As part of an overhaul of its retail investment unit, NBD Bancorp will create a brokerage unit and end its relationship with investment marketing firm Essex Corp.
The bank is about to hire 120 Essex brokers currently working in NBD branches in Michigan, Indiana, Ohio, and Illinois. It plans to announce the change officially in early June.
The move will give NBD more control over its investment products sales efforts, bank officials said. Officials at New York-based Essex declined to comment.
Other changes also are in the works. NBD is adding new share classes to its proprietary fund family, the Woodward Funds.
For example, customers will be able to pay sales charges when they sell shares on the bank end in addition to the customary front-end load options. The new products, which will be available within the next six months, will include a back-end load product, bank officials said.
"We need to have as much pricing flexibility as we can in our proprietary funds," said Russell E. Browne, first vice president and director of NBD's retail investment and insurance group in Farmington, Mich.
Detroit-based NBD is also looking for an alliance with an outside broker-dealer to sell its proprietary funds to a wider market. "We'd like to have broader distribution of the Woodward funds," Mr. Brown said. "Hopefully we'll have a decision on a distributor and administrator within the next 45 days."
In May, the bank embarked on a three-month project to streamline procedures in investment products sales serving the middle market and emerging affluent market, Mr. Browne said.
He said the bank is not looking at staffing levels, but is looking at the process by which referrals take place.
"We want to eliminate multiple referrals, where a customer is shuttled from one bank representative to another," he said.
NBD also expects to select a clearing agent for the entire bank from among BHC Securities, Pershing, and National Financial. NBD's banks in Michigan and Indiana currently clear through BHC.
NBD's discount brokerage, NBD Securities, will be unaffected by the revamping, Mr. Browne said.
"NBD is doing what's necessary to survive in this environment," said Ellen Landry, a consultant at Cerulli Associates, a banking consulting firm in Boston. "They've recognized that long-term success in this business lies in raising retail assets, and they're taking a new look at distribution."
Last year, NBD pulled out of a joint venture with Essex to syndicate its investment services and market the services to NBD's correspondent banks.
Essex took over the effort of marketing to the correspondent banks. Mr. Browne said the failure of that business venture had no bearing on the bank's decision to bring its brokerage operations in-house.
Other banks are trying to streamline referrals, said Joy Montgomery, president of Money Marketing Initiatives, in Morristown, N.J.
"You can have employees in the bank competing to serve investment needs, and that can confuse or alienate the customer," she said.
Ms. Montgomery said that many small banks are now following the lead of larger banks in overhauling their retail strategies.
About $151 million flowed into the Woodward funds in the first quarter of 1995, compared with a cash inflow of $284 million in the first quarter of 1994.
