WASHINGTON -- The Farm Credit System plans to offer mutual funds to the farmers who already rely on it for loans to buy land and sow their fields.
The St. Paul-based farm credit bank, known as Agribank, and Minneapolis-based IDS Financial Services will team up to market mutual funds and other investment products to farmers and ranchers through three local lending associations in two states.
If the other 10 regional farm credit banks follow Agribank's lead, about 1.8 million farmers nationwide could buy mutual funds through the system's 250 local credit associations.
Today Agribank plans to announce the system's latest shift toward retail banking from wholesale banking. IDS, an American Express Co. subsidiary, will sell the mutual funds, annuities, insurance, and other investment products starting next month.
Agribank's vice president of government affairs, John O'Day, said, "There are a substantial number of farmers who are not now taking advantage of financial planning."
While the system would earn fees for the affiliation, Mr. O'Day said, "the profit potential is not great."
Instead, he said, "the real focus from our standpoint is that we want to be a real service to our customers."
Bankers told about the move cried foul about the Farm Credit System making inroads in markets they view as the province of commercial banks.
"Everybody wants to protect their turf," said Jeffrey L. Gerhart, president and chief executive officer of Nebraska's First National Bank of Newman Grove. "But if you have an awful lot of different types of charters out there and everybody is doing the same thing, you have a certain amount of cannibalization."
Marketing mutual funds "is stepping out of the bounds of what those folks were designed for," said Mr. Gerhart, whose bank soon plans to offer mutual funds itself. "Let them get a bank charter."
The Farm Credit System, which was set up in 1916 to channel Wall Street funds to farmers and ranchers, emphasizes that it would not sell or underwrite the mutual funds.
Instead, Agribank would lease space in its local lending offices to IDS, which has paid a fee for the affiliation. In the future, IDS might also pay a commission for referrals, Mr. O'Day said.
The three local lending associations that will house IDS salesmen are Farm Credit Services of Eastern Arkansas, in Jonesboro, Ark., Farm Credit Services of Central Arkansas in Little Rock, and Farm Credit Services of Grand Forks in Grand Forks, N.D., Mr. O'Day said.
The Independent Bankers Association of America and the American Bankers Association oppose the Farm Credit System move.
"Our bankers have a visceral reaction anytime they offer new products and services," said Ronald K. Ence, the IBAA's director of legislative affairs. "The cross-sell opportunities are there."
