SAN DIEGO - Banks beefing up their brokerage operations should take care not to let their trust business suffer, and they can better ensure that both lines of business succeed with the aid of financial planners as middlemen, according to a third-party brokerage firm.
Sean P. Casey, senior vice president of Invest Financial Corp. in Tampa, a third-party brokerage firm for banks, spoke at a trust and investment conference sponsored by the California Bankers Association here last week. He outlined how banks could use financial planners to help direct customers to the most appropriate bank unit.
"At many banks, there's been a conflict between trust officers and investment brokers, both competing for business from the same bank customers," Mr. Casey said. "But with the use of financial planners who can point customers to the right trust and brokerage products that meet their needs, trust officers and brokers can actually work together."
Mr. Casey cited a financial planning pilot program that Invest Financial helped install at the former First American Bank in Nashville. With the aid of certified financial planners, brokers at the $9 billion-asset bank referred about $30 million worth of business to the bank's trust division in two years. First American was recently bought by the $20 billion-asset Amsouth Bancorp. of Birmingham, Ala.
In an interview, Robert R. Blagojevich, who was executive vice president of First American's brokerage and trust operations during the pilot program, explained why it was needed.
"Before we started the program," he said, "we found that branch managers and commercial lenders would inevitably invite someone from the trust group and someone from the brokerage group to the same luncheon, and both guys would be at the same table trying to sell products to a bank customer at the same time. It was very confusing to the customer, and sales in both divisions suffered."
In partnership with Invest Financial, First American began using financial planners in October 1995 to help determine which products were best suited for each customer. Through the fourth quarter of 1997, trust officer referrals helped double brokerage assets, to $600 million, and gross commissions, to $12 million.
First American was so enamored of Invest Financial that it bought the company in 1997, putting Mr. Blagojevich in charge. Amsouth sold the unit in July to National Planning Holdings, a brokerage subsidiary of Jackson National Life of Lansing, Mich.
Mr. Blagojevich now recommends the use of financial planners to other banks.
"Bank customers still trust" their banks, he said, "and when you put a qualified financial planner in front of them, it just further reinforces that trust."
"Also, when you do financial planning, you wind up uncovering about 80 to 90% of their assets that are at someplace other than the bank," Mr. Blagojevich added. "If you can get those assets under your management, your customers won't need to go roaming for financial planning services at Merrill Lynch or Schwab or anywhere else."