FIRST BANKS' ADVISORS
MOVE FRONT AND CENTER
Feature Article
Andrew Singer

FAMILY-OWNED First Banks, Inc. (St. Louis) has been a big acquirer of under-performing banks in recent years. The $11 billion (assets) bank holding company has expanded beyond its Missouri roots to San Francisco, Southern California, Houston, Dallas, Chicago, and Tampa, among other markets.

The bank's geographical sprawl presents certain challenges, however. The 100-year-old institution has a solid trust franchise in the St. Louis area, including five trust officers, five wealth advisors, two employee benefits officers, and a support staff of 17. First Bank Investment Management & Trust (IMT), as it calls its trust business, had revenues of $4.5 million in 2007.

But First Banks has struggled to sell trust and fee-based products in its newer geographic areas. The acquired banks in almost all cases came with no trust departments and little fee income.

First Banks does have a strong retail investments program, however, with 30 financial consultants (FCs) and 150 licensed bank employees (LBEs)—of whom 50 have Series 6 licenses. It operates throughout First Banks' 218-branch footprint. First Brokerage America LLC, the retail investment-insurance affiliate, had revenues of $5.03 million in 2007. Some confusion existed at the branch staff level in the newer banks with regard to the bank's fee-based business, however, which is largely St. Louis-based. There was "lack of local IMT [trust] coverage," recalls Joe Hoffmeyer, senior vice president and managing director, First Bank Wealth Management Group, speaking at BISA's Community and Regional Bank Forum in September.

The average retail brokerage sale is $70,000. The typical IMT sale was on the order of $800,000. The financial consultants provided good retail coverage, but weren't really focusing on fee-based business. "Nothing was happening with referrals [to trust]," says Hoffmeyer. In those newer areas, clients "were not only under-served" with regard to trust, "they weren't exposed to anything at all."

A new role: 'wealth consultant'

The bank's solution: Create a new hybrid role—wealth consultant. This wealth consultant, a kind of super-charged FC, would sell both retail investment products and fee-based trust products and services—that is, general securities, mutual funds, annuities, life insurance, advisory accounts, and fiduciary services. Both FCs and IMT (trust) officers would be eligible for the new position.

In addition to providing more wealth management coverage to these outlying areas, it was thought that the new wealth consultants (WCs) would also attract a different sort of financial advisor: experienced, independent advisors who would recognize the value of support from the bank network. They could still enjoy 70 to 80 percent of their freedom, noted Bruce Stava, the retail investments chief, but now they would be part of a bank organization.

"We bought banks in Florida that didn't have trust departments or financial consultants—so we used Florida as a pilot," said Hoffmeyer. They brought in a new wealth consultant. "[His] business is serviced back in St. Louis. He's involved in every customer 'touch.' We want to keep him selling."

'Nothing was happening with referrals.' In those newer areas, clients 'were not only under-served' with regard to trust, 'they weren't exposed to anything at all.

—Joe Hoffmeyer, First Bank Wealth Management

There was some resistance from local sales management who feared "losing their best people" to this new channel. The bank addressed this concern by incorporating a new level of WC goals into local management scorecards and providing local managers with incentives based on WC program success.

The new position is still less than a year old. As of November, First Banks had six wealth consultants, although Hoffmeyer notes that "several FCs asked me to become WCs at our recent sales meeting."

Most WCs are from the retail brokerage channel—as opposed to IMT—because "that's where we have the most current staff," adds Hoffmeyer.

The bank sent its FCs to the Cannon Financial Institute for its five-day wealth management course to help get them up to speed with regard to some of the more upscale products and services. The wealth consultants cover three to four retail branches each—about the same as First Banks' FCs. They also often cover a commercial lending office—First Banks has five such lending offices. The WCs wear a different hat at the commercial lending office; here they are helping commercial lending clients with their wealth needs.

The WC essentially functions as a financial consultant but is able to offer a wider array of services. They don't have to worry about the $500,000 "line in the sand"—that is, they can work with clients who have more than $500,000 in investable assets, unlike FCs at some other banks who have to 'hand off' these more affluent bank customers to a trust officer. (First Banks itself had a $500,000 'guideline' of this sort before the new program.)

Although it is still too early to declare the program a success, Hoffmeyer sees encouraging signs. "In our new market, Tampa, we have experienced a surge of bank referrals including both IMT and retail prospects. In California we have seen an uptick in referrals to the previous wealth advisor in his new role as wealth consultant."

The bank created a new hybrid role, a wealth consultant, a kind of supercharged FC to sell both retail investment products and fee-based trust products and services.

The WCs are more aggressive than the trust officers and more fee-based than the FCs. They operate largely "outside the mother ship," says Hoffmeyer, that is, outside St. Louis.

The move has other advantages. Like some other institutions, First Banks is looking to move its highly paid trust officers from fixed compensation (salary) to more variable (commission) compensation. They want to pay for performance—at least to a greater extent than is typical at most traditional trust departments. This is easier to do in newly acquired institutions. The rise of a new wealth consultant role should hasten this transition.

Eliminating silos

The institution appears serious about tearing down product silos. Hoffmeyer was hired in June 2005 to head wealth management. In the elevator on his first day of work he noticed a placard by the button for the third floor that read, "Trust Department."

"I thought I was supposed to be the head of wealth management," he said to himself. He found the building's maintenance man and told him to change the placard.

Shortly thereafter, Hoffmeyer attended a meeting of the wealth management department. He asked about the head of brokerage. Where was he? "He doesn't come to wealth management meetings," Hoffmeyer was told. The new wealth management chief changed that. Brokerage is now seen as an integral part of wealth management.

First Banks views the wealth consultant role as eventually becoming the 'job of choice in the organization for good, successful FCs'

The bank's position is: "We are not a Trust Department…We are a Wealth Management organization." This is reflected in their internal branding. Virtually the same posters are used for both trust and brokerage—although the text is different, and one carries the trust logo, the other the brokerage logo.

First Banks began aggressively introducing life insurance recently. Life sales have been helped by the new structure. About 12 to15 percent of brokerage unit revenues have been in life insurance this year.

Hoffmeyer reports to First Banks' head of noninterest income businesses, which also includes the institution's property and casualty insurance agency. His peers include the head of the retail bank and the head of commercial lending. The WCs report to Stava, who in turn reports to Hoffmeyer.

Asked about the most difficult part of creating the new 'hybrid' wealth consultant role, Hoffmeyer answered, "Getting FCs into the habit of thinking about internal asset management as opposed to using outside managers. The more they learn, the easier this becomes.

"Also difficult is continuing to get parts of the bank like Commercial [lending] to refer to wealth consultants—they have historically been reluctant to do this. However, as their confidence in our competence grows, referrals are increasing."

First Banks views the WC role as eventually becoming the "job of choice in the organization for good, successful FCs," says Stava.