American Express Financial Advisors has teamed up with an inner-city Philadelphia bank to provide investment service to low- and moderate-income depositors.
For United Bank of Philadelphia, a minority-owned institution with assets of $102 million in six neighborhood offices, the alliance is part of plan to beef up deposits while encouraging customers to save and invest more cash.
"Our intention is to market to the community financial planning. It's a way to attract more customers and also help our current depositors" boost their savings and investments, said Emma C. Chappell, the founder, chairman, chief executive, and president of the five-year-old bank. "We're asking people to rethink the banking relationship."
Since Feb. 28, American Express has been offering its own investment products at the bank as well as detailed planning advice for investments, estate, retirement, insurance, and income taxes.
The planning service, which includes evaluating what a customer can afford to save or invest, isn't cheap; the up-front fee is $350. But Amex says it won't be pushed on people who can't afford it; they'll be offered other Amex investment products or steered to bank officers for advice-for instance, to open a savings account.
"I'm not going to charge a fee if it burdens someone's financial situation," said Larry Daniels, an American Express financial adviser who was instrumental in setting up the United Bank arrangement.
Ms. Chappell acknowledges the service is not for everyone but fits with the bank's strategy of persuading all customers to come up with a financial plan-starting with setting aside 10% of net income as savings or investment.
"I'll accept 5%. Sometimes that means setting aside $5 to $10," she said. "I'm trying to get them to think about it, so that when their kids get ready for college, they'll have a plan."
Ms. Chappell, who holds a doctorate in law and spent 25 years in commercial lending at Continental and Midlantic banks, regularly holds seminars in churches, hospitals, unions, and radio stations in Philadelphia. She teaches the fundamentals of savings and money market accounts, stocks and mutual funds, and annuities and insurance products.
"Our whole idea is to take an educational approach, giving seminars in churches and community associations, said Ms. Chappell." "The theme is 'pay yourself first.'"
For some new United Bank customers, a check-cashing agency may be the only contact they've had with a financial institution, she said.
United Bank, with $87 million in customer deposits, is not shy about the fact that to be profitable it needs capital to make loans. (In part to remedy that, a year ago it arranged a loan program with a suburban bank, Cherry Hill, N.J.-based Commerce Bancorp.)
Mr. Daniels, who was director of diversity programs at American Express Financial Advisors' regional office in West Conshohocken, Pa., and Ms. Chappell first talked a year ago, at a Philadelphia conference, about sharing resources.
"We talked for an hour. We researched the idea. I liked the fact that American Express had credibility and name recognition," said Ms. Chappell.
But Larry Post, regional manager at American Express Advisors, had to be convinced of the plan. Its financial institution group had similar arrangements with about 50 other banks, but few were in urban areas and none were as small as United Bank, Mr. Post said.
"There is huge wealth in the African-American community in Philadelphia" and very little of it is in financial institutions, Mr. Post said. "This was a way to bring more assets to both American Express and United Bank."
Lance Haber, education director at the Consumer Education and Protective Association in Philadelphia, praised the United Bank program. "We recommend that people find financial advisers where the fee is stated clearly up- front," said Mr. Haber. "The point is someone can say 'no' and walk out the door before they're committed."
American Express pays United Bank a percentage of securities sold and a flat fee for the privilege of selling insurance products (state law prevents a payment based on percentage of sales). Mr. Daniels and his partner, Lyndell Carey, staff two of United Bank's six sites.
Mr. Daniels said all sorts of people come to him for advice. He cited a 45-year-old woman who asked him to invest $1,000 in an individual retirement account. "She had $5,000 in annual income and saves $50 a month," Mr. Daniels said. Instead of proposing she pay $350 for a financial workup, he suggested she buy a bank IRA, which she did.
Amex is exploring a similar arrangement with South Shore Bank of Chicago, Mr. Daniels said.
United Bank was started with seed money from 3,000 charter stockholders, who paid $10 for each share. It remains privately held.
Within two years, the bank plans to open two more Philadelphia offices. The five-year plan calls for building assets to $250 million and expanding the branch network to other urban areas in the region, including Norristown, Pa., Camden County, N.J., and Wilmington, Del.
"We're in business to serve the underserved," said Ms. Chappell.