Amid industry consolidation, PrimeVest Financial Services, Inc., has enjoyed growing success over the past few years in signing its bank partners to longer contracts.
This year, 70% of PrimeVest’s partners are under five-year deals rather than three-year deals, compared with 33% in 2008. The company, a unit of Cetera Financial Group, said that the revenue sharing arrangements it’s offered banks have been a factor, but other factors -- such as banks’ desire to focus uninterrupted on business development for longer stretches -- have been more decisive.
“One thing I keep hearing (from banks) is that there’s been so much consolidation,” said Sean Casey, PrimeVest’s director of business development. “They’re going through the evaluation process and looking for someone they can partner with for the long term.”
PrimeVest’s transition to having mostly long-term contracts has been swift and steady. The percentage of clients with five-year contracts went from 33% in 2008 to 55% in 2009, 67% in 2010 and 70% so far this year, according to the company.
Catherine Bonneau, president and chief executive of PrimeVest, said financial institutions increasingly expect firms like hers to be strategic partners, not just vendors.
“Our goal is to expand institutions’ share of wallet with their clients,” she said. “We’re not just looking for that quick win.”
PrimeVest’s five-year deals have come from existing and new bank partners. One of the new ones is Home Savings Bank, in Youngstown, Ohio. The $2 billion-asset bank had been a client of UVEST Financial Services Group, Inc., until it signed a five-year agreement with PrimeVest a month ago. Uvest was acquired by LPL Financial LLC in 2007, and it is now being consolidating onto LPL’s self-clearing platform.
“We had to go through a conversion anyway,” said Richard Vilsack, manager of the PrimeVest investment program at Home Savings. “LPL is a very good organization, but it’s focused on the individual advisor, and PrimeVest only works with financial institutions.”
Indeed, PrimeVest positions itself as a dedicated partner of banks and credit unions, drawing a contrast with some of its big rivals.
“It’s useful positioning," said Kenneth Kehrer, director of research firm Kehrer-LIMRA. “Bank broker-dealers’ needs are somewhat different, and certainly the needs of banks for reporting are significantly different.”
Home Savings signed a five-year deal in part to avoid the need to reassess, and possible change, firms every three years, says Vilsack. “Clients don’t like change, reps don’t like change and bank management doesn’t like change,” he says.
Vilsack also preferred a longer deal because of his conviction that longer relationships are usually more successful, whether with advisory clients or with broker-dealers, he says.
Meanwhile, State Bank & Trust, in Fargo, N.D., recently signed a five-year deal, following a three-year contract, because of factors such as good service and low turnover at PrimeVest, says Tim Bush, PrimeVest’s program manager at the $2.1 million-deposit bank.
PrimeVest built into the agreement payout incentives based on higher levels of production that the bank expects to meet, Bush said. State Bank & Trust has $225 million of assets under management and five reps, and it wants to double its size over the next five years, according to Bush.
“We’re going to aggressively grow our program, so we built in a little better payout at higher gross production levels,” he said. “They cut us a deal on that.”
Bonneau said longer-term relationships, increased growth and favorable revenue-sharing deals can go together for PrimeVest clients.
“When you have the consistency of a provider relationship to experience growth over time, there is often tiering in our arrangements as their business grows,” she said.
State Bank & Trust based its five-year commitment in part on Cetera’s independence, Bush added. Cetera was created last year when ING Groep NV sold its ING Advisors to New York-based private-equity firm Lightyear Capital. Cetera consists of broker-dealers PrimeVest, Financial Network Investment Corp. and Multi-Financial Securities Corp.
“We felt they are a little more nimble now in terms of getting new products approved, for example—we’ve noticed a quicker turnaround,” he said.
PrimeVest has one more advantage in retaining existing clients, notes Kehrer. The firm is self-clearing, meaning that when clients leave they must convert to a new clearing firm.