After referring customers in need of investment advice to a North Carolina bank for the past seven years, First Citizens Bancorp Inc. of Columbia, S.C., has launched a broker-dealer unit to bring that work in-house.
The unit, First Citizens Securities Corp., began operations Nov. 1 with $450 million of assets under management from customers in South Carolina and eastern Georgia. Britt Borders, the director of First Citizens Bancorp's wealth advisory group and the president of First Citizens Securities, said he expects assets under management to grow 12% to 15% annually.
First Citizens Bancorp hired Mr. Borders two years ago from AmSouth Bancorp of Birmingham, Ala., to integrate the South Carolina company's trust and private banking services into a wealth advisory group. He said when he came aboard he discovered that the brokerage business of the company's First Citizens Bank was being outsourced to First Citizens Investor Services, a unit of First Citizens Bankshares in Raleigh.
Despite the similar name, the Raleigh company is not affiliated with the South Carolina one, though there is some common ownership of stock.
Until November, advisers from the North Carolina company worked in the South Carolina bank's branches, he said.
The South Carolina holding company had $5.64 billion of assets as of Sept. 30. Though it had a revenue-sharing agreement for customer referrals, Mr. Borders said, he knew that opening a broker-dealer unit could help his company generate more revenue.
"Our bankers were referring business to another firm. We had to build our own broker-dealer because it would give us more control over our business in terms of where to put financial advisers," he said. "It would also give us control over the types of products we could offer. Basically, it would just be easier to manage everything by owning it ourselves."
The unit, which uses a platform from BNP Paribas SA's FundQuest of Boston, offers three fee-based managed accounts to customers. Maryann Morrow, the vice president of national accounts at FundQuest, said unified managed accounts - a product that allows an adviser to assemble multiple products on a single platform - will be added soon.
"We wanted to launch the program initially with fee-based mutual funds, separate accounts, and exchange-traded funds, but unified managed accounts are definitely part of the plan," she said. "It will certainly be a 2007 initiative."
Mr. Borders agreed the unified managed account is a good product to add down the line, but his focus is to get a network of advisers established through its branches in South Carolina and Georgia.
First Citizens Bancorp launched its open architecture platform with 10 advisers and plans to increase that number "substantially" this year and beyond, he said. "In the short term, we want to add a good number of advisers as this initiative grows over the next 12 months and then over the next 24 to 36 months."
Eventually he hopes to have one adviser for every seven to 10 of the bank's 170 branches.
Ms. Morrow said more banks are outsourcing their investment advisory services to FundQuest, which offers its platform to 65 financial services companies.
"Banks want to provide their customers with best-of-breed asset management services to enhance the relationships they have with their stable of clients," she said. "They need our products to provide a broader array of financial products and investment managers."
Mr. Borders said that he hopes the new platform will stimulate growth, and that he also expects to increase First Citizens Bancorp's $300 million of trust assets by 12% to 15% a year.
"We have strong and deep relationships with these clients through the bank," he said. "A lot of our bank clients do business with bigger brokerage firms and our competitors, but I think we have the kind of relationship to bring these customers over to First Citizens Securities. These relationships are our competitive advantage."
Ms. Morrow said FundQuest, which had $30 billion of assets under management as of Sept. 30, has an active pipeline, and she expects more banks to follow this year.
"This is a growing trend in the industry," she said. "More and more banks are interested in offering this type of platform."
