As banks and insurers buy third-party marketing firms, some small banks find they're suddenly doing business with a competitor.

If the firm a small bank uses to distribute investment products is bought by another bank, bankers say, it can raise concern that the larger bank might try to woo away retail banking customers with a one-stop shopping pitch.

And if the firm is bought by an insurer, there's a chance it will start pushing proprietary investment products.

"It's just best to keep competitors separate as much as possible when dealing with the same customer base," said Steven C. Wade, executive vice president of $475 million-asset Metropolitan National Bank of Little Rock, Ark.

Mr. Wade said his bank has decided not to use Invest Financial Corp. because it fears the company's banking parent, First American Corp. of Nashville could buy a bank in the Little Rock market.

First American bought Invest and Investment Centers of America in 1996. Since the mid-1990s at least a dozen third-party marketing firms have been bought by banks and insurers.

For Mr. Wade and Metropolitan the choice was clear. The bank chose Investment Professionals Inc. of San Antonio to be its independent third- party marketing partner.

Another banker expressed concern that despite rules forbidding information sharing between banks and brokerages, some data might leak out.

"I get concerned about confidentiality of records," said Wesley W. Sturges, president and chief executive of First Commerce Bank of Charlotte, N.C., which is close to picking a third-party marketer.

Mr. Sturges said the bank has narrowed down the field to three firms. One is owned by an insurance company; the others are independent, he said.

Other bankers interviewed for this article said they would shy away from a bank-owned third-party marketing firm only if the owner was a direct competitor.

"I don't think First American is interested in a small bank in Aberdeen, S.D.," said Richard Westra, president of Dacotah Bank, which uses Investment Centers for brokerage services.

"If I was next door to them, I'd probably look at that all differently," he said.

Neil M. Fried, who manages the investment program at Ramapo National Bank of Wayne, N.J., agreed.

"Our customers don't have a clue that Invest is owned by First American," he said.

Bank clients have not been running out the door, said Robert R. Blagojevich, president and chief executive of IFC Holdings Inc., the First American unit that owns Invest and Investment Centers of America.

Though banks sometimes question the relationship between First American and the marketing firms, "we get the business more often than not," he said.

Indeed, National Commerce Bancorp. of Memphis recently signed on with Invest, though the banking company is a direct competitor of First American, said a spokeswoman for IFC Holdings.

For those bankers who find out that their third-party marketing firms are being bought by insurance companies, the news is generally positive.

It gives a bank confidence, knowing the "strength and depth of resources" that a marketing firm can draw on, said Louis Kruger, senior vice president at Plymouth Savings Bank of Wareham, Mass., which uses Independent Financial Marketing Group Inc.

Independent Financial of Purchase, N.Y., is owned by Boston-based Liberty Financial Cos.

Though the parent company's products are offered, banks are not forced to sell them, bankers said.

"Just because it's on the menu doesn't mean we have to order it," said David D. Butler, senior vice president and trust officer at First National Bank and Trust Co. of Asheboro, N.C., which also uses Independent Financial.

Larry Doris, who manages the investment program at GreenPoint Bank of New York, said he does not see his bank's product mix changing because John Hancock Mutual Life Insurance Co. bought Essex Corp., the bank's marketing partner.

"You just don't do a product push overnight," he said.

Still, for some banks, the potential for a nonindependent third-party marketing firm to peddle proprietary products is reason enough to steer clear.

"The bank is expected to offer investment choices that are laid out for the customer according to the customer's needs, not according to some sales objective that involves pushing proprietary products," said Mr. Wade of Metropolitan National.

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