Banking on diversification: from investment banks to insurers, B.E. financial services companies are discovering that they must diversify to achieve the competitive edge - B.E. Financial Services Overview - Industry Overview

Black Enterprise, June, 2002 by Jeffrey McKinney

Teasley, however, is optimistic about his bold plans to restructure Golden State. By late September, he plans to form two holding companies--Golden State Mutual Holding Co. and GSMF Financial Corp.--enabling the firm to sell mutual funds and variable-rate annuities to its core clients. Teasley estimates that the expansion could eventually account for 20% to 25% of Golden State's revenues. "We need other sources of fee income and this will allow us to accomplish that," he says.

CUSTOMER IS KING

These days, financial service firms, whether a bank or venture firm, must stick close to the customer. In fact, two investment banks--Rice Financial Products (No. 10 on the BE INVESTMENT BASKS list with $12.1 billion in total issues) and May Davis Group (No. 13 on the BE INVESTMENT BANKS list with $5.9 billion in total issues)--had their offices obliterated in the World Trade Center attacks and were handling clients' accounts within a day or two.

Christopher Williams maintains that last year's tragedy and financial scandals stifled transactions across all business lines, including a reduction in the issuance of corporate bonds and fewer public offerings. The events forced his firm--and others--to become more cost conscious and client obsessed. While Williams Capital seeks to reduce operating costs by 15% this year through cheaper flights and trading town cars for yellow cabs, it has also placed a greater emphasis on retaining existing clients than chasing new deals. "[This environment has] forced us to call on established clients more than ever before," he says.

But the firm has managed to break new ground over the last year, handling more debt underwriting for corporate clients and serving as co-manager on the $3 billion Prudential IPO--the third-largest public offering in 2001. It was the first black investment firm to land such a transaction.

Williams' example is one that most black CEOs have heeded wisely. From diversification to top-notch client services, CEOs cannot afford to leave even a minute detail unattended. It can mean the difference between the elevation or extinction of their firms.

Financial Services Summaries (2000-2001)

TOP 25 BANKS                     2000           2001       %CHANGE

Number of Employees                2,078          2,055      -1.11%
Assets *                      $4,093.379     $4,336.936       5.95
Capital *                        329.961        349.753       6.00
Deposits *                     3,326.175      3,556.638       6.93
Loans *                        2,547.275      2,562.043       0.58

TOP 10 INSURANCE COMPANIES       2000           2001       %CHANGE

Number of Employees                1,361          1,066     -21.68%
Assets *                        $654.072       $559.372     -14.48
Statutory Reserves *             429.664        322.761     -24.88
Insurance in Force *          23,624.122     31,327.435      32.61
Premium Income *                 160.029        180.645      12.88
Net Investment Income *           35.648         31.684     -11.12

TOP 15 INVESTMENT BANKS          2000           2001       %CHANGE

Number of Employees                  491            540       9.98%
Total Issues ([dagger])         $394.379       $664.417      68.47%

TOP 20 ASSET MANAGERS            2000           2001       %CHANGE

Number of Employees                  340            340       0.00%
Assets Under Management *    $43,285.031    $49,251.924      13.79

* IN MILLIONS OF DOLLARS, TO THE NEAREST THOUSAND. AS OF DEC, 31 2001.

([dagger]) In BILLIONS OF DOLLARS, TO THE NEAREST MILLION,
AS OF DEC. 31, 2001

PREPARED BY B.E. RESEARCH.