After more than a year of preparation, Manufacturers and Traders Bank has taken charge of an investment sales program formerly managed by Liberty Financial Cos.
The Buffalo bank - the lead unit of $10.3 billion-asset First Empire State Corp. - is now conducting a broad range of securities sales through its brokerage affiliate, M&T Securities. The affiliate had previously handled discount-brokerage transactions only.
"Our program had evolved to such a size that it made sense to bring this in-house," said James A. Gately, president of M&T Securities. "We felt we could equal or better the amount of revenue that the Liberty program had generated for us."
M&T's move places it among the many large and midsize banks, including Dime Bancorp. and Wells Fargo & Co., that outgrew their relationships with their investment product marketers and set out on their own. M&T had been the largest user of Boston-based Liberty's full-service brokerage program.
"I think that any bank, of almost any size, that gets into this business goes in thinking that one day they'll do it themselves," said J. Edward Diamond, president of Dime Securities of New York.
While bringing an investment program in-house means a bank will keep a bigger slice of the revenue stream, pure economics is not the prime motivator behind banks' drive to internalize, Mr. Diamond said.
"Being able to use your own name to promote these services gives a level of control in a program that can help make it an integral part of the bank's overall services," he said.
Maintaining continuity in the investment program is also seen as essential to an easy transition for a bank and its customers. To that end, M&T extended job offers to all of Liberty's 72 full-time investment sales representatives last fall, and all but two accepted. The reps will work out of M&T's 140 branches in New York and Pennsylvania.
James A. Gately, president of M&T Securities, said the bank did $1 billion of investment sales in 1994, with $275 million coming from the sale of mutual funds and annuities.
M&T hopes to boost its sales this year by offering a broader range of investment options, including adding Financial Horizon Inc.'s Best of America variable annuities and funds from Federated Investors.
The bank is also hoping to cash in on the popularity of Treasury instruments and government and municipal bonds by making them more widely available to bank customers. Until now, those investments were sold only through the bank's discount brokerage service.
"We've found that our customers are interested in investing, on a short- term basis, in local governments and school boards," Mr. Gately said.
M&T investment reps are also training to use asset-allocation software the bank has licensed from Sterling Wentworth, a Salt Lake City-based software company. The service will be made available at branches early this month.
While Liberty will no longer manage the M&T program, the company has been contracted to help M&T Securities resolve any problems that may crop up as the bank moves to new recordkeeping platform maintained by Beta Systems Inc., a Milwaukee-based clearing firm owned by Kemper Corp.
Kenneth Hoffman, president of the Optima Group, a Fairfield, Conn.-based consulting firm, said the choice of a clearing firm is an important decision, because it "directly affects the interaction of sales platform reps with customers." That's because some clearing firms only give reps the barest information on the investment products available.
