Third-party Brokers Rock

Third-party brokerage services give banks another bullet for hitting their target share of the market.

Unlike bank-owned securities brokerages (See list, Page 26), these free agents of the financial industry are out-sourced by banks that want to diversify their menu of services without tying up tremendous amounts of assets with an in-house division. Several such companies partner with banks in Northwest Arkansas, including Investment Professionals Inc. of San Antonio.

IPI entered Arkansas seven years ago and already has alliances with about 15 banks in the state. For fiscal 2001, the decade-old brokerage had $2.3 billion in assets under management through 52 offices in 11 states. The company was, on Feb. 5, rated the No. 1 third-party marketing firm in the nation by the American Bankers Association.

Keith Lea, a 1985 graduate of the University of Arkansas, is IPI’s financial consultant at The Bank of Fayetteville. Lea said his full-service brokerage firm handles everything from stocks to fixed and variable life insurance.

“We give you basically the whole realm of investment services that you could get at a large brokerage firm, but with a community bank touch,” Lea said. “We have the resources of a big brokerage, but we allow customers to continue doing business with their community banks. Most people have relationships from the time they’re about 15 with their local bank, but not very many probably have that kind of relationship with a brokerage.

“Most people want to maintain that close, local connection.”

Lea, who spent five years with A.G. Edwards and nine with Arvest Asset Management before joining IPI, said he likes his new firm’s flexibility. He has “a tremendous amount of respect” for both of his former employers but said he enjoys meshing with a community bank’s corporate culture.

“I like the smaller community feel,” Lea said. “IPI provides the back office support, but generally when someone is here to see me, it’s because of The Bank of Fayetteville.”

Scott Barnes, IPI’s president and founder, said IPI is affiliated with 30 percent of all the Arkansas banks large enough to offer brokerage services.

“We have $30 million banks and $900 million banks,” Barnes said. “At the end of the day, we sell the same Putnam Fund and IBM stock that say a Stephens Inc. or a Merrill Lynch sells. All that matters is service, and the difference between most securities firms and those operated by banks is significant.

“To be successful, you have to figure out how to service a Siloam Springs, Magnolia, Blytheville or Mountain Home in a community atmosphere. Our revenues are approximately 25 to 30 percent more than the average investment bank brokerage firm because our services are very high hands-on.”

T.J. Raney & Sons Inc. of Little Rock, founded in 1931, is a securities broker dealer and registered investment advisor with four bank affiliations in Northwest Arkansas. Alton Raney, T.J. Raney’s senior vice president and great-grandson of the company’s founder, said his firm had about $75 million in assets under management for 2001.

Marty Dennis, a financial adviser with T.J. Raney, was recently hired to oversee the firm’s Northwest Arkansas bank affiliations and to work with several of them directly as a broker.

“It’s become obvious in our industry that in order to offer someone a comprehensive investment plan you need certified specialists in several disciplines,” said Raney, who boasts degrees from the UA and the Whorton School of Business at the University of Pennsylvania.

“We offer our banks and customers a team approach.”