When Paul Patsis took over Marketing One in 1989, he had trouble on his hands.
The Portland, Ore., company, set up to market mutual funds and annuities through thrifts, was hemorrhaging red ink as clients fell victim to the S&L crisis.
At its most troubled, in 1989, Marketing One lost $3 million. "I can't even say that without getting a lump in my throat," Mr. Patsis said.
But that's in the past.
Since joining Marketing One as chief executive officer, Mr. Patsis has engineered a remarkable turnaround.
He came to the 10-year-old company from Colonial Penn Insurance Co., where he was president.
Under Mr. Patsis' guidance, Marketing One sold more than $1.9 billion in mutual funds and annuities through 100 client banks last year.
This comes after Mr. Patsis set Marketing One on a course of courting commercial banks, which a few years ago were just starting to get into the investment products business.
He changed the company's thrust, deciding to concentrate primarily on mutual funds.
Mutual funds now account for about 80% of Marketing One's sales through banks.
Hungry for High Returns
Annuities, though offering higher commissions, were less attractive to customers craving the higher returns of stock investments, he said.
Mr. Patsis also set about cleaning house. He found the company crippled by a severely bloated payroll in which dozens of middle managers clogged the organizational structure.
The former regime thought nothing of spending $1 million to fly 200 S&L executives to luxury resorts for lavish conferences, Mr. Patsis said. "We were fat, dumb, and happy."
Mr. Patsis did away with the CEO conference and jettisoned more than 60 positions, many of them middle management.
All told, Marketing One now has 125 employees, and about 300 brokers on its payroll. Another 400 brokers are employed by banks using Marketing One's program.
Mr. Patsis said his goal was to place more people on the customer contact level and fewer on the executive level.
Also, where possible, Mr. Patsis decentralized Marketing One's operations to allow speedier service to clients.
For example, the company's eastern regional servicing operation in Philadelphia has a regional vice president with authority to make most day-to-day decisions.
In the old days, the East Coat representative would call a mid-level executive who might get back with an answer in a few days, Mr. Patsis said.
Checks and Balances
Mr. Patsis also instituted sharp checks and balances to keep down costs at the restructured company. Gone are the days when salesmen could offer clients special deals without a thought about what it would cost, Mr. Patsis said.
Now, the company's number crunchers approve every deal.
As a result, profits in 1992 were the second best in the company's 10-year history, said Mr. Patsis, though he declined to give specific figures.
Marketing One can keep some secrets. The company is privately owned by Jupiter Industries, Chicago, and Head Insurance Investors, New York. The partnership purchased Marketing One and its sister company, Integon Life Insurance, from troubled Southmark Corp., Dallas, in 1990.
Marketing One includes Integon products among the annuities it offers to banks.
$250 Million Threshold
Marketing One primarily targets banks with more than $250 million in assets.
Smaller institutions simply can't support the rigorous training and extensive service that customers receive, company officials say.
In addition to products, clients can receive distribution, clearing, information support, product due diligence, advertising, and training services from Marketing One.
The company's client roster, spanning 37 states, includes Wells Fargo & Co. in California and First Fidelity Bancorp. in New Jersey.
First Fidelity is a plum Marketing One landed in June. The marketing company is now recruiting about 200 sales representatives to handle the Lawrenceville, N.J., bank's expanded investment products program.
Growing Demand Seen
First Fidelity is among the growing swell of financial institutions that sold $12 billion of investment products in 1992.
Mr. Patsis compares the sales figure to financial institutions' $2.4 trillion deposit base and says there is room for growth on the investment products side.
If banks penetrate 1% of that market, there would be $24 billion of business, he said. "You could say we're halfway there."
To help banks boost their business, Marketing One is nudging clients to stay in touch with changing times.
Marketing One sales manager Reid Relchert said employees can take a page from their lives to identify changing needs. For instance, he said, he had planned to retire from the bank he worked at previously with the proceeds from his past five years' salary. Those five years paid him the biggest paychecks of his career.
Like many others, his situation provided an opportunity for a bank to get involved with his financial planning. The challenge is to incorporate retirement planning into bank's investment products programs, Mr. Reichert said.
"There's a whole industry that has been springing up around that," he said.
Mr. Reichert also believes banks should be offering investment products to a larger customer base.
"The bank market has not been able to drop itself down to the 50-to-55-year-old who's still in the accumulation stage, as opposed to the customer who's in the distribution stage," he said.
These and other untapped venues offer almost unlimited opportunities for banks in the investment products business, Mr. Patsis said. "It's just begining."
And that means organizations like Marketing One should continue to thrive, he said. "The future looks bright for third-party marketers. Banks don't have the staff or time to develop an expertise in this area."