn into links automatically.
  • Lines and paragraphs break automatically.