FundQuest, an investment management unit of BNP Paribas, has fallen short of its bank trust department sales goal for turnkey open architecture asset platforms as banks have shown wariness about signing up before they see others succeeding, the Boston company says.
“By the end of the year we’ll have maybe four banks, but right now we only have three online,” said Robert Del Col, FundQuest’s chief executive officer. “It is hard to convince banks that they can afford to break away from offering just their own” proprietary products. In April he said the company expected to sign up eight to 10 banks this year.
Installing the platforms has taken longer than expected, which also gives banks pause, said Jim Graves, FundQuest’s managing director of marketing. “They want us to show them anyone that brought an open architecture platform to a bank, integrated it with their systems, and made it work,” he said.
Mr. Del Col said FundQuest remains committed to offering a turnkey open architecture asset management platform and continues to receive strong support from its parent.
With BNP Paribas urging FundQuest to continue hiring salespeople, he said, he is confident of his company’s staying power despite the slow start.
“FundQuest is more committed to this business today than we were five months ago,” he said. “Either you have to pull up your pants and spend the money, or you have to give up. But to be honest, right now our phones are not ringing off the hook. We have to ring them up.”
FundQuest signed the first bank trust client for its platform — the First Tennessee Bank unit of First Horizon Corp. — in January. Since then, it has added First National Bank of Omaha and First Hawaiian Bank.
But the business has stalled since April when First Hawaiian came aboard, said Mr. Graves, because turnkey open architecture platforms lack a track record.
Mr. Del Col said in order to gain momentum the firm plans to hire salespeople and launch a “significant” marketing campaign aimed at the 300 to 350 bank trust companies with $500 million to $5 billion of assets. He did not say how much he would spend.
“We have to start a campaign to let them know we exist,” he said. “We are going to call on them.”
“We have the staying power if this takes 10 years,” he added. “We believe in the channel, and BNP believes in it as well. They are they ones that keep on telling us to get more salespeople and more people to tell our story. They are not a reluctant investor.”
BNP Paribas bought FundQuest, which was founded in 1993, in August 2005. After the deal closed, the Paris-based parent bank transferred $20 billion of assets under management to FundQuest, giving it $30 billion in all.
Analysts said bank-owned wealth managers are still wary of turnkey open architecture platforms because most are already generating steady profits from proprietary products.
“Banks can say they want open architecture, but the truth is, above everything else, everyone wants to generate assets,” said Burton Greenwald, an analyst at BJ Greenwald Associates in Philadelphia. “Banks want wealth management to be a quiet asset generator. Most banks are satisfied, and it is difficult to get them to change their approach and go totally open architecture.”
David Robinson, FundQuest’s managing director of national accounts, said some banks have been slow to adopt because they are accustomed to generating revenue from certain proprietary products. To deal with this objection, FundQuest’s platform is flexible enough to accommodate a bank’s proprietary products.
Timothy J. Clift, FundQuest’s chief investment officer, said all three FundQuest bank customers have proprietary products on their platforms.
The company is trying to expand its products and services. In addition to its turnkey platform, it is working on an expansion of its unified managed account platform to more providers. The company has $120 million of unified managed account assets under management.
“It has been a steady ramp up,” Mr. Clift said. “We are offering our UMAs to three firms, and all of them are insurance companies, but we expect to be offering [them] to seven firms by the end of the year.” Two of the four companies that will begin offering FundQuest UMAs in the next three months are banks.
Through these initiatives and new customers, FundQuest expects to add $5 billion of gross new assets next year, Mr. Del Col said. His company and competitors such as GlobalBridge are working to develop the track record needed to help the turnkey business gain traction, he said.
“We are anxious to present ourselves as successful,” he said, “but sometimes these products take a while to really take off.”
