AAM Bullish On ?Everyman?

Much like the bank that owns it, Rogers-based Arvest Asset Management started off as a side project.
Sam Walton, founder of Bentonville’s Wal-Mart Stores Inc., bought controlling interest the Bank of Bentonville on Aug. 31, 1961, as an investment opportunity. It eventually became Arvest Bank, now-chartered in Fayetteville. In 1986, Alice Walton, Sam Walton’s daughter, championed AAM as a side to the bank’s core business to sell fixed income securities to retail bank customers.
AAM is now a full-service broker with insurance and trust services and offers fee-based money management.
The bank is not required to report AAM’s assets — numbers are “off the balance sheet.” But Mel Parks, CEO of AAM, said the bank’s wholly-owned subsidiary, including its trust and brokerage segments, now has assets of “between $5 billion and $6 billion.”
That’s quite a spread, but it compares to a $3 billion to $4 billion range reported by an Arvest insider in early 2005.
And, AAM’s assets have an impressive showing when compared to the bank’s assets of $8.53 billion as of June 30, up from $7.54 billion a year earlier. Combined, Arvest Bank Group Inc., the bank’s holding company, probably has about $14 billion in assets, up an estimated 30 percent from a year and a half ago.
Not bad for a couple of side projects.
And AAM is giving the big city wire houses a run for their clients’ money. Arvest Asset Management is the largest broker dealer in Northwest Arkansas when ranked by the number of licensed agents within the six-county market.
On this year’s list of largest broker dealers compiled by the Northwest Arkansas Business Journal (p. 35), AAM had 56 licensed agents. National firms Edward Jones and A.G. Edwards & Sons Inc., both tied at No. 2 with 41 agents each.
Parks said brokerage services account for about 50 percent of AAM’s three main business offerings, with trust services producing about 40 percent and insurance about 10 percent.
Groupwide, AAM employs about 215 people and has 117 licensed investment associates in 62 locations in Arkansas, Oklahoma and Missouri. The AAM locations are spread across 217 Arvest Bank branches.
Parks wouldn’t share the number of AAM customers. But a registered agent at the AAM trading desk estimated he averages 50 customer calls each day. There are six reps at the desk, so that’s about 300 calls a day, and that doesn’t include what’s happening in the field at the 62 AAM offices.
Volume, Volume, Volume
AAM’s growth may not be surprising given the company’s non-elitist philosophy, a sharp contrast to many wealth management firms.
Arvest is still owned by the Walton family, with primary ownership by Sam Walton’s son, Jim Walton.
Though Arvesters claim the two businesses are distant cousins, there’s no denying Arvest has some things in common with the Wal-Mart business model: lots of convenient locations and selection of offerings suitable for multiple demographics — even to those with little money.
John Martfeld is a vice president, client adviser and investment specialist for AAM at a Rogers branch. He said he and his office partner, Mike Dunlop, a client adviser and investment specialist, will meet with just about anyone and line out a wealth strategy despite the person’s level of assets.
“A lot of our younger clients don’t have a lot of money to bring, but … it’s planting a seed,” Martfeld said.
He noted that he has an appointment with an 18-year-old high school student who wants to make a small buy into a mutual fund. He knows there’s not much if any commission he’ll make on the sale, but to him its about the long-term potential to gain business.
Dunlop agreed, “We will help everybody. The whole point is to gain confidence in them.”
Then they will make referrals and continue to come back with repeat business, he said.
Unlike traditional wire houses, AAM advisers aren’t paid the next week for what they sold this week, Martfeld said. There is a commission structure, but the lag time is closer to nine months.
But AAM’s unique tie to such a high profile, high traffic bank as Arvest generates tons of leads, the pair said, so there’s plenty of motivation.
The two average 15 appointments per week, with about half of those being new or potential clients.
Martfeld said AAM agents, like other reps at other broker dealers, are inundated with offers for paid trips to exotic locales as a reward for high sales of specific financial products. But what’s different at AAM, Martfeld said, is that Jim Walton won’t allow AAM agents to accept the rewards.
Therefore, agents are truly motivated to work in the client’s best interests.
Challenged
Parks’ windowless office is on the second floor of the Arvest Bank-Rogers headquarters at the corner of Second and Walnut streets.
He has a double-screened Bloomberg computer station, a laptop and a desktop computer within easy reach of one another. A television across the room stays tuned at mid-volume to a 24-hour news network.
He is a certified financial planner and said he doesn’t really follow all of the ups and downs of the markets on a daily basis.
Most of AAM’s customers — 78 percent as of 2005 — are primarily interested in managing their money for retirement, he said. So daily fluctuations aren’t as important to the overall business.
The company is privately owned and therefore employees don’t feel the pressure to hit quarterly earnings targets, Parks said.
Calvin Jarrett is the president of AAM’s investment services. He said the profits made by AAM go right back into the bank, because the bank is recognized by the Walton’s as the business’ primary income stream, not AAM.
Jarrett also has been with the bank for 19 of AAM’s 20 years.
He said the firm really turned a corner in June 2003 when it began to use First Clearing, a subsidiary of Wachovia Securities. The product offerings really opened up at that time, he said.
What’s the biggest challenge to AAM over the next year or three? Parks said that is merely getting the word out about what the firm offers to Arvest customers and potential customers.
“Ownership is committed to the long-term,” he said. “We want to meet the customer on the customer’s terms.”