Milwaukee's Firstar Bank has been an established player in bank-run mutual funds for years, but now the bank is gathering momentum for another challenge.
This time, the $14 billion-asset bank is going head to head with investment marketing companies on their own turf, offering smaller banks access to Firstar's mutual funds and brokerage expertise.
Leading the assault is Geoffrey G. "Rip" Maclay, Jr., head of Firstar's brokerage arm, Elan Investment Services.
"It's shake 'n' bake time and we're ready to crank this out," Mr. Maclay said.
Firstar's plan is to provide small banks in its network of correspondent banks with brokers and investment products, including the bank's proprietary Portico funds.
The potentially lucrative arrangement would give the other banks the investment opportunities their customers crave, and present Firstar with nearly 1,000 additional points of distribution for its funds, which had $2.4 billion in assets at midyear.
"You can't compete on product any more, and anyone who thinks they can is living on another planet," Mr. Maclay said.
"The key is market share. Traditionally, banks have looked at the investments business as fee income, but now you have to look at building up assets," he said.
So far, 100 institutions have taken the bank up on its offer, either utilizing Elan's brokerage services or selling Firstar's proprietary Portico funds, said Mr. Maclay.
And to make sure that the bank can continue to practice what it preaches, Mr. Maclay says Firstar is busy integrating its insurance operations, which the bank acquired in 1982, with its full-service brokerage. So far, the bank has whittled its insurance sales force from 600 representatives to only 100.
The remaining effort has focused on recruiting and training brokers who can sell both insurance products and mutual funds. To date, the bank has 475 investment sales representatives across six states. About half carry Series 7 licenses, the full-service brokerage credential from the National Association of Securities Dealers.
But the success of the plan will lie in Mr. Maclay's ability to persuade more of the banks in Firstar's correspondent network to use its brokerage services instead of going with established investment products marketers like Invest Financial Corp. or Marketing One Corp.
"They are either going to look to a third party provider -- an Invest, let's say -- or they'll look at us," he said.
Mr. Maclay thinks he has the edge.
"There's already an existing relationship," he said. "They know who we are, our philosophy and our products, so it comes down to trust and service."
Industry analysts say the strategy is a sound one.
Banks have had correspondent relationships with other institutions for years. Rolland Johannsen, president, Furash & Co., Washington, suggests that it is a "natural channel of distribution."
Smaller banks stand to gain more attention for their fledgling sales programs from bigger banks they already have relationships with.
"When you have a richer web of relationships, you stand to have better service from the bank you work with," said Avi Nachmany, a partner with Strategic Insight, New York.
Attracting smaller banks to its syndication program may not be a difficult task, but keeping them in the fold will be more challenging.
Mr. Maclay is hoping that cutting-edge technology will give Firstar the upper hand.
The bank's brokerage is automating all order entries, and offering risk and portfolio modeling to bank customers, as well as a prospecting service that would generate lists of potential customers for the bank.
However, having a larger, potential competitor, setting up shop in their bank lobbies may provoke some fears of disintermediation among community bankers.
Firstar is trying to smooth over any problems by being careful not to project its image on that of other banks. Only brokers in Firstar branches operate under the Firstar name, while those working in other banks fly the Elan banner, Mr. Maclay said.
"I think it's pretty well understood that the ownership of the customers lies at the correspondent level and they know that we're not just trying to expand our deposit base," said Mr. Maclay.
Firstar's isn't alone in downstreaming investment products and services. With Premier Bancorp, Baton Rouge, La., running a successful program and Charlotte-based NationsBank looming in the back-ground with their long-awaited syndication program, Firstar is in good company.
Mr. Maclay thinks he trend is just the next step.
"It's pretty clear that we [the industry] are getting into the universal bank concept."