The brokerage services group at Washington Mutual Inc. is undergoing a makeover as the Seattle-based thrift combines its businesses with those of two recent acquisitions.
WM Financial Services is an amalgamation of Washington Mutual's Murphy Favre brokerage and similar units from Great Western Financial Corp. and American Savings Bank, two California thrifts acquired by Washington Mutual in the last 12 months.
Under J. Pamela Dawson, its recently appointed president, the combined brokerage is revising the short list of mutual funds it sells, working with different third-party marketing firms for the distribution of annuities and life insurance, and increasing its oversight of brokers.
The broker-dealer covers the Pacific Northwest, California, and Florida. Great Western Securities will keep its name until May, but it already shares policies and procedures with WM Financial, Ms. Dawson said in an interview last week.
The brokerage chief, who came to Washington Mutual from American Savings, said the current system should not be cast as the product of a specific predecessor institution.
"We adopted a strategy and vision for the broker-dealer that's common throughout the system," Ms. Dawson said. "There is a real sensitivity to saying we adopted any one (company's) philosophy and strategy."
Though Great Western and WM Financial are still separate legal entities, she said, "we do have a common strategy for the program as it relates to distribution, product lineup, the consumer banking relationship, and compensation."
Washington Mutual inherited legal issues from Great Western, including an investigation of sales practices by the Florida Attorney General's Office. Great Western settled two lawsuits from customers in California and Florida, but the lawyer for another set of Florida plaintiffs, Jonathan Alpert, said he plans to file an amended complaint in U.S. District Court in Tampa within two weeks.
"There are still some outstanding issues that need to be resolved," Ms. Dawson said. All trades made by salespeople will now go through a compliance department, she added.
The brokerage units at Washington Mutual and American Savings have not faced the same kinds of legal difficulties as Great Western's brokerage unit, she said. The company anticipates no problems now that a new compliance program is in place, she added.
WM Financial's revised product lineup has not been introduced to its salespeople, Ms. Dawson said.
The group has alliances with eight mutual fund companies and sells proprietary mutual funds, including Great Western's Sierra Funds and Washington Mutual's Composite Group. Before Washington Mutual bought Great Western, the California thrift had been seeking a buyer for its fund family.
Once the short list of preferred funds is in place, the group's brokers will learn about them from their 18 sales managers. In California, 10 of these sales managers report to regional manager Ruth Ann Tyner. The other sales managers, in the Northwest and Florida, report directly to Ms. Dawson.
Ms. Dawson said she wants to beef up the staff to 350 brokers with Series 7 licenses next year. The group has lost a few brokers along the way. She said Great Western had about 165, Murphy Favre 115, and American Savings 90.
Besides these changes on the securities and mutual fund side, annuities and life insurance are undergoing a revamping as well.
Essex Corp., a New York-based third-party marketing firm, has worked with American Savings and Washington Mutual to sell variable annuities. It also provided Great Western with fixed and variable annuities and life insurance.
Under the new system, Essex will have only a limited contract with WM Financial to market a Putnam Investments variable annuity underwritten by the Hartford.
Now WM Financial representatives will sell variable annuities that are invested in mutual funds offered by companies the brokerage is aligned with.
The relationship with Essex was trimmed back after Washington Mutual sold its WM Life Insurance Co. to Safeco Corp., a Redmond, Wash.-based insurance company.
WM Life underwrote, managed, and sold policies. Safeco's own third-party marketing firm, Talbot Financial Corp. of Albuquerque, now sells fixed annuities from Safeco, American General, and Jackson National through WM Financial.
Essex, which had sales of $3.1 billion of annuities and mutual funds last year through banks and thrifts, doesn't seem very disappointed by the loss of business from Washington Mutual.
"It's not the end of world," said David Foster, first vice president. "We've got some other major clients out here." He said Essex still does business with California Federal Bank, People's Bank of California, and U.S. Bancorp.
The West Coast sales manager said that there is always the possibility of getting more business from Washington Mutual's new "powerhouse."
"Nothing is forever in this business," he said. "We've picked up some accounts in mergers, we've lost some accounts in mergers. Then later some of those same accounts brought us back in."
To sell life insurance policies, WM Financial is working with another third-party marketing firm, Duerr Financial Corp. of Irvine, Calif., which is training the thrift company's licensed insurance employees and providing back office support.
