BIRMINGHAM, Ala. - When the three key executives at AmSouth Investment Services look back on 1994, a bowl of cherries is not what comes to mind.

For George L. Stevens, Gregory J. Miles, and Lincoln B. Yersin, last year was filled with long hours and hard work as they launched AmSouth Bancorp's drive into the retail investment products market.

"Last year was more like two or three years wrapped into one," said Mr. Miles, senior vice president and chief financial officer for AmSouth Investment Services, the brokerage arm of the $16.8 billion-asset banking company.

Although the AmSouth's retail investment effort was started in the fall of 1993, it was last year that the revamped brokerage really began - at a time when mutual funds were at their worst in four years and bank regulators took a huge magnifying glass to bank-based brokerages.

In other words, not stellar timing.

"It was sort of intimidating trying to build a bank-related investment sales program in the teeth of a very hostile regulatory environment and in the midst of an awful market," said Mr. Stevens, department head for consumer investment services, who oversaw the project of repositioning the brokerage as a retail vehicle.

"We carried this program into a rising interest environment," he said. "It's been a challenge from the day it began."

Although the brokerage unit had existed as a subsidiary of the banking company since 1984, not until 1988 did the bank create the first three of its 10 proprietary mutual funds, which were offered solely through the trust department.

Formerly known as the ASO Outlook Funds, the funds have since been renamed the AmSouth Mutual Funds and are administered by Bisys Investment Services Group, a Columbus, Ohio-based unit of the Bisys Group, Little Falls, N.J.

The 10th portfolio, a Florida tax-exempt bond fund, was added just last month, and the fund family now boasts $1.6 billion in assets, according to Lipper Analytical Services, Summit, N.J.

In May 1993, Mr. Stevens, who then was head of the personal trust department, was put in charge of the consumer investment services division of the bank - a newly created arm of the bank's consumer banking division.

Mr. Stevens' mission was to incorporate AmSouth Investment Services, a broker-dealer that had mainly performed discount brokerages for trust customers, into the consumer division.

In June 1993 he hired Mr. Yersin as president and chief financial officer of the broker-dealer. Several months later, Mr. Miles was brought in from the bank's discount brokerage to take charge of the new broker- dealer's financial operations and compliance.

But soon after the party balloons marking the launching of the program floated away, the three executives went back to the 15th floor of their downtown Birmingham office and realized the magnitude of the task ahead.

"In the spring of 1994," Mr. Stevens said, "the three of us sat down and looked at each other and said: This is a really, really big project."

There were regulations to contend with. Last February, four federal bank regulatory agencies jointly released guidelines requiring extensive disclosures by bank-affiliated brokerages that sold investment products.

Then the National Association of Securities Dealers got in the act by issuing a series of proposed regulations, the last of which came out last December.

Mr. Stevens said he doesn't worry about the emphasis on disclosures - AmSouth's bright-red mutual fund brochures, he said, are clear about the risk associated with buying investment products. The problem, he said, is unnecessary scrutiny of banks.

"This idea that banks set out to deceive customers and trick them so they could sell them a couple of thousand in mutual funds is just silly, because that would be self-defeating," said Mr. Stevens.

And then there were the typical challenges that come with building an retail investment program in some 308 branches in Alabama, Georgia, Tennessee, and late last year, Florida.

By the end of 1994, AmSouth had added over 125 branches in Florida alone with the acquisition of several Florida banks, the largest of which, Clearwater-based Fortune Bank, came last June.

"When we got to the end of 1994, 40% of AmSouth was in the state of Florida," said Mr. Stevens. "We spent a lot of time in 1994 building our investment program in our Florida banks."

In the last three months of 1994, AmSouth Investment Services practically doubled its sales force of 25 people by hiring 20 brokers in Florida alone. Mr. Miles and Mr. Yersin will tell you they have practically lived in Florida, filling out licensing applications, hiring brokers and supervisors, and dealing with regulatory issues.

On the technology side, Mr. Miles has also been busy integrating the program into the rest of the bank. For example, a customer service center and a broker hot line have just been installed.

In addition, all the brokers are computer-trained and Series 7-licensed, which allows them to sell general securities. Come this summer, Mr. Miles said, all brokers will be outfitted with laptop computers.

AmSouth's investment program has not been without competition. Rival SouthTrust Corp., for example, decided to expand its retail investment program at about the same time as AmSouth's. That bank also announced an effort to double its sales force of Series 7 brokers by the end of 1995.

In addition, a consistent threat has come from large brokerages like Merrill Lynch. These firms have moved into the Southeast and are drawing an increasing number of customers to their phone lines.

"When you can go to Merrill Lynch and get a mortgage or a car loan, then they are competing with us in all of our products," Mr. Stevens said.

Mr. Yersin rates AmSouth's retail investment program "above average." The program sold $600 million in mutual funds and annuities last year, placing it 25th in retail investment product assets, according to Lipper.

One of the bank's own funds, the three-year-old AmSouth Balance Fund, which invests in both stocks and bonds, has done particularly well, selling $239 million last year.

"What's great about AmSouth is that they're very committed to the mutual fund business," said William J. Tomko, a vice president at Bisys. "That's very refreshing."

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