Expanding an unusual alliance with PaineWebber Inc., Comerica Inc. is moving to take its trust and private banking business national.
A unit of the Detroit-based banking company last week received permission from the Office of the Comptroller of the Currency to begin offering trust services nationwide. Comerica's trust activities are currently limited to Michigan, Florida, California, Texas, and Illinois.
With a national trust charter in hand, Comerica plans to rapidly expand its high-profile marketing alliance with PaineWebber, the country's fourth- largest brokerage. Launched in November, the agreement calls for PaineWebber's sales force to offer Comerica's trust and private banking services to its well-heeled brokerage clients.
The deal marked the first time a national brokerage house teamed with a bank to crack the trust market.
Initially limited to 1,300 PaineWebber brokers in Michigan and Florida, the agreement was expanded this week to include another 1,900 in California and Texas. Now, Comerica plans to strike another deal with PaineWebber under which the two companies will take their joint program national.
The trust charter "gives us a national platform from which we could expand the alliance," said David B. Stephens, executive vice president of Comerica. The bank has long had plans to offer its trust services coast-to- coast, he added, but "certainly the alliance we're doing with PaineWebber made us much more excited about it."
When the national agreement is signed, the $35 billion-asset Comerica will have access to 6,005 PaineWebber brokers who do business with some 2.4 million customers nationwide.
PaineWebber, for its part, will be able to hawk to those customers trust products and services, such as estate planning and portfolio management, designed by a bank that boasts more than $30 billion of discretionary trust assets under management, including $13.1 billion in personal trust.
"What our personal trust clients want is investment flexibility," said John W. Emery, PaineWebber's manager for personal trust services. PaineWebber already administers $48 billion in trust assets through agreements with 10 small independent trust companies.
But alliances between big brokerages and banks haven't always worked out. NationsBank's vaunted partnership with Dean Witter Financial Services, for instance unraveled two years after its announcement in 1992.
And PaineWebber has a tough road ahead of it in marketing Comerica's services far away from the bank's Midwest home base.
"I'm not sure that the average investor in Seattle or Santa Fe would know of Comerica," said Perrin H. Long Jr., an independent brokerage industry analyst in Darien, Conn. "That might be a difficult selling point."
But officials at both the bank and the brokerage firm say the program has so far been a success. While they will not reveal how many new trust accounts they have opened since the program's launch, they say the number is double what was originally anticipated. Indeed, the two partners are entering California and Texas six months ahead of schedule, they say.
"We are running well ahead of the expectations we had at the time we started this," Mr. Stephens said.
PaineWebber refers clients to Comerica in two ways. It either recommends the bank as an asset manager for a funded account or suggests that a client name the bank as the fiduciary of a trust account.
"Banks are going to be looking for more of these alliances," Mr. Stephens predicted.
Once a referral is made, the three parties - the bank, the brokerage, and the client - determine which entity will be the client's main contact for trust services. Most PaineWebber clients initially call on the brokerage, which then contacts Comerica. How each party is compensated was not disclosed.
The agreement gives Comerica access to a firm with considerable retail marketing prowess. Observers say the success of the deal will depend on how well PaineWebber can harness that to sell a bank that does not enjoy national name recognition.
"It really would depend on PaineWebber's reputation in (other) states," said Kenneth R. Hoffman, president of Optima Group Inc., a consulting firm in Fairfield, Conn. PaineWebber has not "teamed with U.S. Trust, Northern Trust, or Trust Company of the West - somebody with a nationally known trust operation."