METLIFE HAS HARLEM ON ITS MIND BECAUSE IT KNOWS IT WILL PAY: SEES NO NEARBY RIVAL IN MUTUAL FUND SALES

In 1968 Shearson Hammill & Co. became the first major brokerage to open a branch in Harlem. The move made more headlines than money, and the retail investment office eventually disappeared.

Now, 30 years later, Metropolitan Life Insurance Co. is picking up where Shearson left off. This fall the Manhattan-based insurance giant will open one of its Financial Services Storefronts at 201 West 125th St. — just up the block from where Shearson used to be at 144 West 125th.

New York’s booming economy has revitalized Harlem’s middle class, and MetLife is convinced that a market for investment products exists today that did not exist 30 years ago.

money is green

“If you look at the African-American community at large, the average income is still lower than the norm,” says Shailendra Ghorpade, MetLife vice president for corporate marketing. “But there’s now a significant middle and middle-upper class, as well as an emerging high-income group.”

Like its Wall Street peers, MetLife never before viewed Harlem as a strong market for investment products. A full 96% of what MetLife sells in Harlem is life insurance — vs. 55% nationally. The only financial institutions now making any effort to sell mutual funds in the neighborhood are banks with Harlem branches.

“Other than banking and life insurance, there’s been a real drought when it comes to financial services offered here,” says Harlem restaurateur Van Woods, president of Sylvia’s.

That will change with the opening of MetLife’s Harlem storefront. The branch will sell a wide array of mutual funds and annuities, and company officials expect investment products to make up as much as half of the branch’s business.

Although MetLife will become the only investment company with an office in Harlem, it may not be alone for long. Nationally, the median household income of new mutual fund investors is $50,000. In Harlem the number of households with incomes higher than $50,000 has increased 46% since 1990 to 20,994; by 2002, that number is expected to rise another 19% to 24,956, according to Columbia University’s Empowerment Zone Monitoring and Assistance Project.

Even more striking is the rise in the number of Harlem households earning more than $75,000 per year. That figure has increased 68% since 1990 to 8,850. By 2002, there should be 11,718 Harlem households earning $75,000 or more, and these upper-middle-class households will make up 10% of the total Harlem population, Columbia researchers predict.

With an economic renaissance under way, veterans of Shearson’s Harlem branch believe MetLife will have an easier time selling investment products. “The income level is there, and nowadays people are much more educated about the market,” says James Greene, who now runs his own public relations firm.

The Shearson branch, which eventually became First Harlem Securities Inc., survived only because it developed a lucrative niche selling to institutions and underwriting municipal bonds. In 1986 it was absorbed by now-defunct WR Lazard & Co.

Despite the losses, First Harlem continued selling to individuals because the firm wanted more African-Americans to learn about Wall Street. “We were trying to get the message out,” says Earl Andrews, a First Harlem alumnus who is now on the board of the New York City Housing Authority.

Education will also be a priority at MetLife, says Al Florant, the 12-year MetLife veteran who will manage the Harlem branch. Still, both Mr. Florant and Mr. Ghorpade say MetLife would not be opening up shop in Harlem if it did not anticipate making money.

“Al’s targets will be the same as those of any other new branch,” says Mr. Ghorpade. “We look for new branches to have a 15% return on equity by year three.”

This won’t be easy. While MetLife has a strong track record in minority neighborhoods, its most recent openings have been in Asian-American neighborhoods, such as Flushing in Queens or Chinatown in Manhattan. There, commercial banks were already making money selling investment products, so MetLife knew there was a ready market.

This is not a certainty in Harlem. A year ago, Carver Federal Savings Bank began a pilot program selling mutual funds, but so far the results have been underwhelming. “There’s a warming-up process — an educational process — that first needs to take place,” says Walter Bond, Carver’s chief investment officer.

The Harlem-based bank is now considering whether to dump its partner in the pilot program, financial planning firm Friend Enterprises, in favor of a bigger-name brokerage. Sources say Carver is negotiating with Salomon Smith Barney.

Flushing and Chinatown were also surer bets because Asian-Americans are the nation’s wealthiest ethnic group. As consumers, they also tend to be brand-conscious. For a big-name company like MetLife, the conditions could hardly have been better.

Some Harlem residents, on the other hand, have mixed emotions about the arrival of large companies like the Gap, pharmacy chain Rite Aid and now MetLife. Certainly, the newcomers have created jobs and boosted real estate values, but there is a feeling among some that corporate carpetbaggers are driving out home-grown businesses.

from soul food to snoopy

This is a particularly delicate issue for MetLife. Its West 125th storefront used to be the home of Copeland’s, a popular soul food restaurant. The restaurant’s owner, Calvin Copeland, complained that he was being forced out in order to make room for tenants with deeper pockets.

“It’s an uneasy renaissance,” acknowledges Mr. Florant, who has been making the rounds with Harlem leaders, trying to convince them of MetLife’s good intentions.

The flip side is that without a local presence, no company is going to make serious inroads with Harlem investors.

“I get a lot of calls from downtown brokers asking me how they can offer their services, but there’s a limit to how much they can do,” says Barbara Askins, executive director of the 125th Street Business Improvement District. “Being here on-site is going to be an advantage for MetLife.”

Crain News Service