3d-Party Marketers Race onto Net
Winokur, Cheryl, American Banker
With their long-term survival at stake, third-party marketing firms are revving up on the information superhighway.
The firms, which provide investment services to banks, are increasingly turning to the Internet and other forms of technology to distinguish themselves as banks rejigger sales strategies and reduce their dependence on the firms.
Though technology is only one reason banks choose one third-party firm over another, it has become a major one, heads of brokerages said.
"Mutual fund companies, brokerages, and insurance companies are providing access to client information on the Web. ... A third-party marketer also has to provide that information to be competitive," said Neil M. Fried, who manages brokerage operations at Ramapo Bank, Wayne, N.J. The $320 million-asset bank has used Invest Financial Corp., Tampa, for 10 years.
Technology is one reason German American Bank of Jasper, Ind., switched in January to St. Cloud, Minn.-based PrimeVest Financial Services Inc., said Norm Kempf, vice president of the bank.
The unit of $600 million-asset German American Bancorp had been using Invest Financial for several years, but Mr. Kempf said his bank decided that PrimeVest's technology was more advanced. PrimeVest lets representatives place orders, access account information, and obtain detailed product information over the Internet, he said. Invest is adding those capabilities.
PrimeVest, which has 650 bank clients, will spend $1 million to enhance its Web site, said Randall Ciccati, president and chief executive officer.
Marketing firms' increased emphasis on technology coincides with sweeping structural changes in the industry.
As big banks merge and rethink their approaches to investment products, marketing firms have been scrambling to maintain those relationships and forge new ones. Some banks are bringing their brokerage operations in- house, while others are getting products directly from mutual fund and insurance companies.
Though consultants say third-party marketers will not become extinct, their numbers are dwindling. There are about 140 marketing firms today, compared with 200 in 1997, according to Richard Ayotte, a consultant with American Brokerage Consultants, St. Petersburg, Fla. That does not include third-party marketers that sell only life insurance products, a new breed for 1998.
To compete, firms must offer better products, services, and prices. That means, among other things, investing heavily in technology, said Kenneth Kehrer, who heads a consulting firm in Princeton, N.J.
"I think technology is going to play a large part in separating the successful firms from the not-so-successful ones," Mr. Ayotte said.
To stay competitive, some companies are experimenting with video conferencing, which lets customers see and hear a representative at a remote site.
Richard A. Adams, director of business development at Compulife Inc., Midlothian, Va., said his company is talking to a few banks about installing the technology in 1999.
A trial run was well received by brokerage customers last year at the Richmond, Va., branch of Jefferson National Bank, Mr. Adams said. Though the project fizzled after the bank was bought by Wachovia Corp. of Winston- Salem, N.C., "we stand ready to put it into practice with any organization that we're dealing with," Mr. …