Training Essential for People Working in Multiple

By Striegel, Lynn | American Banker, June 23, 2000 | Go to article overview

Training Essential for People Working in Multiple


Striegel, Lynn, American Banker


The Gramm-Leach-Bliley Act of 1999 set the stage for improved delivery of financial products, enhancing the competitiveness of U.S. companies in global markets. Consumers will reap the benefits of this more efficient regulatory structure, encouraging further innovation in financial services products and the means by which they are delivered. There is good news and bad news for financial holding companies under the law. The good news is that fee income from cross-selling opportunities may rise as a result of streamlined product delivery through multiple channels. The bad news is that liability risk increases where delivery is streamlined not only through multiple channels but also through multichannel employees. Under the law, financial holding companies may now deliver a variety of financial services through affiliates, but each affiliated delivery channel must function in accordance with specific laws. These affiliated "multiple delivery channels" may include an extensive menu of products and services such as insurance, broker-dealer services, mortgages, mutual funds, investment advice, and new finance-related business. In order to provide seamless delivery to clients and to produce fee income, many institutions are turning to employees trained to deliver products through many or all of the affiliated distribution channels. This new multichannel employee may be a dual, triple, or even quadruple employee, licensed to provide brokerage, insurance, and investment advisory services, in addition to traditional banking products. To do so, the multichannel employee will be required not only to have a thorough understanding of the laws governing these several distribution channels but also to know how the laws affect his or her client relationships. A risk management audit of multichannel employees involves an analysis of all the distribution risks inherent in brokerage-insurance-advisory and banking product distribution through one employee. The primary multichannel employee risk management tool is training. Without a comprehensive training program, institutions face the risk that employees not familiar with a variety of differing regulations may be putting the institution at risk for sales practices and other violations that can prompt lawsuits or regulatory sanction and create reputation risk. It is not enough to verify that the employee offering the institution's latest banking product, along with its new asset allocation account or insurance product, is a dual bank-brokerage or bank-insurance agent employee. If the employee does not know when to put on his or her banking or brokerage or insurance hat, the verification is incomplete. …

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