Liberty Financial Bank Group is drawing on the money management expertise of a sister company in a bid to differentiate itself from rival investment product marketers.
The Boston-based subsidiary of Liberty Financial Cos. is aggressively promoting a so-called wrap account aimed at helping bank clients diversify their assets. Dubbed SteinRoe Personal Counselor, the account is available to customers with at least $50,000 to invest.
The accounts - currently marketed through seven of Liberty's 70 bank clients - are managed by Stein Roe & Farnham, a Chicago-based unit of Liberty that caters to high-net-worth investors.
Wrap accounts are designed for investors who are willing to pay a fee and make a substantial initial investment to get a professional to monitor their portfolio on a daily basis.
Liberty's offering, for instance, charges annual fees ranging from 1% to 1.5% of assets invested. Banks that sell the product receive the lion's share of the annual fees. Liberty makes its money on the deal by managing the mutual funds that make up the wrap accounts.
Observers say the wrap account is already shaping up as a hit. Investors pumped $350 million in Personal Counselor accounts during a pilot program last year, according to Cerulli Associates, a Boston consulting firm that tracks the wrap-fee business.
The SteinRoe Personal Counselor blends eight or nine mutual funds in a single portfolio. An investment manager balances the customer's money between equities, cash, and bonds, adjusting the asset mix periodically to reflect changes in the economic climate and the individual investor's risk tolerance.
Liberty introduced the product more than a year ago at four banks: Eastern Bank, Lynn, Mass.; First Federal Bank of Connecticut, Waterbury; San Francisco Federal Bank; and Westamerica Bank, San Rafael, Calif.
Since then, three more banks have signed up, and Liberty expects to boost the roster to at least 10 this year, said Porter Morgan, president of Liberty Financial Banking Group, the subsidiary that supplies brokers to banks.
Mr. Morgan said he sees strong potential for the product because "people don't have the time or the inclination to become investment experts."
The appeal for banks is that they "are also concerned they are losing the war of the upscale customer to the Merrill Lynch's and Charles Schwab's," he added.
Eastern Bank began offering the SteinRoe program to customers in late November, said executive vice president Mark Primeau. The bank targets the wrap account to customers who aren't wealthy enough for the bank's trust business, which generally requires a minimum investment of $200,000, Mr. Primeau said.
He said the bank signed up for the program because "customers were asking for more asset allocation and investment advice." So far, the program has attracted more than $2 million of initial investments of between $50,000 and $100,000, he added.
Customers have been young "upper income" professionals seeking to build a portfolio, he said. Also, people who receive lump sum payments as part of retirement plans or recently sell a house are good candidates.
"I think asset allocation will become more popular over time," Mr. Primeau said.
Industry experts agree. Liberty's program is part of a "strong trend" in the banking industry to provide investment services that will develop long- term relationships with investors, said Carolyn Spitz, a senior consultant with the Spectrem Group, San Francisco.
Banks have been offering wrap accounts in their trust departments, but now they want to expand them to customers whose only relationship with a bank may be through a checking account or mortgage.
"By packaging these services banks make them more accessible to investors who did not have enough balances to invest in a trust," Ms. Spitz said.
