Several years ago, Trustmark, the largest bank holding company based in Mississippi with $6.4 billion in assets, decided to expand its financial services into a full-service financial center. They weren’t alone.
“In the last six or seven years, Trustmark made the decision to move out of common trust funds and into mutual funds, which allows us to create immediate visibility because our daily numbers are published in the newspaper,” said Jon E. Anderson, senior vice president and senior trust officer. “Executive management made the conscious decision to have diversified revenue stream. The revenue, generated by financial services, is a major component of that.”
Other banks, such as Union Planters and Deposit Guaranty, have gradually added services, including proprietary funds.
“Changes in the laws resulted in other types of businesses getting in to banking business via mutual funds, insurance companies or brokerage houses,” Anderson said. “At that point, banks made a conscious decision to compete on a level playing field and made aconscious effort to elevate services they had been providing only for trust customers to a larger segment of the population.”
Lewis “Lou” Laughlin, chief investment officer of Union Planters’ trust and investment management division, who was with Magna Trust Company before it was acquired by UP, said the bank has two proprietary mutual funds.
“The Magna Intermediate Government Bond Fund, about $144 million now, is designed primarily as a fund for personal trust accounts,” he said. “It’s a ladder type management fund where you don’t deviate from the original cost and there are not a lot of gains or losses flowing through it. It’s more of an income vehicle and a conservative type of investment.”
Two weeks ago, UP began offering a Magna Money Market Fund, with an initial funding of $159 million in assets.
“Right now, the fund is offered through the bank and used exclusively by our trust clients,” he said. “We’ll offer it through the trust company in the near future.”
Like other banks, Union Planters offers a series of common and collective funds, and 401(k)s with 35 well-known mutual funds as investment options, including the bank’s own.
“We hope to offer the same service on the Internet next year,” he said.
Trustmark’s Performance Funds, part of the financial services division, has about $1.3 billion in assets, with a large cap of about $372 million, said Zach Wasson, senior vice president and chief investment officer.
“These funds are a very efficient way for trust and retail customers to invest in the fixed–income markets or the equity markets,” Wasson said. “We have two fixed-income funds, and three equity funds, one being the large cap. We have mid-cap and small-cap funds for those people who want exposure for those different type markets.”
Anderson said stocks are evaluated in a two-step process prior to being added to the portfolio.
“We use computer models with 12 different factors on each stock,” he said. “After they are ranked, we look at the top half. At that point, our portfolio managers have a roundtable discussion to determine, based on qualitative measures, what are the best stocks to include. Our long-term approach helps us buy good stocks at reasonable valuations that have good, long-term expected growth. Most stocks, over time, will perform very well.”
An individual, company or foundation can expect to bring a half-million to a million dollars to the table to qualify for trust services, Anderson said.
BankPlus and BancorpSouth do not offer proprietary funds, but have added new services to keep pace in the marketplace.
“There’s more money flowing into the stock market than ever before,” said Blake Headley, vice president of the BankPlus Investment Center in Jackson. “It really comes down to the personal service our brokers, like Michael Chandler or Reg Aycock, give them. If it’s convenient for a client to come by at 6:45 a.m. or at 8 p.m., we’re available.”
BankPlus also offers 401(k) plans, IRAs, SEPs and other personal investment accounts.
Alan Leach, president of BancorpSouth Investment Services Inc., which opened Feb. 22, said the bank offers “virtually everything most people would ever want.”
“There are a few things that we don’t do — intentionally — because they’re very high risk,” he said. “We have many, many funds available but we do not have our own proprietary fund. That’s mostly due to a matter of size. To create a mutual fund, you need certain volume of size. Most banks created mutual funds to have something to sell to the public. In some cases, it’s been pretty successful. In other cases, it hasn’t. In terms of growth and how much new money they’ve been able to raise through mutual funds, there’s been a mixed success with quality of the management of the fund. That’s the way it is in the whole mutual fund arena, not just banks.”
BancorpSouth offers “typical stocks, bonds, pensions, annuities, full line of insurance products, trust and estate planning,” he said.
“We’re a new company, but the individuals are all highly experienced, most with 13 to 25 years of experience each,” he said.
In addition to a new 401(k) plan for small businesses with fewer than 100 employees, Trustmark recently unveiled a fixed annuity product and an asset allocation program.
“The fixed annuity product is primarily a longer-term fixed payment product sold through retail branches and the brokerage group,” Anderson said. “It’s designed to reach investors that typically have $5,000 to $50,000 to invest in a tax-deferred account and want something more than a CD would typically provide and they’re willing to have it held for a longer period.”
The asset allocation program is geared to the investor with $10,000 to $100,000 to invest in a product that “allows full diversification of assets with a smaller amount of money,” he said. “This program is typically available only to people with larger blocks of money for investment management services.”
Anderson said being based in the South “is not the impediment that some people might have assumed it was 15 years ago.”
“We can talk by fax, phone or e-mail, or have access to Web sites as quickly and efficiently as any Wall Street banker or brokerage firm could talk,” he said. “We have the same access to same types of information at the same efficiency and speed. We have a better understanding of our clients than other financial institutions that are not headquartered here.”
The perception of banks being “perhaps too conservative” has not hurt the marketing of newly developed financial divisions, Anderson said.
“As long as the market keeps going up and up and up every year, everybody says they can throw a dart and make money,” he said. “When you’re looking at an environment like that, sometimes conservatism may almost be, in some peoples’ perception, a hindrance. We don’t look at it that way because we know the market doesn’t always go up. There are times, we know, when it comes down. Our purpose is to manage money well with a risk factor considered. We may not be the high flyer, but we want to be someone that provides real value to our clients year in and year out.”
Deposit Guaranty did not return calls by press time for this story.
Contact MBJ contributing writer Lynne Wilbanks Jeter at email@example.com.