Charter One Financial Inc. plans to hang out its shingle as a broker- dealer after it wraps up a pair of acquisitions in October.
The Cleveland thrift company will use the brokerage arm of one of the thrifts it recently agreed to buy-CS Financial Corp., also of Cleveland-as the takeoff point for the expanded operation, said Gary Arnolds, a senior vice president who would head the new brokerage. Pending regulatory approval, it would be called Charter One Securities Inc.
Currently, $20 billion-asset Charter One offers brokerage services through an unaffiliated firm, or third-party marketer, as does the larger of the two thrifts it is buying, $4.1 billion-asset Albank Financial Corp., Albany, N.Y. But CS Financial, which has $381 million of assets, has owned a brokerage since 1982.
Charter One had considered starting a brokerage for several years but had made no definite plan, Mr. Arnolds said. The deal for CS Financial, the parent company of Cuyahoga Savings Association, gives Charter One a "shell" to start with-Cuyahoga Financial Services Agency Inc.
"They only sell maybe $4 million of packaged product, and that's a drop in the bucket when we do about $240 million," Mr. Arnolds said. But Cuyahoga had already paid the start-up costs for launching a brokerage, and Charter One sees no reason to duplicate the investment, he explained. He said he expects sales of packaged products-mutual funds and annuities-to rise to $300 million next year.
With the shift, the future role of the third-party marketers is up in the air. Charter One uses Locust Street Securities Inc. of Des Moines, and Albank uses LM Financial Partners Inc., a unit of Legg Mason Inc., Baltimore.
Mr. Arnolds said that his company plans to contract with Locust Street as needed-possibly for marketing and compliance work, among other things- although the details have not been ironed out. Charter One is also reviewing whether and how to continue using Legg Mason's services, he said.
A spokeswoman for Locust Street did not return telephone calls seeking comment. John Houston of LM Financial Partners also failed to return calls.
Third-party marketing firms have been losing some business as banks continue to pull their brokerage businesses in-house. But Richard Ayotte of American Brokerage Consultants, St. Petersburg, Fla., said that the companies appear to be holding their own. "They are bringing new banks in the front door and there are some slipping out the back door," he said.
The three thrifts' brokerages have a combined 79 sales representatives, most of whom carry Series 7 brokerage licenses, and Mr. Arnold said he hopes all will remain with Charter One Securities.