Eager to boost its income from asset-management fees, Star Banc Corp. is laying the groundwork to expand sales of its own mutual funds and annuities.
The Cincinnati-based banking company has hired a new investment marketing firm to help draw more assets into Star Banc's proprietary fund family, Star Funds. The bank has $1 billion in assets under management in those funds.
Star Banc is also launching its first proprietary annuities.
Like many of its peers, Star Banc also markets investment products from mutual fund and insurance companies, earning commissions for these sales.
But Randy Bateman, Star Banc's chief investment officer, said his company is tired of selling other company's mutual funds and annuities and settling for sales commissions.
"If we sell a mutual fund that we do not manage, we get a portion of the load, but somebody else gets the management fees forever," he said.
Amplifying the bank's commitment to its own funds, Star Banc slashed its roster of proprietary and outside fund offerings by 70%. That pruning gave the banking company's managed funds a more prominent position in front of brokers.
Star Banc is about to enlist the aid of Bankmark, a Morris Plains, N.J., investment marketing firm, to help it sell more of its proprietary funds.
Bankmark won the bid over 10 other competitors because it was more willing to let Star Banc control the program, said Steven Short, Star Banc's vice president for trust and financial services.
Mr. Short co-chaired a committee that interviewed the various marketing companies.
"If our object was to drive proprietary funds, they were willing to do that," Mr. Short said of Bankmark.
The five-year contract between Star Banc and its current investment marketer Financial Horizons Distributors Agency ends in late June. Financial Horizons, Columbus, Ohio, chose not to renew its contract, said Mr. Short.
Bankmark will also help Star Banc sell the fixed and variable annuities it plans to introduce later in the year.
Annuities are generally used as investments to bring in steady income during retirement years. Thus, they represent a long-term management fee opportunity for banks.
"On the annuities side we were essentially giving customers to our competition, and it was only because they have an annuity and we don't," Mr. Bateman said.
The bank generated $74 million in annuity sales last year, but lost out on $592,500 in management fees it could have charged, said Mr. Bateman. Those fees add up every year, Mr. Bateman said.
He said he hopes to get the total assets under management of the variable annuities to $60 million in six months.
"That's an ambitious goal," said Andrew Singer, managing director of Bank Insurance Marketing Research Group, Mamaroneck, N.Y. The handful of banks already selling proprietary annuities haven't been generating a lot of assets, he said.
