January 30, 2014 / 5:45 PM / 5 years ago

To sell more, BofA turns to existing clients

(Reuters) - Bank of America Corp (BAC.N) is trying to solve one of the most difficult problems that big banks face: convincing reluctant employees to sell more products to current customers, who are themselves reluctant to buy them.

A Bank of America sign is shown on a building in downtown Los Angeles, California January 15, 2014. REUTERS/Mike Blake

The bank says that in at least one part of its operations, namely administering 401(k) plans and related accounts for companies, it is making real progress. It attributes its success to pay incentives, working harder to zero in on the right clients, and training specialist sales staff.

In terms of the number of plans, it sold nearly three times more to clients in 2013 than it did a year before, said Bank of America spokesman Matthew Card. In the first year that it tried to attract existing banking clients of all sizes, the bank won 750 new retirement plans compared with the 263 plans it won in 2012.

“We set aggressive goals and this year for 2013 they hit all the goals,” chief executive Brian Moynihan said on a January 15 conference call with analysts, referring to the business.

By other measures, its progress in selling retirement services has been halting. It won $14 billion of assets from existing clients last year, up just a touch from 2012’s $13.9 billion.

Most of the 2013 growth came from selling smaller plans to smaller companies. The bank won 470 plans from these clients in 2013 compared to 70 in 2012.

Selling these services is complicated, but Bank of America’s efforts are also critical as the second-largest U.S. bank tries to increase its revenue. It has a vast customer base - serving one out of every two U.S. households, for example - making it tough to win new customers. Instead, the bank under Moynihan is trying to win more revenue from existing clients, a practice known as “cross-selling.”

For decades, banks have tried to cross-sell customers everything from insurance to wealth management in the hopes of boosting sales. What they often find is, employees used to selling one kind of product struggle to sell something different, and setting up systems to facilitate cross-selling can take some time.

“It’s better than it used to be,” said one veteran Merrill Lynch broker of the process to sell more retirement services to current clients. “It used to be like the Wild West where you just started chasing companies for 401(k) business. Prospects got pissed because they had six different people talking to them.”

To see how the bank’s efforts may be bearing fruit in these kinds of services, consider the way it won business from a tour bus company in Hawaii that was already a banking customer.

Mark Perry, a regional executive at the global commercial bank based in San Francisco, said some of his bankers pitched the company on what products they could offer. Then a group of brokers from the bank’s Merrill Lynch wealth management unit paid a visit to the bus company’s offices to educate employees on crafting and meeting their retirement and investment goals. They sealed the deal.

Bank of America is behind rivals in the retirement plan business by some metrics: it administered $103.9 billion in defined-contribution benefit plan assets in 2012, less than JPMorgan Chase & Co (JPM.N) and Wells Fargo & Co (WFC.N), according to data from Cerulli Associates.

Overall, the financial benefit plan business is responsible for more than $1 billion in annual revenue for the bank. It is impossible to tell how much the bank’s efforts at cross-selling are boosting the bottom line in this business, but Bank of America officials say that income from servicing retirement plans helped propel both revenue and profitability at the bank’s global wealth and investment management division to record levels in 2013. The division accounts for around 21 percent of the entire company’s revenues.


Kevin Crain, Bank of America’s managing director in retirement and benefit plans services, has been working for years to figure out how to convince bankers to sell his product.

In 2010, Crain asked bankers to refer all mid-sized clients to his division that might be a good fit. His group soon found itself flooded with referrals “that didn’t have a whole lot of life to them,” he said. Crain also heard complaints from bankers that were hesitant to entrust their clients to different people at Bank of America.

Then, Crain decided instead to get more focused. He designated around 125 to 150 Merrill Lynch retail brokers to work directly with the bankers in presenting Merrill’s retirement capabilities to clients.

Brokers took an added interest in selling companies’ retirement plan because when employees switch jobs they often look for a broker to help them roll over money they have in a 401(k) account into another type of savings plan, Crain said.

To encourage commercial bankers to buy into the strategy, a component of their pay started to be based on the total revenue a client brought to Bank of America. Retirement plans provide a very good revenue stream that will naturally grow each year once the plan is sold, so “a banker takes an interest in that,” Crain said.

The brokers would sit down with bankers to target businesses that lie within Bank of America’s “sweet spot,” Crain said. Those companies usually had plans ranging from about $5 million to $50 million of assets, and they usually had many different types of plans, like 401(k)s and health savings accounts, for which they only wanted one administrator. That gave the bank a shot at multiple sources of revenue.


Cross-selling is particularly thorny when it comes to bankers that deal with businesses. A lender might have a relationship with a company’s treasurer or chief financial officer, but decisions about other products, such as retirement plan services, might be made by other officials, such as heads of human resources. The banker must then get to know someone new at the company.

“Just because you have a good relationship with one part of a client, it doesn’t always transfer to the ability to gain mindshare with other parts of that organization,” said Derek De Vries, a bank analyst at UBS Investment Research.

Reporting by Peter Rudegeair, additional reporting by Jed Horowitz, editing by Dan Wilchins and Andrew Hay

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