What is a Cross-Sell?

To cross-sell is to sell related or complementary products to a customer. Cross-selling is one of the most effective methods of marketing. In the financial services industry, examples of cross-selling include selling different types of investments or products to investors or tax preparation services to retirement planning clients. For instance, if a bank client has a mortgage, its sales team may try to cross-sell that client a personal line of credit or a savings product like a CD.

Cross-selling to existing clients is one of the primary methods of generating new revenue for many businesses, including financial advisors. This is perhaps one of the easiest ways to grow their business, as they have already established a relationship with the client and are familiar with their needs and objectives.

However, advisors need to be careful when they use this strategy—a money manager who cross-sells a mutual fund that invests in a different sector can be a good way for the client to diversify their portfolio. But an advisor who tries to sell a client a mortgage or other product that is outside the advisor’s scope of knowledge can lead to problems in many cases.

If done efficiently, cross-selling can translate into significant profits for stockbrokers, insurance agents, and financial planners. Licensed income tax preparers can offer insurance and investment products to their tax clients, and this is among the easiest of all sales to make. Effective cross-selling is a good business practice and is a useful financial planning strategy, as well. 

Advisors who cross-sell financial products or services need to be thoroughly familiar with the products that they are selling. A stockbroker who primarily sells mutual funds will need substantial additional training if they are assigned to start selling mortgages to clients.

A simple referral to another department that actually sells and processes the mortgage may lead to situations where referrals are made whether they are needed or not, as the broker may not understand when the client really needs this service but is only motivated to earn a referral fee.

Advisors need to know how and when the additional product or service fits into their client’s financial picture so that they can make a more effective referral and stay compliant with suitability standards. FINRA may use the information that it collects from its inquiry to develop and implement a new set of rules that govern how cross-selling can be done.

Until the 1980s, the financial services industry was easy to navigate, with banks offering savings accounts, brokerage firms selling stocks and bonds, credit card companies pitching credit cards, and life insurance companies selling life insurance. That changed when Prudential Insurance Company, the most prominent insurance company in the world at that time, acquired a medium-sized stock brokerage firm call Bache Group, Inc.

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