Coastal Federal Savings Bank has figured out that one way to beat the competition is to hire its talent away.
The Myrtle Beach, S.C., thrift is going against the received wisdom at most small-town institutions by drawing talent for its investment sales program from local brokerages rather than from within its own ranks.
So far, half of the $400 million-asset thrift's six brokers have come from local brokerage firms.
The move was in response to sagging investment sales and increased competition from brokerages that are looking to cash in on the area's growing retirement community. And Coastal says it is increasing market share with its new staffing approach.
J. Pinckney Kellett, president of Coastal Federal Investment Services, joined the thrift last September after five years with the local office of A.G. Edwards & Sons, a regional brokerage firm based in St. Louis.
He said brokers who come from outside the bank environment are more familiar with explaining the risks of investing than their bank-trained counterparts, who have the security of selling federally insured bank products.
"It gives me more comfort knowing that we will present the investments in the right light," Mr. Kellett said. "I would love for an Edward D. Jones broker to come in and ask me, 'Do you have a place for me here?' "
More bankers are sharing Mr. Kellett's wish.
While most community banks still cull investment sales talent from their own employees, an increasing number have turned to hiring local brokers with close ties to the community, said John Philip Sousa 4th, president of Investment Program Management, a Westlake Village, Calif., consulting company.
"Most community banks don't have top-notch sales people in-house," said Mr. Sousa. "But if a bank can hire someone that worked in that community for an extended period, then that person can bring with them a lot of relationships."
However, potential drawbacks exist, he said. Hiring experienced brokers can be expensive; many earn upward of $60,000 a year. And an institution runs the risk of hiring a person whose selling style clashes with that of the bank.
"You may pick a bad apple that only sells the highest commissioned products and doesn't do right by the customer," Mr. Sousa said.
At stake for Coastal is a slice of the Myrtle Beach marketplace - the second-fastest-growing community in the country. The once sleepy seaside resort town is now a haven for snowbirds from the Northeast and Midwest who are attracted to the area's mild climate and many golf courses.
Retirees make up more than 70% of Coastal Federal's brokerage customers.
Competition for those customers can be fierce, and Coastal has felt the pressure more than other banks and thrifts. Merrill Lynch & Co. has an office right around the corner from Coastal's main office.
Al Wiggins, office manager for Merrill Lynch in Myrtle Beach, said all banks and thrifts are tough competitors because of the banking services they can offer.
"You can't get change for a $100 bill at Merrill," Mr. Wiggins said. But he added that his office does well serving a more affluent clientele.
Eric A. Long, an Edward D. Jones & Co. investment representative whose office is near a Coastal Federal branch, said he competes with the thrift for market share.
"Anyone that believes that (banks) are not going to be a significant player now, or in the future, is dead wrong," Mr. Long said.
Mr. Kellett's outlook is conservative, however. He expects the thrift's investment program to do about $800,000 in gross commissions this year, down from $1.5 million in 1994, when the thrift had 10 sales representatives.
Still, Coastal is going ahead with plans to hire one more investment representative - also drawn from a local brokerage house - and recently completed a satellite link that connects its sales people to the financial markets almost instantaneously through laptop computers.
"I don't know of many other banks that have this type of access to the markets," Mr. Kellett said.