A One-Stop Shop
Indiana banking companies broaden financial services.

by Bob Kronemyer

(March 2002) - "We no longer see ourselves as competing in the banking industry," says Alan Johnson, regional president and CEO of Wells Fargo Bank Indiana, based in Fort Wayne. "We define it as the financial-services industry."

That's a crucial distinction that explains where banks are heading. From leasing corporate jets to selling homes to offering insurance, financial institutions in Indiana continue to branch out into services that not long ago would have been seen as non-traditional. Fueling the growth are customer convenience and the opportunity to build on a trusted relationship.

Broadening service offerings also lets banks bite into a much bigger pie, Johnson says. So-called traditional banking in this country is a $360 billion business, he says, while financial services is a $2.5 trillion industry, half of which is insurance. That explains Wells Fargo's decision to acquire Acordia, the insurance brokerage that was once based in Indianapolis and a part of Anthem. It strengthens the bank's ability to win more of its customers' financial-services business.

"Banks want their clients or potential clients to have a smooth transition from one financial requirement to the next throughout their lives," says Jud Fisher of the financial-services network at Old National Bancorp in Evansville. The network has four divisions: the private client group (catering to high-net-worth individuals or companies), insurance, trust and investment services.

The insurance division handles commercial, personal (auto, home, fire) and employee benefits (group life and health). "We also sell individual life and health policies," Fisher notes. "Only 3 percent of all insurance is sold through banks, so there is definitely room for growth. Through mergers and acquisitions, banks are increasingly partnering with insurance companies."

Nationwide, Bank One Investment Advisors manages approximately $140 billion for individuals, not-for-profits and corporations. "We were very fortunate last year that our assets under management grew. This was helped by the fact that we manage both equities and fixed income," says Bank One Indiana president Al Smith. "We're seeing people paying much more attention to diversification and sector allocation." In addition, "people who a few years ago thought they could manage their own investment portfolio realize that didn't work out very well."

Today, "a customer can have all his financial needs serviced at one location," Smith observes. For an individual, money can be deposited, borrowed and managed. "We'll even sell your home," Smith says. "We have in-house personnel with the capability to buy, sell and manage literally any type of real estate." In fact, Bank One is the second-largest manager of agricultural property in the country.

Irwin Business Finance, a subsidiary of Irwin Financial Corp. in Columbus, provides leases for office equipment such as telecommunications and computers for the small-business market. "The cost layout is typically less than for outright purchase," says John Nash, president of Irwin Financial Corp. "A large percentage of equipment in this country is leased."

Subsidiary Irwin Union Bank also has an insurance agency that offers property and casualty coverage to both businesses and consumers. "We think this is a natural extension to the other financial services that we provide. Government regulations have changed over the last decade that makes it less complicated for banks to offer these services," Nash says. Furthermore, "a bank is knowledgeable about a client's total business situation and needs. It is convenient for that customer to have insurance included in a total package of services," Nash says.

Nash explains that banks are expanding into other areas to add customer value and uncover new sources of revenue. "Most of these services tend to generate fee-based income as opposed to interest income," he explains. "Fee-based income is an important complement to the interest-margin income."

At Irwin Financial, non-interest income has for years been a major part of the company's revenue, much more so than at a typical banking company. In fact, unlike most banking companies, Irwin's non-interest income typically exceeds its interest income, representing about 53 percent of the company's revenues reported in the last annual statement. That's because of the strength of Irwin's mortgage subsidiary, which operates nationwide.

David Lyons is the central Indiana district president of Key Bank. "Like all major financial-services companies, we offer a broad range of products-investment, insurance, leasing, corporate loan and private banking," Lyons says. "We also have a host of operating services through cash management." These include cash concentration, cash disbursement and account reconciliation. "This speeds up the process of collecting cash and placing it in a lock box."

Leasing ranges from small computers to corporate jets. "The ultimate goal of any financial institution is to garner as much of a client's business as possible," Lyons says. In other words, one-stop shopping is the goal. "The client no longer has to go to five different people. He doesn't need a broker because we have a broker. Likewise, he doesn't need an insurance agent because we have insurance." Apart from customer convenience, "I think there is a trust factor," Lyons says. Key Bank also offers payroll and tax services. KeyRoll is provided by Automatic Data Processing (ADP) and is a convenient solution to payroll.

First Merchants Corp. in Muncie strives to be a comprehensive provider of financial services as well. Besides having an affiliated insurance agency that offers property and casualty, the institution recently acquired a title company. Currently, "people can secure home mortgages through any of our affiliate client banks," says Jennie Sobecki, vice president at First Merchants. "We'd now like to provide title work in-house if possible. Through efficiencies, we hope to pass the cost savings on to the customer."

First Merchants also started a leasing company last fall. "Often, it will not make sense for a commercial client to purchase equipment," Sobecki says. Employee benefit products, personal trust and investment management are provided by the trust division. "Our trust department in First Merchants Bank is actually as big as the bank itself. We provide services to quite a few of our bank clients."

Overall, "for the client looking for a community-banking concept, it is awfully nice to have a place that is somewhat of a one-stop shop, and where he can still be known by name and be treated by local decision-makers," Sobecki relates. "We can give the personal touch to all these various transactions."