Marketing One, a leading provider of brokerage sales support to banks, is downsizing after losing a contract with Wells Fargo & Co.
The Portland, Ore.-based company recently told its employees that it will lay off 45 people - 13% of its staff - during the next three months, according to Paul Patsis, chairman and chief executive.
Mr. Patsis said the cutbacks are the result of Wells Fargo's decision to take over some annuity processing duties that Marketing One had handled for three years.
But, he added, "We're not shedding tears." In exiting annuity processing, Marketing One is shedding a costly, paperwork-intensive business that produced minimal profits, Mr. Patsis said.
He said the change would free up the company to refocus on its core business of helping banks sell mutual funds and annuities.
To be sure, even that business has been a rocky one for companies such as Marketing One. Banks, which once depended heavily on investment marketing firms for their expertise, are breaking away from these vendors as they become more self-sufficient. Bank mergers are also taking their toll on client rosters.
Marketing One, for instance, is said to be on the verge of losing a brokerage sales contract with First Fidelity Bancorp., which is being acquired by First Union Corp.
Mr. Patsis declined to comment on the status of the First Fidelity account, but industry sources said it has been producing thin revenues for Marketing One.
Kenneth Kehrer, an annuities consultant in Princeton, N.J., said it makes sense for Marketing One to refocus on the brokerage end of its business. He noted that the company got into annuity processing only at the behest of a large client.
"The lure of working with big banks caused Marketing One and others to take a detour from their core business that was clearly a dead-end," Mr. Kehrer said.
For example, Marketing One's centralized back office at Wells Fargo was set up at the bank's request three years ago. Marketing One's 82 other banking clients performed these functions themselves.
The service probably cost Marketing One $1.7 million in 1994, Mr. Kehrer said. That took a chunk out of the commissions generated from the company's $1.1 billion of annuity sales at Wells Fargo that year.
Then the volume of annuity sales dropped off at Wells, and the bank decided to process annuities on its own, Mr. Patsis said. The bank declined to discuss its dealings with Marketing One.
Wells Fargo accounted for about half of the $2.2 billion in annuity sales booked by Marketing One in 1994, but Mr. Patsis insisted the bank didn't generate an equal portion of earnings. He declined to elaborate.
As part of his regrouping effort, Mr. Patsis is expanding the company's line of life insurance products and hopes to expand his staff of four salespeople, who promote new products to banks.
He is also improving technology support for brokers. And he is trying to make brokers more efficient by automating trading services.
"Banks are always going to ask for help in increasing the productivity of their brokers," Mr. Patsis said.