After floundering briefly with a brokerage program it started in 1998, Gateway Bank and Trust Co. relaunched its brokerage in 2000 under David Twiddy, who has succeeded with an emphasis on fee business.
Mr. Twiddy's bank brokerage program - whose production has escalated from $240,000 in 2003 to $646,000 last year - recently won a best-in-class award from the Bank Insurance and Securities Association.
Gateway opened its doors in December 1998 with $11 million of deposits and one investment rep, who did little to advance the fledgling program. After a year, the bank fired the rep and hired Mr. Twiddy, who until then had run his own insurance business.
Mr. Twiddy, who joined as president of both the investment and insurance subsidiaries, is now president of the bank, reporting to its founder, chairman, and CEO, Ben Barry.
The insurance unit focuses on property and casualty coverage; life insurance is sold through the investment unit, Gateway Investment Services, which works through the third-party marketer Uvest Financial Services in Charlotte.
To execute the fee-business strategy, he hired Sharon Elliott in 2002, and the investment program has been a key to Gateway's success. Uvest's production figures show that the Gateway investment program's $240,000 in 2003 was up 90% from the year earlier, and Mr. Twiddy credited Ms. Elliott's work on the fee side, which kicked in that year. At the time, she was still a one-person unit, a top rep both in terms of dollars and customer satisfaction.
Mr. Twiddy said he anticipates, judging by the program's growth rate, and counting additional business coming in from a new rep in Virginia, that production will soon hit $1 million.
Ms. Elliott, whose background was in trust and estate planning, mostly manages fee accounts. "I grew up on the fee side, so it's my area of expertise," she said. "Gateway was interested in the fee side for consistency of earnings, and I already had a book - I brought over 80% of my book. It's grown tremendously since then" - to $100 million this year.
She joined Gateway from RBC Centura, the Rocky Mount, N.C., banking division of Royal Bank of Canada, where she had served the high-net-worth market since graduating from college in 1988 and joining the trust department.
Ms. Elliott has about 500 clients at Gateway, which she says breaks down to about 350 relationships - a lot for an adviser offering high-touch fee services. "I wouldn't want to grow my customer base any larger because it would affect the level of service I'm able to give and that they're paying for," she said.
Her client base is diverse. One part comprises small-business owners in their 50s and 60s, but she also has many clients who are already retired. "They've made their money, and I manage their cash flow," she said. "Then there's the younger generation who are the children of the clients I started with and who are still in growth mode."
Her fees primarily come from mutual fund wrap programs and separately managed accounts, though she also sells life insurance and long-term-care coverage. Her commissions, which make up 20% of her book, come from products such as 529 college savings plans and the occasional variable annuity a client wants for the living benefit - though she said that this is a rarity.
Ms. Elliott also has full access to trust services. She said the line drawn between trust and brokerage at Centura frustrated her. "I'm now a one-stop shop; there's nothing I can't do for a client, and I win business because of that infrastructure," she said. "I've never lost a client due to quality of service, and that I'm working with successive generations is a mark of my success."
With Ms. Elliott's early and continued success, it quickly became apparent that she did not have time to handle smaller clients as well as the larger ones. So Mr. Twiddy brought in John Dawson, an adviser who specializes in transaction business. "They work well as a team," Mr. Twiddy said. "Together, they've been hugely successful."
"I often refer business to John when there's an opportunity to work on something that doesn't fit my model," Ms. Elliott said. She gets most of her referrals from existing high-end clients, plus local CPAs and lawyers. She now only takes branch referrals in high-end cases. "I haven't set a minimum," she said. "I'm always hesitant to turn client referrals away - although I'm looking for referrals of between $500,000 and $1 million from the bank."
Because her clients pay fees, Ms. Elliott's revenue grows with increases in their assets, so maintaining what she has is far from automatic. "I won't turn down a new client with $2 million, but I'd rather grow by leveraging opportunities in my existing client base," she said.
The setup is mutually agreeable, Mr. Dawson said. "I'm purely commission-based. When fee-based business took off at the bank, they decided that the way for [Ms. Elliott] to succeed was to bring in another specialist. I prefer commission business - it's more exciting to me. That teamwork has been key to our success."
Mr. Dawson has worked in the investment industry since 1998; he joined Gateway in 2004 from Edward Jones. He also has been both a loan officer and branch manager, and many people he worked with over the years have wound up at Gateway. He was able to bring over most of his book, about $17 million, from Edward Jones and has more than doubled it in two years, partly through referrals from his bankers.
The bank's culture is such that bankers refer their clients to Mr. Dawson even though they do not get direct incentives to do so. Bankers earn quarterly bonuses based on achieving branch goals but are not paid for individual referrals. This, Mr. Twiddy said, is a good indicator of Mr. Dawson's relationship with the bankers. "I don't think a referral program would generate leads, with or without the compensation component, unless branch people trust reps. These are their own personal customers, so they need to feel very confident."
An equal part of his business comes through outreach in the form of seminars and speaking engagements he arranges with local educational groups. "I contacted schools and universities to let them know I was available to speak to their classes, and it's been amazing how many referrals I got for students' parents," he said. "Once you've got a reputation for speaking, it keeps coming."
Back in the branches, Mr. Dawson runs a high-volume business, working "with anyone who has money and wants to grow it." This approach gives him a lot of younger clients who are just starting to build up their savings, but he also works with retirees and a few small-business owners referred by bankers.
Mr. Dawson now covers nine branches, some clustered and none more than an hour from his home. Nevertheless, covering this many branches takes time management to make the relationships effective. "Branches typically hold sales meetings once per month, and I try to get in on their schedule," he explained. "But I'll also show up on a rainy Wednesday and get a good 10-minute sales meeting in."
He said that in order to maintain strong relationships with bankers it is important to communicate the results of client meetings. He also makes sure to get on bankers' e-mail lists for new products and regulations in order to understand what other time pressures they have.
Combining his experience at the wire house with the advantages of a bank-based program has helped Mr. Dawson raise his production from $15,000 a month to $20,000.
The Gateway program is growing - the bank has 22 branches, 11 in North Carolina and 11 in Virginia, and is establishing more. At the end of 2005, it had $880 million of assets under management, and Mr. Twiddy said he expects to top $1 billion this year.
Mr. Twiddy hired an adviser in March to cover the bank's burgeoning Virginia footprint. A 15-year veteran of the regional brokerage Davenport & Co., the new rep's business will probably be half fee-based and half commission, but leaning toward the former.
Though the adviser's background is far from the branch network, Mr. Twiddy said he is confident the new hire will quickly find his feet. "It'll be new ground, but he has an outgoing personality, and I hope he'll be able to bring over his book. Either way, the branch system is growing well in Virginia, and I think he'll fit in with the branch people."
Gateway also has just moved into Raleigh, N.C., and will soon add an investment rep there, relieving Ms. Elliott and Mr. Dawson.
"One thing that jumps off the page is that we've built a successful business in a rural area," Mr. Twiddy said. "There's not a huge number of people to work with, so we've had to rely on relationships, word of mouth, and referrals. But we've always put the customer first, never the dollars."
Mr. Stock is the managing editor of Bank Investment Consultant, a SourceMedia publication where this article appeared in longer form.
