Financial markets have suffered through significant turmoil in the past year and most of it has centred on the banking industry. Although much of the pain has been felt on the wholesale side, retail bankers, too, are feeling the pinch.

According to Investment Executive’s 2008 Account Managers’ Report Card, the average banker has seen no growth in his or her assets under management. In 2007, the average account manager in IE’s survey had slightly less than $50 million in AUM; this year, that total has slipped to slightly less than $48 million.

The deterioration in AUM is clearly reflected in the distribution of accounts reported by the average banker. However, these results may be skewed somewhat by the addition of another account category. Last year, when bankers were asked to estimate the share of their books represented by accounts in various ranges, the lowest category was accounts of less than $250,000; this year, a category of less than $100,000 was added.

What’s clear, however, is that bankers are reporting a sharp increase in the portion of their books that falls into the less than $250,000 range. Last year, they estimated that about half their accounts were worth less than $250,000. This year, they report that about 37.5% are less than $100,000 in AUM and another 29% are in the $100,000-$250,000 range. The result is a huge jump for the share of accounts that are estimated to be worth less than $250,000 — to 66.6% from 50.5%.

This large increase in the number of the smallest accounts is coming at the expense of other account categories, except for the very largest accounts, those worth more than $2 million. The share of book held by the biggest accounts jumped to 2.4% this year from 1% last year, while every other category saw its estimated share diminish substantially.

The share for accounts in the $250,000-$500,000 range dropped to just 18% this year from 30% last year. Similarly, the share of accounts in the $500,000-$1 million range slumped to 10% from about 15%. The proportion of accounts in the $1 million-$2 million range also slipped year-over-year to 3% from 3.4%, but the decline was not as dramatic as the drop in the $250,000-$1 million accounts.

Moreover, these shifts in account distribution are not being felt equally across the banking sector. In dividing the account manager population by productivity, there are some notable differences between the most productive banking account managers and the rest of the sector’s advisors.

Historically, retail productivity was measured by AUM per client. This year, respondents were asked to estimate the number of households they serve rather than the number of clients, on the basis that they can give more accurate estimates of the number of households on their books. As a result, the productivity metric has changed to AUM per household from AUM per client, and the numbers are not directly comparable.

With that caveat, the most productive bankers of 2008 can still be compared with the most productive bankers of 2007. And it appears not all account managers have felt the effects of the credit crunch equally.

The top 20% of bank advisors have seen their AUM rise year-over-year at a time during which AUM for banking advisors overall slipped slightly. The top 20% report average AUM of $91.4 million this year, up from $85 million in 2007. At the same time, the remaining 80% of the sector has seen its average AUM decline notably, to $37.5 million from $41 million.

The two different populations have also seen their account size mix evolve differently. Although both the top 20% and the remaining 80% saw a jump in the reported portion of their books represented by accounts of less than $250,000, they’ve seen share gains come in very different areas.

For the top 20%, the only other account size category to grow year-over-year was the $500,000-$1 million range. But oddly enough, the remaining 80% reported gains in the largest accounts, as their share of accounts worth more than $2 million increased to 1.6% in 2008 from a tiny 0.4% in 2007. Although these advisors still lag the top 20% in the portion of their books represented by these very large clients, the gap between the two advisor populations has narrowed significantly year-over-year.

@page_break@The top 20% hold a much bigger edge in accounts in the $500,000-
$2 million range — and, indeed have widened their lead in the $500,000-$1 million category. However, both groups now report having about 20% of their accounts in the $250,000-$500,000 range. Naturally, the only area in which the less productive account managers hold an edge is in the accounts of less than $250,000. Indeed, almost 40% of their accounts are worth less than $100,000, vs 21% for the most productive bankers.

Apart from these differences in account distribution, there isn’t a great deal to choose from between the top 20% of bankers and the rest of the sector. Both groups get the almost 90% of their compensation from salary. Other sources of compensation remain relatively insignificant; in fact, almost 80% of all account managers report that their compensation is 100% salary. Only about 8% get some transaction-based revenue; and fee-based or asset-based arrangements, as well as referrals, are only relevant to a very tiny portion of the account manager population.

Nor is there a huge difference between the two advisor groups in terms of the product mix of their books. The top 20% hold a slight edge over the rest of the sector in terms of the share of their clients’ AUM devoted to managed investment products. The top 20% have about 19% of AUM in proprietary managed products and 6.6% in third-party products, vs 13.4% and 3%, respectively, for the rest of bankers. However, the remaining 80% of advisors hold an edge in mutual funds, with 51% of AUM in these products vs 45% for the top 20% of bankers.

In terms of banking product mix, the more productive advisors have a slightly higher proportion of AUM in high-interest accounts and term deposits, as well as a slightly lower share of GICs compared with the rest of the advisors. However, for both advisor populations, GICs remain the most popular choice, at around 25% of AUM overall.

Along with mutual funds, the remaining 80% of bankers also hold an edge in their use of mortgage or travel insurance, with that asset category representing 2.5% of their books, vs 0.4% for the most productive bankers.

Of course, productivity isn’t the only way to divide the account manager population; it can also be looked at by gender. Along gender lines, it appears that women are, on average, having a tougher go of it than their male counterparts. The average female respondent in the survey is older, almost 44 years of age compared with slightly more than 41 years for men; has been in the industry longer, more than 20 years vs 16.5 years for men; and with the same firm for an average of almost 18 years vs slightly more than 12 years for the men. And yet, despite handling more clients as well, women manage smaller books on average.

The average woman in this year’s Account Managers’ Report Card has $45.4 million in AUM and more than 500 households on her books vs more than $49 million in AUM spread over just 400 households for the average man. Not surprising, given these figures, men also account for a greater share of the industry’s most productive advisors; although men represent about 54% of the overall survey sample, they account for 64% of the most productive advisors.

This apparent gender gap is also reflected in account distribution mix. Female account managers report higher average allocations in all AUM categories below $500,000 — and smaller allocations in all AUM categories above the $500,000 mark. The biggest difference comes at the very top end, for which female bankers have slightly more than 1% of AUM in accounts worth more than $2 million, compared with 3.4% for the average male account manager.

With women bankers’ smaller asset totals, larger client bases and heavier reliance on smaller accounts, it’s hardly surprising that these advisors are also more reliant on salary for their take-home pay than their male counterparts; salary makes up more than 93% of compensation for females vs 88% for males.

The superficial conclusion from all of this could be that women simply aren’t as productive as men in the world of retail account management — they have to work longer to build comparable books. But what the data does not account for is the working time that female account managers lose to maternity leaves.

The average female banker may have been on the job longer than the average man, but if she has also had children during these core career-building years, she has likely sacrificed several years on the job for the sake of her family. IE