Washington Mutual Inc. is shifting its investment and insurance product approach to emphasize in-branch sales, says Sandy Cavanaugh, the president of WM Financial Services.
The brokers it had serving in multiple branches were not generating sufficient customer contact, Ms. Cavanaugh said, so the company plans to put at least one licensed representative in each branch by yearend.
The doubling of its staff with series 6 licenses will be partly funded from savings realized by the layoffs last week of 21 financial consultants, who Ms. Cavanaugh said were having a difficult time generating revenue.
“These brokers were placed in de novo branches and expected to build from nothing,” she said. “It is very hard to build a base that way.” A broker could be serving as many as six or seven branches, she added.
“We believe we can generate more investment sales through the platform,” she said. “We want to integrate more series 6 reps into the mix so that we are facing more customers.” Series 6 reps are authorized to sell annuities and mutual funds. Series 7 brokers are authorized to sell from a more sophisticated menu of products.
“This is not at all about being unable to generate revenue through series 7 brokers,” Ms. Cavanaugh said. “We want to generate more revenue. We don’t want to cut down our series 7 people.” Down the road, she said, Wamu could add to its roster of series 7 brokers but for now wants to focus on more than doubling its force of series 6 reps to “effectively cover our customer base.”
WM Financial Services’ cuts last week included 13 brokers in Florida, three in Texas, two in Atlanta, and three in Chicago. The layoffs reduced Washington Mutual’s roster of series 7-licensed brokers from 560 to 539. Washington Mutual has 700 series 6 brokers but expects to have one in each of its 1,500 branches by yearend and to have 75% of the branches covered by September.
Ms. Cavanaugh was promoted in October to succeed Joel Calvo as president of WM Financial Services in what was the first in a series of senior executive changes. In January, the parent company hired Stephen Rotella, a former JPMorgan Chase executive, to be its president and chief operating officer.
This month the Seattle thrift company replaced Deanna Oppenheimer, its head of retail banking, with Michael Amato as president of retail banking distribution and Ken Kido as president of banking products and operations. Wamu also hired three senior executives from JPMorgan Chase for its mortgages unit this month.
Richard X. Bove, an analyst at Hoefer & Arnett who covers Washington Mutual, said Mr. Rotella can begin to look at the thrift’s business units and make adjustments now that he has settled into his job and has the appropriate people in place around him.
“Wamu has no business being in the brokerage business,” Mr. Bove said. “This isn’t a core business. This isn’t an area they can make a serious impact with a series 7 broker that is there for two hours a week on a Wednesday.”
James R. Bradshaw, an analyst at D.A. Davidson & Co., said Wamu’s strategy could succeed.
“Traditionally, Washington Mutual has focused on generating additional assets from its existing customers, and that is part of their core philosophy,” he said. “Washington Mutual has to focus on getting more wallet share from its customers.”
Mr. Bradshaw said the strategy seems to focus on retail customers, where Wamu has a strong track record despite the problems in mortgages.
“Washington Mutual generates a lot of traffic in their stores, and by placing people in these physical locations they can cross-sell five or six products to a single customer just by getting folks in the door,” he said. “Washington Mutual is focusing on its strengths. They are trying not to concentrate on their failures but rather accentuat[e] their successes to generate revenue.”
Mr. Bove, though, said he is skeptical of the strategy.
“Washington Mutual’s opportunity is fairly well-defined,” he said. “That opportunity is based around the fact that they have hundreds of thousands of customers who are marginally profitable and the bank wants to sell them products such as mortgages and CDs that can make them more profitable. Anything that diverts from that with brokers trying to push securities or investments at them is against achieving the goal they are seeking.”
