North Fork Bancorp. has turned to third-party marketer Essex Corp. to help it reach its goal of more than doubling investment revenue, to $20 million, by 2004.
North Fork's full-service brokerage unit, Compass Investment Services, already sells nonproprietary mutual funds, fixed and variable annuities, and stocks and bonds through branch-based representatives. It is a small operation, however, with only 31 reps and about $395 million under management, according to the company.
Investment revenue at the Melville, N.Y.-based banking company was $8 million in 2000 - less than 3% of the company's $278.1 million of revenue, according to Jacqueline Reeves, a research analyst at Putnam Lovell Securities Inc. in New York.
Essex's platform program, which is designed to help banking companies augment their brokerage divisions, would enable $15 billion-asset North Fork to expand its distribution of basic investment products, such as fixed and variable annuities and mutual funds, by training branch employees to sell them, said Bill Wade, executive vice president of Essex.
Tom Canecchia, senior vice president in charge of investments at North Fork, said Essex will begin by licensing and training 150 North Fork branch employees to sell the most basic product - fixed annuities - by yearend and another 150 by 2004. "The goal is to have at least one rep" ready to sell in each branch - there are 151 - as soon as possible, he said.
Mutual funds and variable annuities require more training and licensing, which Mr. Canecchia said Essex will provide later.
Programs such as Essex's generally do not train or license employees to sell more sophisticated investments such as stocks and options, Mr. Wade said, since selling them requires extensive training and testing, and it is easier to teach branch employees to sell packaged products such as funds and annuities.
The products Essex is to make available to the North Fork reps will come from John Hancock Life Insurance Co., Essex's parent, as well as from American International Group's life insurance sales subsidiary, AILife, and GE Capital.
The effort will be coordinated with James Senatore, Compass' program director, Mr. Canecchia said.
Gerard Cronin, a bank analyst at McDonald Investments in Boston, said that right now roughly 90% of North Fork's income is derived from loans and deposits.
Ms. Reeves of Putnam Lovell said North Fork's venture is an effort to mine more investment business from its 180,000 depositors rather than to reach potential investors outside the bank, and she added that cross-selling is its main strategy.
She said that North Fork's $20 million goal is attainable, since to meet it branch reps would have to sell fixed annuities to only 3% of its depositors - a one-percentage-point increase.
Hiring a third party to train and license branch reps is better for a mid-tier bank such as North Fork because few people at such banks have much experience with brokerage, Ms. Reeves said. Buying or merging with a broker to increase investment business poses many expensive problems, so banks prefer this route, she said.
During an analysts conference call June 14, North Fork executives stated that the company will open 55 branches by 2004, including 20 in Manhattan, where its presence is small. The expansion is aimed primarily at deposit growth but will also create opportunities for boosting investment revenue, Ms. Reeves said.