First Mercantile Trust Co. has co-branded a retirement plan with its seventh bank partner, a Maryland community bank, as part of its nationwide push to increase its assets under management.
The Memphis trust company, a unit of National Commerce Financial Corp., said on Monday that it will co-brand a corporate retirement plan with Sandy Spring Bancorp. First Mercantile will run the multimanager platform and manage the profit-sharing and 401(k) plan that Sandy Spring offers its customers.
Todd Proctor, First Mercantile's director of institutional sales, said this relationship gives his company a distribution outlet in the Middle Atlantic states. He said it began selling the multimanager mutual fund platform in August 2001.
In the year since, the Memphis company has developed distribution relationships with Cincinnati's Fifth Third Bancorp.; Commerce Bancorp in Cherry Hill, N.J.; Stephenson National Bank and Trust in Marinette, Wis.; Security Bank and Trust in Glencoe, Minn.; Winona National Bank in Winona, Minn.; and Stearns Bank in St. Cloud, Minn.
With the exception of Fifth Third and Commerce, these banks have less than $5 billion of assets. Sandy Spring has $2.2 billion.
"Banks of this size are our sweet spot for this business," Mr. Proctor said. "We anticipate this business will continue to ramp up. Small and midsize banks want to offer more asset management services, and we can provide them with a platform."
Mr. Proctor said the difference between First Mercantile's platform and others' is its flexibility. The platform offers mutual funds, annuities, and separately managed account options from different managers but lets the individual bank select which products it will offer. First Mercantile manages only the assets generated under the partnership pacts.
"What the banks are doing is taking our platform and our back-office capabilities and plugging in investment options that they are comfortable with," Mr. Proctor said. "When Fifth Third came in, we added 40 of their mutual funds to the platform. We want them to feel comfortable selling products that are recognizable locally."
Sergio Oliver, a senior vice president at Sandy Spring Asset and Trust Management, said the Olney, Md., banking company chose First Mercantile as a partner because it could co-brand the product and offer its own investment management through the platform.
"When we were looking, we only found one provider, First Mercantile, that would allow us to offer our own products," he said. "As a moderate[-size] institution, we didn't want to have to create an entire back office to offer our investment management capabilities. This offered us a partner and the opportunity to be part of a multimanager platform."
Mr. Oliver said First Mercantile also offered strong technological capabilities, including Web access. Burton Greenwald, a Philadelphia investment products analyst, said that by targeting midsize banks with strong Internet capabilities First Mercantile will quickly expand distribution.
"This is a good tack. But the key is finding the right partners," Mr. Greenwald said. "Now may not be the best time to be looking to offer something new and innovative. People want things that are tried and true."
Mr. Proctor said First Mercantile had expected the multimanager platform to generate $250 million of assets in 2002 but, with markets tumbling, now expects to reach just $150 million by yearend.
In the next month, his company will announce a deal with a $4 billion-asset bank in California's Bay Area, Mr. Proctor said. First Mercantile has hired five employees to support the spread of this business, he said.
"We think this business will continue to ramp up over the coming years," Mr. Proctor said. "This is a real focus for us on a national basis. … People like our platform because it is flexible. We aren't forcing them to have 60% of their assets in our proprietary funds. This makes us attractive."
