Sun National Bank in Vineland, N.J., has found a big difference between using investment sales representatives that work for a third-party broker-dealer and employing them directly.
In January 2008, the $3.4 billion-asset bank brought in-house the reps at Sun Financial Services, its investment arm, and saw strong results. Through the first three quarters last year, investment product sales revenue grew 50% from a year earlier, according to the bank's executives.
Sun National, which had $250 million of investment assets under management at Dec. 31, accomplished the improvement without adding to its 10-person corps of investment reps.
For the first nine months of last year, Sun National's parent company, Sun Bancorp Inc., reported mutual fund and annuity income of $2.35 million, according to Michael White Associates' Fee Income Ratings Report.
Moving the investment professionals under Sun National's banner allowed the bank to better integrate the brokers into a branch-based system of goals and incentives. This system makes branches as a whole accountable for meeting investment revenue targets, said Edward Malandro, the executive vice president of consumer banking at Sun. "We share the accountability and the goals," he said.
What is more, moving the reps in-house won them additional credibility with the retail sales force, Mr. Malandro said. "It gave our employees a level of comfort that they were dealing with a fellow employee," he said.
The new arrangement has created more of a "marriage" between the reps and other branch employees, he said. A Sun National spokeswoman said that bankers and investment reps use referrals to help each other reach branch- and investment-revenue goals.
Sun National's investment program stacks up well against its peers' programs, according to the White Associates report. Among the nation's 252 bank holding companies in the $1 billion- to $10 billion-asset class, Sun National ranked 34th in terms of mutual fund and annuity income for the first nine months of 2008.
The bank also generated mutual fund and annuity income per employee — $3,146 — that was better than all but 18 of its peers, according to the report. And the $2.35 million of mutual fund and annuity income accounted for 2.4% of the bank's operating revenue; only 20 banks its size did better during the nine months, the report said.
Sun Financial Services was started in 1998. Its employees reported to Invest Financial Corp. in Tampa, until last year. Invest remains the broker and clearing house agent for the investment program.
When Sun National started its program, it did so to offer clients an additional set of products, and the strategy was little more than that, said Thomas Geisel, the bank's president and chief executive officer.
"When we first started this investment business, we had [a] great third-party partner," he said. "But we were really being more reactive with the products as opposed to proactive."
The logic for bringing the program in-house a decade after its creation was to let bankers target products to customers in a rational way, Mr. Geisel said. "It's allowed us to say which combination of banking and investment products best fits the needs of our customers," he said. "It's been of absolutely tremendous value."
Among the employees at Sun National's 62 branches are 18 platform bankers licensed to sell fixed annuities and other investment products. Mr. Malandro said the relationships between investment sales reps and licensed bankers has been smooth and that the reps have done a good job of coaching the bankers.
"This has worked so well; there have not been a lot of kinks," he said. "The biggest challenge has been just trying to keep on top of our appointments."
Sun National has adjusted its investment sales program in the past, with less success. "A few years ago, we mandated that we wanted a licensed employee in every branch," said Mr. Malandro. "That didn't work."
After that experiment, the bank changed its approach, offering to apt customer service reps the opportunity to become licensed and gain income.
"We're hoping, as we develop the sales culture further and further, that there will be more licensed bankers," said Mr. Malandro. The bank still wants "to have one in every branch," he said.