Hawkeye Bancorp. of Des Moines plans to launch its own broker-dealer unit by yearend in an effort to gain more control over its investment products program.
In doing so, the $1.9 billion-asset bank is following the lead of many other banks that have shed their ties to investment marketing firms to go it alone in the mutual fund sales business.
Hawkeye has been selling mutual funds and annuities for more than a decade, and bank officials believe they have developed the know-how to run a brokerage efficiently and profitably.
"I think we can manage it better," said Donald R. Runger, an executive vice president at Hawkeye who also oversees the investment trust division. "We've been in the business 10 to 12 years, and we know our customers."
Major Provider in Iowa
The bank set the stage for launching a brokerage unit last year, when it consolidated its trust and securities businesses into a subsidiary called Hawkeye Investment and Trust Services, Mr. Runger said.
The unit is one of the largest investment service providers in the state, with more than $1.3 billion in assets under management.
Though smaller banks can gain better control of their investment sales programs by launching brokerages, the strategy does have its downside, said David Nadig, senior consultant at Cerulli Associates, Boston.
Banks of Hawkeye's size may lack the expertise to generate the flow of business necessary to turn a profit, Mr. Nadig said.
"That's not to say that they can't make a profit," he said. "They just have to be more careful."
When Hawkeye's brokerage unit opens for business, the bank will sever its ties to Broker Dealer Financial Services, a Des Moines-based investment products marketer, Mr. Runger said.
The bank has signed up with Stephens Inc., a broker in Little Rock, to clear securities transactions and provide sales training, research, and recordkeeping.
Mr. Runger said the brokerage sales force will be managed from headquarters instead of by the individual branch managers.
He said this approach will give sales representatives more support and resources, and hold them more accountable for production.
After its first year of operation, the division booked sales of $3.3 million in mutual funds and annuities in 1993, according to Mr. Runger. The bank expects volume to top $4 million this year.
Fixed Rate Annuities Popular
Sales have been about evenly split between mutual funds and annuities, but fixed-rate annuities have been gaining recently, and now account for about 60% of total sales, Mr. Runger said.
He attributed the change to market fluctuations that scared many customers away from mutual funds. "I guess you could say Iowans are kind of conservative," Mr. Runger said.
On the mutual fund side, growth and income funds have been especially popular.
The bank's offerings include funds managed by Capital Research and Management, Oppenheimer Management Corp., Franklin Resources, Lord, Abbett & Co., G.T. Global Financial Services, and AIM Management Group.
