Who says banks and independent advisors can’t get along? Try this on for size: Everbank, the nationwide branchless division of Jack-sonville, Florida-based First Alliance Bank, recently launched a program for advisors that allows them to compete against banks and wirehouses on banking products and mortgages.
Broker/dealers who sign a joint marketing agreement with Everbank can offer the Everbank Advisor Program to their affiliated advisors. Since the program’s launch in April, 30 broker/dealer firms have signed up, says Robert Foregger, Everbank’s COO. And 10% of the B/D firms’ 5,000 reps, he says, have already joined the program.
Why would a bank, and a virtual one at that, develop such a program? The answer is simple, says Foregger: Everbank gets to distribute its products through a nationwide channel of advisors, while advisors gain access to products their competitors offer, and earn extra cash. Since starting up in 2000, “Everbank always saw the independent financial advisor market as a potentially intelligent component of our business, and an attractive distribution channel because we thought they were underserved,” Foregger says. “Everbank is a branchless bank, so for us to be able to serve advisors across the country is very easy because that’s what we already do” for customers.
Everbank initially launched the first iteration of the Everbank Advisor Banking Program in partnership with American Skandia in the first quarter of 2002, according to Foregger. However, American Skandia discontinued the advisor banking program in April 2002 after putting itself up for sale. Prudential Financial acquired Skandia in December 2002, with the deal being consummated last month. “In essence, Skandia discontinued new business development as it cleaned itself up for sale, and our great new banking program was a casualty,” Foregger says.
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Everbank originally used Skandia to sign firms for the advisor program, Foregger says. “Today, Everbank goes directly to each firm to sign agreements and build relationships,” he says. After Skandia’s sale, “Everbank spent the next nine-plus months completely overhauling the program structure to allow Everbank to market and directly support the needs of B/Ds and advisors.”
Michael Arcaro, a Prudential spokesman, says American Skandia broke off its efforts with Everbank to market banking products through B/Ds after deciding to focus on its core businesses: mutual funds and annuities. “Banking regulatory hurdles” were also a factor in Skandia’s decision, he says.
These days, “coopetition,” where financial services firms compete with each other while also leveraging each other’s strengths, is becoming standard practice. Foregger says advisors are embracing Everbank’s program because of two trends: the convergence of financial services firms, as well as the trend toward financial planning and away from pure investment management. Today, advisors can’t be without banking services, he says. The wirehouses are adding banking services left and right; first it was Merrill Lynch, joined most recently by the launch of Charles Schwab Bank. “One of the most exciting and interesting stories in financial services has been Merrill Lynch’s premeditated move of moving its clients’ money market mutual fund assets into FDIC insured bank accounts,” Foregger says. “Today [Merrill] has $65 billion in FDIC bank deposit accounts.”
Michael Lytle, principal of Canfield-Ohio based Lytle & Co., which is affiliated with Questar Capital Corp., says banking services are something his firm had to have. It’s an important component of a client’s complete financial picture, he says, “and a lot of clients are looking for the FDIC insurance.” Banks are offering investing and financial planning services, he says, so why shouldn’t advisors offer banking products? “From my office, I look out at four different banks, and I live in a pretty conservative area; [banking is] something that I absolutely had to have for my practice.” Lytle adds, “the name of the game is gathering assets, and Everbank gives us a terrific avenue to do that.”
Banks to Brokers
Independent advisors are also running up against more and more banks that are morphing into brokers. One recent example is Wachovia Securities Financial Network merging its retail brokerage force with that of Prudential Financial. The merger makes “Wachovia the third-largest broker network in the nation,” Foregger says. “As a financial advisor, do you want to refer your business to Wachovia for a mortgage or an FDIC-insured banking product?” he asks. “The obvious answer is no.”
And independent advisors just can’t ignore the fact that banks are becoming “more sophisticated players in the financial advisor space,” Foregger says. “Some are growing a few hundred percent as far as the broker workforce that’s now in a bank holding company.”