When NationsBank Corp. bought Boatmen's Bancshares this year, Boatmen's Trust Co. was considered one of the jewels in the deal's crown.
Nine months later, about 30 former Boatmen's trust bankers-salespeople, trust administrators, and portfolio managers-are working for NationsBank's St. Louis competitors.
The defectors include high-ranking Boatmen's executives, such as its former head of private-client services and its head of sales for personal trust. Their moves underscore how NationsBank-which now manages more than $60 billion of assets for private clients in 18 states-is intent on remaking the highly regarded Boatmen's in its own image.
"Their model seems to work for them in other markets," said Edward D. Higgins, president of Mercantile Bancorp.'s trust unit, which has hired 10 Boatmen's executives since March. "It's just that it's new to St. Louis."
"They could be a fierce competitor when the dust settles," he added.
When it comes to private-client services, Charlotte, N.C.-based NationsBank uses a relationship manager model. That means one person is primarily responsible for each account and brings in experts for trust, lending, and investment management as needed.
That differs substantially from how Boatmen's and other old-line trust banks serve their customers. At Boatmen's, professionals stayed in their own lines of business. Portfolio managers worked exclusively on investments; trust officers handled estate planning; and lenders just sold banking products.
"When people talk about, 'Gee, we had a wonderful way of doing our business,' they were insulated, and that really was at the expense of our customers," said John Morton, former president of Boatmen's lead bank.
"At Nations, we think we should organize around how the customer wants to be served," added Mr. Morton, who is now president of NationsBank's private-client group in St. Louis. "That creates a different organization than what you've seen in banks."
Several other of the country's largest banking companies-Fleet Financial Group and PNC Bank Corp. among them-have also integrated trust, investments, and lending under one private-client group. The jury is still out on whether such integration, which NationsBank adopted in 1995, works.
Indeed, some large institutions are falling out of favor with trust and estate attorneys-a valuable source of referrals. The remodeling of private- client services often brings disruption and personnel changes, they note.
"The typical big bank trust department is a less viable solution," said Frederick R. Keydel, of Joslyn Keydel & Wallace, Detroit.
"It's not personal services," he said. "The people there are order- takers and administrators, and they don't understand what trusts are about. The service you get from the typical large bank trust department is declining."
But according to Mr. Morton, NationsBank's success in trust has been "outstanding." The fact that other banks are undertaking similar reorganizations of their private-client groups proves the business "can't be organized around product, distribution channel, or regional market."
At NationsBank in St. Louis, Mr. Morton runs private-client services with the former chairman of Boatmen's Trust Co., Martin E. "Sandy" Galt 3d, who oversees portfolio management. David Fisher, a longtime NationsBank executive, is in charge of trust.
Mr. Morton said production volume has increased in his group since the NationsBank takeover. The company does not disclose volume for private- client services, but in announcing third-quarter earnings, NationsBank said all fee-based activities acquired with Boatmen's had helped drive a 26% increase in net income, to $788 million.
One major change NationsBank instituted at Boatmen's was an overhaul of the compensation system for people in sales and service.
Instead of receiving several commissions a year for sales of particular products, such as winning appointments as personal trustee, making loans, or taking on investments, the bank's 2,400 private-client associates are now each paid a percentage of their group's annual net income. Mr. Morton said it's up to the regional managers to determine who gets what.
"The most important thing to us is how the customer perceives the value of our service," Mr. Morton said. "So we don't pay commissions to people because we don't want to push product on our customers."
Another difference NationsBank brought to the Midwest market is a higher fee schedule for trust services. In St. Louis, NationsBank's fees are 20% higher than those of its competitors, bankers in the market said.
Some observers said the high fees are designed to weed out smaller accounts.
The strategy for NationsBank is to "either make customers profitable or lose them," said Richard X. Bove, an analyst at Raymond James & Associates Inc., St. Petersburg, Fla.
Among those who have resigned is Boatmen's former head of private-client services, Joseph J. Gazzoli, who is starting a trust company in town for TIAA-CREF, the teachers' pension fund. He is joined there by John Handy, another Boatmen's veteran.
The former head of sales for personal trust, William F. Ottinger, went to Harris Bank, Chicago. The former manager for private-client services in Kansas City, Mo., John A. Ovel, joined Mellon Bank Corp.'s private asset management division this month.
Other beneficiaries of Boatmen's talent include Commerce Bancshares, Kansas City, Mo., and Guaranty Trust Company of Missouri, St. Louis.
Any loss of executives and their clients in St. Louis should have no impact on revenue for NationsBank, which paid $9.76 billion for Boatmen's, said Hal Schroeder, an analyst at Keefe, Bruyette & Woods Inc., New York.
"It's certainly an issue that has to be dealt with," Mr. Schroeder said, but "in the grand scheme of things, is it an issue for NationsBank? No."
But whether NationsBank has found the best way to serve wealthy people is less clear, Mr. Schroeder added. "That's what we're still shaking out. They say it works. The numbers look reasonably good. The question is, 'Will it stand the test of time over 10 years?'"
Competitors in the St. Louis market said they are happy to take on former Boatmen's executives and even some clients. But they are staying on their toes.
At Mercantile, Mr. Higgins said, there would have been some horse trading with Boatmen's regardless of the NationsBank acquisition, but he added, "The fact that they are doing things different has given us some opportunity."
Similarly, Commerce picked up nine former Boatmen's people, according to Peter F. Mackie, its St. Louis-based executive vice president of investment management. He said NationsBank's style may be different but that might not be all bad.
"Nations may come up with profitable units. It's just that, along the way, the existing book of business they acquired may change," he said.
