In a fresh sign that small banks are embracing the brokerage business, America's Community Bankers has entered into a strategic partnership with an investment marketing firm.
The trade group, which represents 2,000 thrifts and banks, has endorsed Money Concepts International Inc., a North Palm Beach, Fla., provider of investment services. The endorsement, which the ACB plans to announce to its members Monday, is similar to a Good Housekeeping seal of approval.
Though the endorsement does not guarantee that ACB members will sign up with Money Concepts, it does make it easier for them to enter the investment products business. The thrift group had spent two years seeking a strategic partner for investments-a process that included sifting through dozens of candidates and performing extensive background checks.
"Every CEO has a nightmare list of 10 things he needs to pay attention to," said Mike Potter, chief operating officer of ACB Partners Inc., a unit of the Washington-based trade group responsible for service partnerships. "To the extent that we can help them filter through that list, we make their job easier."
Currently, 669 ACB members are in the investment products business.
Mr. Potter said the thrift group chose Money Concepts because it stresses financial planning over individual transactions. The group's banks "want to have that customer next week, next year, next decade," he said.
About 140 third-party marketing firms offer investment services to banks, according to Richard Ayotte of American Brokerage Consultants, St. Petersburg, Fla. Trade group endorsements "can't hurt" these firms, but "the question is, does it really help?"
Wesley W. Sturges, president and chief executive officer of First Commerce Bank, Charlotte, N.C., said an endorsement might encourage banks to take a closer look at a third-party marketing firm.
"It would mean we'd consider them," he said. "We'd be aware of (an endorsed firm) and willing to consider it, recognizing that they are a credible player in the market."
First Commerce, which is looking to enter the brokerage business, is not a member of the ACB but belongs to other trade groups, including the American Bankers Association. The ABA endorses Security First Group, Los Angeles, for investment products.
Endorsements give investment marketing firms "extra points up-front" because trade groups do extensive due diligence, said Ramona Jones, president of IBAT Services Inc., an arm of the Independent Bankers Association of Texas. The group, which represents 700 community banks, endorses Primevest Financial Services Inc. of St. Cloud, Minn. About 25 IBAT members use Primevest, she said.
In its search, ACB Partners was also looking for a partner that did not sell proprietary products, Mr. Potter said.
"There are lots of third-party groups out there. Most of them do business the same way, and that's not how we want it," he said.
ACB Partners surveyed dozens of banks that use third-party marketers, as well as those looking for a provider. In many cases, the banks were not satisfied with the level of production or the way the relationship reflected on them, he said.
Money Concepts, however, got rave reviews, he said.
For almost 20 years, Money Concepts has focused on training people to become financial planners and helping them establish offices. Money Concepts has 1,200 financial planners in 500 offices around the world, said John P. Walsh, the firm's chairman.
Now it is trying to augment its bank client list, which totals 50. Fewer than a dozen members of the trade group use Money Concepts. "That's the opportunity for us," Mr. Walsh said.
Endorsements get "you an audience," said William N. Wade, executive vice president of Essex Corp., New York. "On the other hand, even if you're endorsed, you still have to make sure that it works for the bank and for you."
He noted that Essex has relationships with 25 to 30 banks as a result of its affiliation with the New York Bankers Association, which has 130 members.
Meanwhile, Mr. Walsh said, he hopes Money Concepts forms relationships with a significant number of banks in the next few years. He projected that a bank could produce $4 million of gross sales in its first year with the firm. That could grow to $6 million in the second year, and $8.9 million in the third, he said.
"We're going to build them as fast as we can intelligently, from the point of view of having them sustained," he said. "We don't want to outrun ourselves."
