PNC Bank Corp.'s brokerage unit, Hilliard-Lyons, is changing the way it compensates brokers, moving from paying commissions on investment product sales to a system that encourages asset-gathering.
The Louisville, Ky., arm of the Pittsburgh banking company recently finished training its 640 brokers to offer financial planning services that encompass a customer's overall investment goals instead of simply placing clients' investments in individual mutual funds and stocks.
The new program charges an annual fee of roughly 1% on portfolios. It was started with the help of Kenneth Mathis, a financial planning coach hired from a unit of the investment firm Morgan Keegan & Co. Mr. Mathis, who joined Hilliard-Lyons last month from Southern Capital Advisors in Louisville, is responsible for schooling brokers on asset-allocation strategies and retirement planning.
"We're making a move to handle accounts on a fee basis and with more customer input," said James Allen, executive vice president at Hilliard-Lyons. "By getting a fuller understanding of their goals, we can help them in long-range planning."
The change reflects Hilliard-Lyons' determination to develop a more affluent customer base, Mr. Allen said. He predicted that its new emphasis on asset-gathering should help Hilliard-Lyons book $210 million of branch revenues this year, compared with $183 million in 1999.
The typical customer's investments are now to be put in a basket of products with staggered durations. Until now Hilliard-Lyons brokers had tended to steer investors toward a single mutual fund or stock with no set maturity.
Mr. Allen said the switch has caused only minimal defections from his broker ranks.
"It's not something that everyone looks at and says, 'That's for me,' " he said. "But I think anyone who sees where the industry is headed is going to find comfort with this."
Hilliard-Lyons' move to offer financial planning furthers a trend in the brokerage business, said Dennis Dellago, research director at the Optima Group in Fairfield, Conn.
"It's becoming a lot more commonplace," Mr. Dellago said. "The investment firms benefit by developing a more steady stream of income."
Clients benefit as well, he said, because the system "can discourage churning by brokers and align their interests more closely with what is good for the customer."
At the same time, Hilliard-Lyons continues expanding operations. It recently opened several offices and brought in 70 brokers who had been selling investment products in PNC Bank branches.
The company is targeting the Pittsburgh area, Delaware, and northern New Jersey, where PNC operates branches, Mr. Allen said.
Plans are in the works to start opening offices in a bigger swath of the East Coast, he said.
