Curian Capital announced today a partnership with the Independent Community Bankers of America to offer separately managed accounts through its member banks.
The Denver investment management firm, a subsidiary of Prudential PLC in London, is to be the preferred provider of separately managed accounts to 4,700 community and regional banks through ICBA Financial Services Corp., the trade group's broker-dealer.
Bill Reid, the president of the community bankers asociation, said he expects 500 banks to begin offering Curian's managed account platform.
"Many of our community banks don't have trust departments, or a trust department that is active, to take advantage of the trust powers that the bank has," he said. "Small banks are searching for a managed account product to effectively compete."
Curian, which was started in March, has developed a reputation as the first managed account provider to offer diversified managed accounts for a minimum investment of $25,000 at a time that most banks' investment arms required at least $100,000. Curian creates a stock portfolio for each investor. Each portfolio includes 10 to 20 style-specific money managers and typically holds positions in up to 500 securities.
The company, which says its average account is worth $300,000, distributes through broker-dealers, including some that distribute through banks.
It has 130 sales agreements with brokerage firms and registered investment advisers, up from 90 at the end of June, said Jim Vitalie, an executive vice president at Curian. About 6,000 professionals are authorized to sell Curian's custom-style portfolios, up from 1,600 at June 30.
Kevin Garrow, the vice president of business development at Curian, said community banks have been very interested in offering managed accounts in order to compete with larger banks. But companies must offer the right incentives, he said, to get their brokers to move to a fee-based platform.
"Fees have been a big hurdle, culturally," Mr. Garrow said. "Small banks just didn't have the technology or the human resources budget to create their own platform."
Curian's fee-advance program lets financial professionals transfer from commission-based business to fee-based business more easily by paying fees up-front. This is a big incentive for small banks to initiate managed account programs, Mr. Garrow said.
Mr. Reid said the fee-advance program is important but that it was Curian's turnkey technology that really made it stand out. Most bankers, he said, are comfortable offering fee-based products.
"Bankers think in terms of a level and constant commission," he said. "Really, it is more of a culture change to launch a mutual fund or an annuity. Brokers like their fees on the front end, but banks are quite comfortable with managed accounts."
More companies are offering fee-based products to banks. Fundquest Inc., a Boston-based independent provider of fee-based products, has relationships with five banking companies, including Bank of America Corp., Comerica Inc., Huntington Bancshares Inc., and FleetBoston Financial Corp.'s Quick & Reilly brokerage subsidiary.
Robert Del Col, the president of Fundquest, said it has the capability to offer its platform of fee-based products to 50 to 100 more banks this year.
"There are smaller banks, there are CEOs at smaller banks, that are demanding that we come visit them," Mr. Del Col said. "They want to move into wealth management and away from pure selling of annuities and commissioned mutual funds."
Mr. Garrow said banks, large and small, want to offer managed accounts to their customers.
"Community banks, super community banks, superregionals, and regionals have all evolved into the type of bank that we want to talk with," he said. "Community bankers recognize that if they want to get on a level playing field with large banks and wire houses they have to offer managed accounts to their customers."
