Amid industry consolidation, PrimeVest Financial Services Inc. has enjoyed growing success over the past few years in signing its bank partners to longer contracts.
This year 70% of PrimeVest's partners are under five-year deals rather than three-year deals, compared with 33% in 2008. The company, a unit of Cetera Financial Group, says the revenue-sharing arrangements it has offered banks have been a factor, but other factors — such as banks' desire to focus uninterrupted on business development for longer stretches — have been more decisive.
"One thing I keep hearing [from banks] is that there's been so much consolidation," says Sean Casey, PrimeVest's director of business development. "They're going through the evaluation process and looking for someone they can partner with for the long term."
PrimeVest's transition to having mostly long-term contracts has been swift and steady. The share of clients with five-year contracts went from 33% in 2008 to 55% in 2009, 67% in 2010 and 70% so far this year, according to the company.
Catherine Bonneau, PrimeVest's president and chief executive, says financial institutions increasingly expect firms like hers to be strategic partners, not just vendors.
"Our goal is to expand institutions' share of wallet with their clients," she says. "We're not just looking for that quick win."
PrimeVest's five-year deals have come from existing and new bank partners. One of the new ones is Home Savings Bank in Youngstown, Ohio. The $2 billion-asset bank had been a client of Uvest Financial Services Group Inc. until it signed a five-year agreement with PrimeVest a month ago. Uvest was acquired by LPL Financial LLC in 2007, and it is now being consolidating onto LPL's self-clearing platform.
"We had to go through a conversion anyway," says Richard Vilsack, manager of the PrimeVest investment program at Home Savings. "LPL is a very good organization, but it's focused on the individual advisor, and PrimeVest only works with financial institutions."
Indeed, PrimeVest positions itself as a dedicated partner of banks and credit unions, drawing a contrast with some of its big rivals.
"It's useful positioning," says Kenneth Kehrer, director of the research firm Kehrer-Limra. "Bank broker-dealers' needs are somewhat different, and certainly the needs of banks for reporting are significantly different."
Home Savings signed a five-year deal in part to avoid the need to reassess, and possibly change, firms every three years, Vilsack says. "Clients don't like change, reps don't like change and bank management doesn't like change," he says.
Vilsack also preferred a longer deal because of his conviction that longer relationships are usually more successful, whether with advisory clients or with broker-dealers, he says.
State Bank and Trust in Fargo, N.D., recently signed a five-year deal, following a three-year contract, because of factors such as good service and low turnover at PrimeVest, says Tim Bush, PrimeVest's program manager at the $2.1 million-deposit bank.
PrimeVest built into the agreement payout incentives based on higher levels of production that the bank expects to meet, Bush says. State Bank and Trust has $225 million of assets under management and five reps, and it wants to double its size over the next five years.
"We're going to aggressively grow our program, so we built in a little better payout at higher gross production levels," Bush says. "They cut us a deal on that."
Bonneau says longer-term relationships, increased growth and favorable revenue-sharing deals can go together for PrimeVest clients.
"When you have the consistency of a provider relationship to experience growth over time, there is often tiering in our arrangements as their business grows," she says.
State Bank and Trust based its five-year commitment in part on Cetera's independence, Bush says.
Cetera was created last year when ING Group NV sold its ING Advisors to Lightyear Capital, a New York private-equity firm. Cetera consists of the broker-dealers PrimeVest, Financial Network Investment Corp. and Multi-Financial Securities Corp.
"We felt they are a little more nimble now in terms of getting new products approved, for example — we've noticed a quicker turnaround," Bush says.
Kehrer says another client-retention advantage for PrimeVest is that it's self-clearing. This means that when clients leave they must convert to a new clearing firm.
