As he leads his community bank into the business of marketing investments, Steven C. Wade is discovering anew what thousands of bankers before him have learned.

Picking a sales partner is a "leap of faith," said Mr. Wade, executive vice president of Metropolitan National Bank, Little Rock. You are "opening your bank's doors to an outside firm that will have some measure of control of your success."

Metropolitan, a $450 million-asset bank, jumped into investment sales in August. It has hired Investment Professionals Inc. of San Antonio to help it set up sales centers, pick investment products, field brokers, and run the program.

Working with a third-party marketer like Investment Professionals is a time-honored way for banks, large and small, to learn the ropes in securities brokerage.

Metropolitan is a relatively late entrant to the business. Most big banks and many smaller ones have pushed into investment products sales over the past decade, drawn by the prospect of fee income from sales of mutual funds, annuities, and other brokerage products.

About 32% of banks now offer investment services, up from 30% in 1996, according to American Brokerage Consultants of St. Petersburg, Fla.

Nevertheless the field is not saturated, and community banks like Metropolitan are slowly but steadily joining the pack. Many of the 7,500 banks that do not offer investment services are being courted aggressively by third-party marketing firms.

Metropolitan was slow to enter to business, Mr. Wade said, in part because it had other goals to accomplish first.

The bank, which has been growing steadily over the last few years, focused first on "traditional mainstream commercial banking activities" such as trust and mortgage lending, he said.

And finding the right third-party marketing partner took several years, he said. Previously, Metropolitan might not have been a desirable partner because it was too small, he added.

The benefits of offering brokerage services are plentiful. The business leads to new customers, new products, and new lending opportunities, said Richard Ayotte, president of American Brokerage Consultants.

Having brokerage capabilities also gives banks a shot at retaining assets they might otherwise lose to a wire house, said E. Lee Beard, president of First Federal Bank, Hazleton, Pa., which has $540 million of assets. First Federal hired T.H.E. Financial Group, Mechanicsburg, as its third-party marketing partner in July.

Customers "are going to be purchasing (non-FDIC-insured products) anyway, and they enjoy the opportunity to be able to make their investment decisions in one location," Ms. Beard said.

Banks can also make a nice profit from brokerage if it is run properly, said Charles G. Brown 3d, president and chief executive of Charlotte State Bank of Port Charlotte, Fla. The $58 million-asset bank hired Invest Financial Corp. of Tampa as its third-party marketer in July.

Nonetheless, merely setting up shop does not make a program successful. Metropolitan, for example, faces tough competition from BankAmerica Corp., Mercantile Bancorp, and Regions Financial Corp.-three large regional banks that have brokerage operations in Little Rock.

Metropolitan also competes with major wire houses, almost all of which have offices in Little Rock, Mr. Wade said. Stephens Inc., Salomon Smith Barney, and Merrill Lynch are among the competitors.

Metropolitan is not completely new to the investments business; it has offered discount brokerage since the mid-1980s. But management decided Metropolitan needed full-service brokerage to compete, because "the local ownership just means so much," Mr. Wade said.

The bank considered starting its own brokerage or buying a local financial planning firm but decided to use a third-party marketing firm instead, Mr. Wade said.

However, finding the right partner can be an arduous task, in part because there are more than 140 firms competing for bank clients, according to data from American Brokerage Consultants.

What's more, the firms offer similar services, and bankers must sift through the buzzwords to find the right partner. It is difficult to translate what each firm offers "into what this means for my bank day to day," Mr. Wade said.

Metropolitan sought out literature from large national marketing firms, like Invest Financial and PrimeVest Financial Services Inc. of St. Cloud, Minn.

The bank created a list of priorities and rated the companies. On top of the list was finding a company that worked well with banks of Metropolitan's size in other urban communities. Investment Professionals, which approached the bank in fall 1997, fit that description, Mr. Wade said.

It is important to know how sophisticated firms are at the services they offer, Mr. Wade said. "And you just don't know that until you look at the different banks they do business with."

Metropolitan also liked the fact that Investment Professionals only has about 35 bank clients, and that the firm clears through the Pershing Division of Donaldson, Lufkin & Jenrette Securities Corp., allowing it to sell numerous products.

In addition, Investment Professionals does not sell proprietary products, and the brokers are not "people taken from the bank and given a new title," Mr. Wade said.

Investment Professionals is independently owned, also a significant factor, Mr. Wade said. The bank was concerned for example, that First American Corp., which owns Invest Financial, "could very easily buy into the Little Rock market."

All Metropolitan's brokerage activities are advertised under the Investment Professional moniker, rather than as a Metropolitan subsidiary.

"If we were going to deal with the third party, we wanted people to be clear it was a third party," Mr. Wade said.

The bank must approve all brokers before they are hired and can also request their dismissal. Banks need to retain some level of authority in the event that things get "way out of bounds," Mr. Wade said.

Nonetheless, Metropolitan, which has two brokers and plans to hire a third soon, has been pleased with Investment Professionals' choices, he said.

Of course, there are cultural issues to overcome. For example, branch employees have to be trained to refer business, and brokers need to feel like bank employees, even though they are employed by the third-party firm.

In addition, investment programs must have support from top management, observers said.

Before the brokers came on board, Metropolitan held a series of mandatory meetings for all employees who have contact with customers. They were told about the arrangement with Investment Professionals and briefed on compliance issues.

"They're glad we're here," said Delores Carroll, a 10-year industry veteran, and the first broker hired.

Even little things, such as giving Ms. Carroll a United Way pledge card- which all employees get-helps, Mr. Wade said.

"The brokers need to be a part of our team, regardless of the legal barrier and name differences," he said.

Through mid-November, Ms. Carroll said, she has opened about 300 accounts, 60% of which are new business.

Though only some of the accounts have come from branch referrals, Ms. Carroll is reaching out for more. She tries to visit each of the six branches she covers at least once a week. During those visits, she chats with branch managers and introduces herself to tellers she has not met.

"The more that you visit people, the more they think about you," she said.

Ms. Carroll is also running a referral program until the end of January to drum up business. The employee with the most referrals will win a prize, which has not been determined.

Meanwhile, the branch managers are doing their part to remind tellers about the investment program.

The manager in one of the supermarket branches has posted a reminder to tellers to "always refer customers to Delores, when questions on investments are asked."

"Customers don't ask a lot of questions about it," said Mabline Johnson, the branch manager. But "we mention it all the time."

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