MetLife Inc. has started referring community banks that sell its products to a Mellon Financial Corp. unit for such third-party marketing services as education, training, and provision of in-house insurance and investment sales reps.
MetLife Investors Group used to furnish such services to small banks as well as to financial planners and broker-dealers. But since July 2 it has been referring the banks to Bankmark, Mellons third-party marketing subsidiary.
In the past they would take it on themselves, even though it wasnt a core competency, said Charles Naddaff, who oversees Bankmark as president and chief operating officer of Mellons broker-dealer unit, FutureShare Financial Services LLC in Ridgefield Park, N.J.
He said he did not know what the strategy shift means, and MetLife refused to discuss it.
Bankmark is also working with each of MetLifes community banks to sign new agreements that make Bankmark, rather than MetLife, their official third-party provider.
New York-based MetLife has been providing annuities, insurance and investment products to banks, brokerages, and financial planning firms since October 1997, when it acquired Security First Group Inc. Two years later the purchase of General American Life in St. Louis bought MetLife a life and annuity company with a large bank sales operation, Cova Financial.
Security First and Cova were merged in March to form MetLife Investors Group. The units Web site still says its bank financial services division provides services to over 60 community and regional banks with combined assets of more than $225 billion. (The figures are apparently from 1999.)
Community banks are a growing distribution channel for insurance companies. Two insurers, Guardian Life Insurance of America and Principal Financial Group, recently detailed their own efforts to expand their community bank distribution. Both are putting their own agents into the community banks, instead of taking MetLifes tack of using third-party marketing companies.
New York-based Guardian Life has spent a year arranging for some of its 3,000 agents to establish offices in community bank branches or make periodic visits to them. Guardian is targeting banks with $1 billion of assets or less.
And this spring Principal Financial, of Des Moines, started a new marketing program targeting community banks. Principal is using its agents to sell its insurance and investments to small-business owners who are clients of banks with assets of $2 billion or less.
Mellon bought Bankmark on May 1 from the insurer Conseco Inc., and Richard Ayotte, president of American Brokerage Consultants, says several other insurers may be trying to get out of the third-party business.
Theres a definite trend away from direct ownership of third-party distribution, says Mr. Ayotte, whose St. Petersburg, Fla., firm works with third-party marketers. Im not sure insurance companies are getting what they anticipated from owning such firms.
Those that own them include John Hancock Mutual Life Insurance Co., which owns Essex Corp.; Jackson National Life Insurance Co. of Lansing, Mich., which owns IFC Holdings (formerly known as Invest); and Liberty Financial Cos. Inc., which owns Independent Financial Marketing Group (and is selling it to a Toronto insurer, Sun Life Financial Services of Canada Inc.).
Mr. Ayotte said there is no compelling reason for an insurer to own a third-party marketer. If the insurer makes good products, it will get distribution anyway, he said; if it makes subpar products, it cannot force the marketer to push them through the banks without losing clients.
If the banks dont have the freedom to sell whatever products they feel are best, they begin to resent the ownership, Mr. Ayotte said.
Mellons Mr. Naddaff said being owned by a banking company can help Bankmark in working with an insurer such as MetLife. We are one of the few third-party firms not owned by an insurance carrier, so were not a competitor, he said.