Many banks are embracing fee-based investment sales, but First Federal Bank of Florida stands out — its investment program does virtually all its business without the up-front commissions that banks have traditionally used.

"We just made a conscious decision back in 2003 that we were going to convert all the business we had — and any new business we had — to fee wrap accounts," said Philip Moses, the chief executive of Raymond James Financial Services at First Federal.

First Federal, of Lake City, has a small investment program, to be sure. Mr. Moses and his colleagues manage $200 million of assets, but just about a third of the program's business comes through the bank, which has assets of $636 million. Mr. Moses' firm, Odom, Moses & Co. LLP, provides asset management for First Federal under a revenue-sharing agreement. At the same time, it manages assets for nonbank clients who use the firm's accounting services.

The bank customers' invested assets have tripled since First Federal started to move away from its focus on commission-based transactions five years ago, said John Houston, senior vice president and managing director of Raymond James Financial Services' financial institutions division. Mr. Houston's business runs the investment unit at First Federal.

Fee-based investment programs are a double-edged sword, said Kenneth Kehrer, the director of the Princeton, N.J., research and consulting firm Kehrer-Limra. Because advisers charge a fee of a fixed percentage for their services, they reap more profit when the portfolios under their care grow — and less when they shrink. That is a selling point for clients who want their adviser's interests aligned with their own, he said.

But if panicked clients pull their money out of their fee-based accounts too early, advisers who had counted on pulling in fees year after year may do worse than if they had charged a large, traditional up-front commission, he said.

Moreover, charging fees rather than commissions across the board cuts out customers for whom commissions might make more sense, Mr. Kehrer said.

But First Federal's move away from a transactional orientation has been a success — the bank's investment assets have tripled in the most recent five-year period, Mr. Houston said. It "made a conscious decision not to be all things to all people as it relates to investment services," he said.

The bank's investment business accepts clients with $300,000 or more, and prides itself on providing them with objective advice, Mr. Moses said. The assets that Mr. Moses and his colleagues manage have slipped over the past year by about $60 million, he said. But the firm's income is less prone to dry up now that it is not commission-based, he said. "We'll have less fees, but consistent fees, through this downturn." Odom Moses has spent several weeks meeting with clients to reassure them in the face of the market turmoil, he said.

First Federal has almost all banks beat in terms of the percentage of fee income. Fee-based accounts accounted for 6.7% of bank investment programs' revenue in 2007, according to Kehrer-Limra.

But measuring how much of bank brokerages' revenue comes from fee income is tricky. Taking into consideration products that are not technically fee-based but that have fee-like features raises the percentage considerably, Mr. Kehrer said.

Mr. Moses, a longtime director of First Federal, began managing the bank's brokerage assets in 1999, when First Federal's investment rep departed. His firm has four advisers among its 20-person staff.

The bank program uses asset allocation strategies provided through Raymond James and Russell Investments to invest clients' funds. Its only commissions come from selling term life insurance policies and certificates of deposit, for which the bank pays the investment program a commission. The program does not sell annuities but will custody them, Mr. Moses said.

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