MINNEAPOLIS - Where's a person to turn for help in mapping out a financial plan?
More and more, commercial banks are hoping they will be the answer. They see financial planning as a terrific way to forge close ties with the investing public.
But there's a little problem: American Express Financial Advisors has beaten them to the punch.
Now in its 101st year, the company - known until recently as IDS Financial Services - is the undisputed leader in financial planning.
"I don't know anybody with the financial planning orientation they have that is so visible across the country," says Harold Evensky, an independent financial planner in Coral Gables, Fla.
The American Express Co. unit fields a staff of more than 8,000 planners in 177 cities from coast to coast. Last year, it sold 133,000 financial plans at about $300 a pop.
But selling plans is just a foot in the door. Once planners connect with clients, they keep on selling a range of investment products, including mutual funds, annuities, life insurance, estate planning, and tax advice. The company has amassed $106 billion of assets this way.
Banks are eagerly taking notes.
"Their financial planning process is what everyone is trying to do," acknowledges John McCune, president of Norwest Corp.'s brokerage subsidiary. "Certainly, we're trying to go that way."
David R. Hubers, Amex Financial Advisors' president and chief executive, knows banks are eyeing the financial planning business - and says he isn't worried in the least.
"We've been doing this for 100 years. We haven't really found any banks that are doing what we're doing today," Mr. Hubers said during an interview in the company's headquarters in a landmark building in downtown Minneapolis.
Though the company sees banks as fierce rivals, it has also begun building strategic alliances with banks that want to learn its comprehensive approach to financial planning.
During the past decade, Amex Financial Advisors has become one of the brightest orbs in the American Express galaxy. Earnings have grown at a steady clip of 20% a year, and assets under management have risen nearly as fast. This performance has been so dazzling that next month, in a nod to the unit's star status, New York-based American Express will hold its annual analysts' meeting in Minneapolis.
In the process, the financial planning company is evolving into what analysts have taken to calling "a virtual bank." In two test markets - Philadelphia and Chicago - the company is aggressively marketing an array of planning and investment services to holders of the American Express green card.
"They want to provide total banking services by mail and by phone," said Rhona Heyle, a senior associate at the Optima Group consulting firm in Fairfield, Conn. "Their whole game plan is just to disintermediate the banks from their customers."
The program is slated to go national in about 18 months with even more services, including home equity and general loans.
Mr. Hubers says he is trying to attract investors who don't want financial advisers and who now invest through discount brokers like Charles Schwab or no-load mutual fund companies like Fidelity Investments. So he doesn't see banks as competitors on this front.
Richard A. Davies, who heads up First Chicago Corp.'s brokerage unit, says he hasn't seen Amex Financial Advisors siphoning away customers through the virtual bank program. Right now, he says, investors who want their hands held come to bank branches to visit with brokers face to face.
But Mr. Davies acknowledges that technology is making branches obsolete, which makes finding customers more difficult. "Two-thirds of bank investment customers don't enter the branch," he says.
And bank consultants said the charge card marketing plan will no doubt reach bank customers. People are more and more inclined to get their basic banking services via automated teller machines or telephones, so they are less and less likely to make contact with bank-based brokers.
Mr. Hubers, a plain-spoken man of 54, practically grew up in financial planning. He joined IDS - it stands for Investors Diversified Services - 30 years ago. He became chief financial officer in 1982, helped guide the company through its 1984 acquisition by American Express, and rose to his current post in August 1993.
Since taking the reins, Mr. Hubers has overseen a "rebranding" to align the company more closely with its parent - a step designed to make the most of American Express' name recognition and upscale image.
The company's employees are enthusiastic about the switch from the IDS name to American Express. The marketing move should help boost sales, says Christopher Murphy, an American Express financial adviser in Mamaroneck, N.Y.
Mr. Hubers has also initiated what the company called an "exhaustive analysis" of its core business and set in motion a slew of initiatives aimed at helping financial planners work more efficiently. Among them: equipping planners to devise financial strategies on personal computers.
And in perhaps his most daring move, Mr. Hubers has set out to team up with some banks - though the company sees banks, along with Merrill Lynch & Co., Fidelity Investments, and small financial planning firms as among its chief rivals.
"Let's face it, the banks have very strong client relationships because of their visibility within communities," Mr. Hubers said, leaning back in a cozy chair in his 29th-floor office. "It's easier to generate clients in a bank environment."
"A lot of people still view the bank as the financial center in their life," adds Douglas Lennick, Mr. Hubers' second-in-command. "That's a typical American view."
The executives point to a recent marketing study in which the company found that 76% of prospective clients want their first contact with a financial planner to happen either at work or in a bank.
They clearly see an opportunity to benefit from banks' growing focus on selling investment products.
Banks "have not done comprehensive financial planning," says Mr. Lennick who, as executive vice president of the private client group, oversees marketing. "What they want to do is sell the product without linking the master plan to that product."
So far, Amex Financial Advisors has sold more than 65 community banks on its approach by signing deals to station financial planners in their lobbies.
It has also hooked up with two big banks - Shawmut National Corp. and Banc One Corp. - in pilot programs aimed at developing financial planning programs.
But banks are acutely aware that Amex Financial Advisors "can be a formidable enemy," says an industry consultant, speaking on condition of anonymity. While some banks have teamed up with the company, "they all admit that the sole purpose is to study what IDS does."
Indeed, a partnership with Minneapolis-based First Bank System Inc. came unglued last year, just a year after it was announced with great fanfare.
Lawrence Crawford, general manager of First Bank System's central banking group, said the alliance was scrapped because "it wasn't clear to us that the (Amex Financial Advisors) process in our branches generated that much more income than what we could do on our own."
The split left a bitter taste in the mouths of American Express executives who make no bones about competing with banks.
"I would like to have helped out a local firm," says Mr. Lennick. But now, he says, he's prepared to "eat them up."
