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 $3.6 billion-asset bank brought in-house the reps at Sun Financial Services, its investment arm, and saw strong results by the end of the year. The Sun Bancorp Inc. holding company's investment product sales more than tripled, from $974,000 to $3.04 million.
Overall Sun, 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. Moving the investment professionals under Sun'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, says Edward Malandro, the executive vice president of consumer banking at Sun. "We share the accountability and the goals," he says.
What's more, moving the reps in-house won them additional credibility with the retail sales force, Malandro says. "It gave our employees a level of comfort that they were dealing with a fellow employee," he says. The new arrangement has created more of a "marriage" between the reps and other branch employees, he says. A Sun spokeswoman says that bankers and investment reps use referrals to help each other reach branch- and investment-revenue goals.
Sun's investment program stacks up well against its peers' programs, according to Michael White Associates' Fee Income Ratings Report issued in late January. Among the nation's 252 bank holding companies in the $1 billion- to $10 billion-asset class, Sun 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. The report also says that 2.4 percent of the bank's operating revenue through Sept. 30 came from mutual fund and annuity income, better than all but 20 banks in its asset class.
The move proved to be fortuitous for a rough year. With lagging performance in non-interest income areas like deposit account insurance charges, bank-owned life insurance, loan sales and derivative instruments, the investment products helped boost total non-interest income 13.9 percent, to $28.1 million.
When Sun started its program, it did so to offer clients an additional set of products, and the strategy was little more than that, says Thomas Geisel, its president and chief executive officer. "When we first started this investment business, we had [a] great third-party partner," he says. "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, Geisel says.
Among the employees at Sun's 62 branches are 18 platform bankers licensed to sell fixed annuities and other investment products. Malandro says 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 says. "The biggest challenge has been just trying to keep on top of our appointments."
Sun 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," says Malandro. "That didn't work."
After that experiment, the bank changed its approach, offering 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," says Malandro. The bank still wants "to have one in every branch," he says.