Gold mine or mine field? Uvest is betting that banks will go for full-service brokers.

• Author: Cohen, Jeff
• Position: Company profile

GOLD MINE OR MINE FIELD?

His desk is in the lobby of Farmers & Merchants Bank in downtown Salisbury. But nothing Mark Stevens does is insured by the FDIC.

He's not a banker. He's a stockbroker. Rather than making loans or pushing CDs, Stevens, as F&M's lone "investment counselor," is hard at work hustling a variety of stocks, bonds and mutual funds.

In a radical departure from tried-and-true banking practices of the past, Stevens is part of an experiment intended to push the bank into the full-service brokerage business.

If it works, Uvest, a small Charlotte stock brokerage started eight years ago, should continue its rapid growth. F&M has offered discount brokerage to its customers for six years, relying on Uvest's services designed for financial institutions. But about a year ago, the bank went one step further, becoming the first financial institution to sign up for Uvest's new Full-service brokerage program.

"With interest margins so thin, we felt like we needed a more-diversified income stream," says Paul Fisher, the bank's chairman. "As we looked into it, there weren't that many possibilities. We could have opened an insurance agency or started a trust department, but it takes a lot of business to make a trust department profitable. Then we looked at brokerage."

Banks such as F&M have been dabbling in discount brokerage for several years. Lately, however, the banks have gotten feistier, eyeing a bigger -- and potentially more-lucrative -- piece of the brokerage business: the full-service market.

Some observers remain dubious, citing pitfalls that threaten banks venturing into the already beleaguered brokerage business. "Sooner or later, a customer [of a bank's full-service broker] is going to get some bad advice," says Bruce Brittain, an Atlanta bank consultant. "It is not a question of if it will happen, but when. If that advice is bad enough, it will put that bank's other relationships with that customer at risk."

But Uvest President Steve Robison believes this strategy holds tremendous profit potential for banks -- and for his company.

Until last year, Uvest's sole business was contracting with small and midsized financial institutions that couldn't afford to enter the business on their own to serve as discount broker to their clients. Although deregulation of the financial-services industry in the early 1980s allowed banks to execute stock transactions, they couldn't give investment advice.

These barriers have begun to fall, however, and a handful of large financial institutions, including Charlotte-based NCNB, have entered the full-service brokerage business. Robinson believes many other banks will eventually follow suit, and he wants Uvest to take advantage of these new opportunities.

Typically, a full-service brokerage charges...