Academic journal article ABA Banking Journal

Capital Markets Systems Pay off; Sales of Mutual Funds, Annuities, and Other Nontraditional Bank Offerings Are Up, Partly Due to New Systems and More Focused Marketing

Academic journal article ABA Banking Journal

Capital Markets Systems Pay off; Sales of Mutual Funds, Annuities, and Other Nontraditional Bank Offerings Are Up, Partly Due to New Systems and More Focused Marketing

Article excerpt

Thanks to plunging interest rates, such traditional bank products as savings accounts and certificates of deposit are providing dismal returns for consumers, which is good news for bank broker/dealer subsidiaries. Annuities and mutual fund offerings are selling like hot-cakes, and it seems the equity market isn't so bad after all.

Still, brokerage operations, whether discount or full service, are a low-margin business, and processing costs associated with many nontraditional bank products are considerable. Furthermore, as banks become primary providers of insurance- and securities-based products in their markets, they must process more transactions just as efficiently as before or risk losing the business to a competitor.

Harnessing information. Current automation spending patterns of banks with capital markets operations reflect efforts to wring more efficiency-and Profitability-from both the sales force on the front end and clearance and settlement operations in the back office. The key, say bankers, is to integrate information on bank product offerings so that sales people are more knowledgeable about a customer's relationships with the bank. That way they can access information quickly and easily when, say, a customer calls with a product inquiry. that capability, in turn, should be reflected in the back-office, where customer statements can be produced that combine all the elements of a portfolio-when it is legally permissible to do so. In the meantime, many banks are concentrating on growing the nontraditional lines of business, which doesn't happen overnight.

"We started a bond department long ago and only brought the other [investment] businesses up in the past five or six years," says Michael Smith, president of Dominion Investment Banking, a subsidiary of Dominion Bankshares Corp., Roanoke, Va. "The ability to integrate those businesses from a customer standpoint has been a battle."

Smith says that because the volume of investment business has increased fourfold in the past two years, his organization has been able to negotiate lower fees from a third-party processor for clearing and settling transactions. Dominion's focus, therefore, is now on improving the level of resources available to the sales force, such as access to real-time pricing information and analytical systems to help customers determine whether certain financial instruments are appropriate investments.

Adding value. "Data is king right now," says Lawrence Harb, president of LaSalle Consultants, Ltd., Chicago, "whether you have the most up-to-date information on a stock or bond or whether you can access a client portfolio as soon as the client cars. The more information you have, the better off you are."

Simply put, the sales staff must have more information than the client in order to add value and make the sale, says Harb, whose clients include banks with broker/dealer operations. Institutional clients, for example, have access to a variety of information sources with which to monitor the value of existing investments and decide on new ones. "Speaking as a former broker/dealer salesman," says Harb, "the only time we could offer added value to an insurance company customer was when we did our own deals that the client couldn't get information on anywhere else."

Liberty National Bank & Trust Co., Oklahoma City, with $1.5 billion in assets, invested in broker/dealer technology in the late 1980s that is now paying off in greater sales and trading productivity. Liberty National and its sister institution, the First National Bank of Tulsa, which has $1 billion in assets, installed the workstation-based Intrader system from Digital Solutions, Inc., Bloomington, Minn. Both banks are subsidiaries of the Banks of A&d-America, Inc., Oklahoma City.

"Our focus is giving the salesperson or trader access to all the information needed to get a piece of business done," says Bernard Hall, senior vice-president and manager of Liberty National's investment banking division. …

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