Exhibit 10.3

                           ADVISORY SERVICE AGREEMENT

     This Advisory Service  Agreement  ("Agreement") is made as of this 20th day
of October 1997, by and between Webster Bank (the "Advisor"),  a federal savings
bank with an office  located at  Waterbury,  CT and  Webster  Preferred  Capital
Corporation  ("WPCC"),  a  Connecticut  corporation  with an office  located  at
Waterbury, CT.

                                WITNESSETH THAT:

     WHEREAS,  WPCC  intends  to  qualify as a "real  estate  investment  trust"
("REIT") under the Internal Revenue Code of 1986, as amended (the "Code");

     WHEREAS,  WPCC  desires to obtain from the  Advisor  various  advisory  and
management  services to avail itself of the  experience  and  assistance  of the
Advisor  and to have the Advisor  undertake,  on WPCC's  behalf,  the duties and
responsibilities  hereinafter set forth,  subject to the control and supervision
of the Board of Directors of WPCC as provided for herein; and

     WHEREAS,  the  Advisor  desires  to render  such  advisory  and  management
services to the Company  subject to the control and  supervision of the Board of
Directors of WPCC, on the terms and conditions hereinafter set forth.

     NOW,  THEREFORE,  in  consideration  of the mutual covenants and agreements
hereinafter  set forth and other good and  valuable  consideration,  the parties
hereby agree as follows:

     1. TERM.

     The term of this Agreement  shall commence as of October 20, 1997 and shall
continue until October 19, 1999.  Unless a notice to terminate this Agreement is
sent by  either  party to the other  party at least  ninety  (90) days  prior to
October 19, 1999, this Agreement shall be  automatically  renewed for a one year
period. Thereafter, the Agreement shall continue to be automatically renewed for
successive one year periods unless a termination  notice is sent by either party
to the  other  party  at least  ninety  (90)  days  prior to the end of the then
existing renewal term.

     2. ADVISORY SERVICES.

     The Advisor  shall  consult with the Board of Directors and the officers of
WPCC and shall, at the request of the Board of Directors  and/or the officers of
WPCC,  furnish  advice and  recommendations  with  respect to all aspects of the
business and affairs of WPCC.  Subject to the control and  discretion and at the



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request  of the Board of  Directors  of WPCC,  the  Advisor  shall  provide  the
following  services  (together  with the  services  set  forth in  Section 6 and
Section 7 hereof, the "Services"):

     (a)  administer  the day-to-day  operations and affairs of WPCC,  including
          without  limitation  the  performance  or supervision of the functions
          described in this Section 2;

     (b)  monitor the credit quality of the real estate  mortgage assets held by
          WPCC;

     (c)  advise WPCC with respect to the acquisition, management, financing and
          disposition of WPCC's real estate mortgage assets;

     (d)  establish  and  provide   necessary   services  for  WPCC,   including
          executive,  administrative,  human  resource,  accounting and control,
          technical support,  secretarial,  recordkeeping,  copying, mailing and
          distribution facilities;

     (e)  provide WPCC with office space  pursuant to a lease,  conference  room
          facilities,  office equipment and supplies (including computers,  copy
          machines and fax machines) and personnel necessary for the Services to
          be  performed  by the  Advisor  hereunder  and to  perform  the  daily
          business of WPCC;

     (f)  arrange  for  the   investment   and   management  of  any  short-term
          investments  of WPCC and provide any  investment  and fund  management
          services in a manner  consistent  with Exhibit D to the Master Service
          Agreement, dated March 17, 1997, between the Advisor and WPCC;

     (g)  monitor  and  supervise  the  performance  of  all  parties  who  have
          contracts  to perform  services  for WPCC,  provided  that the Advisor
          shall  have  no  duty to  assume  the  obligations  or  guarantee  the
          performance of such parties under such contracts;

     (h)  establish  and maintain  such bank accounts in the name of WPCC as may
          be required by WPCC and approved by the Board of Directors of WPCC and
          ensure  that all funds  collected  by the Advisor in the name of or on
          behalf of WPCC shall be held in trust and shall not be commingled with
          the Advisor's own funds or accounts;

     (i)  arrange  for  the  execution  and  delivery  of  such   documents  and
          instruments  by the  officers  of WPCC as may be  required in order to
          perform the functions  herein described and to take any other required
          action contemplated by the terms of this Agreement;


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     (j)  arrange for insurance for WPCC including liability  insurance,  errors
          and  omissions  policies and officers and  directors  policies,  which
          shall cover and insure WPCC, members of the Board of Directors and the
          officers of WPCC in amounts and with deductibles and insurers approved
          by the Board of Directors of WPCC;

     (k)  maintain  proper  books and  records of WPCC's  affairs and furnish or
          cause to be furnished to the Board of Directors such periodic  reports
          and accounting information as may be required from time to time by the
          Board of Directors of WPCC,  including,  but not limited to, quarterly
          reports of all income, expenses and distributions of WPCC;

     (l)  consult  and work with legal  counsel  for WPCC in  implementing  WPCC
          decisions  and  undertaking  measures  consistent  with all  pertinent
          federal, state and local laws and rules or regulations of governmental
          or quasi-governmental agencies, including, but not limited to, federal
          and  state   securities  laws,  the  Code  as  it  relates  to  WPCC's
          qualification as a REIT, and the regulations promulgated under each of
          the foregoing;

     (m)  consult and work with  independent  accountants for WPCC in connection
          with the preparation of financial  statements,  annual reports and tax
          returns;

     (n)  prepare  and   distribute  in   consultation   with  the   independent
          accountants  for WPCC,  annual reports to  stockholders  which contain
          audited financial statements;

     (o)  furnish  reports  to the Board of  Directors  of WPCC,  which  include
          reports concerning WPCC's investments;

     (p)  maintain  custody of the documents  related to WPCC's mortgage assets;
          and

     (q)  as  reasonably  requested  by  WPCC,  make  reports  to  WPCC  of  its
          performance   of  the  foregoing   Services  and  furnish  advice  and
          recommendations with respect to other aspects of the business of WPCC.

     3. OPERATING EXPENSES; EXPENSES OF THE ADVISOR.

     (a) "Operating Expenses" for any period means all of the operating expenses
of WPCC (with the  exception  of those  expenses  to be borne by the  Advisor in
accordance  with  Section  3(b)  hereof),   including  without  limitation,  the
following:


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       (i)    interest, taxes and other expenses incurred in connection with the
              real estate mortgage assets of WPCC;

       (ii)   expenses related to the officers, directors and employees of WPCC,
              including   without   limitation  any  fees  or  expenses  of  the
              directors;

       (iii)  fees and expenses  payable to  accountants,  appraisers,  external
              auditors, consultants, attorneys, collection and paying agents and
              all other  persons who contract with or are retained by WPCC or by
              the Advisor on behalf of WPCC;

       (iv)   legal  and other  expenses  incurred  in  connection  with  advice
              concerning  obtaining or maintaining  WPCC's status as a REIT, the
              determination  of WPCC's  taxable  income,  any formal or informal
              administrative   action  or  legal  proceedings  which  involve  a
              challenge  to the  REIT  status  of WPCC  or any  claim  that  the
              activities  of WPCC,  any member of the Board of  Directors or any
              officer of WPCC were improper;

       (v)    expenses relating to communications and reports to stockholders of
              WPCC,   including  without  limitation  the  costs  of  preparing,
              printing,  duplicating and mailing the  certificates for the stock
              of WPCC, proxy solicitation materials and reports to stockholders,
              and the costs of arranging meetings of stockholders;

       (vi)   the costs of insurance  described  in Section 2 hereof,  including
              directors and officers liability  insurance covering the directors
              and officers of WPCC;

       (vii)  expenses relating to the acquisition, disposition and ownership of
              real estate mortgage assets of WPCC, including, without limitation
              and to the  extent  not  paid by  others,  legal  fees  and  other
              expenses for professional services and fees;

       (viii) expenses  connected  with the payments of dividends or interest or
              distributions  in cash or any other form made or caused to be made
              by the Board of Directors to the stockholders of WPCC;

       (ix)   expenses connected with any office or office facilities maintained
              by WPCC separate from the office of the Advisor, including without
              limitation  rent,  telephone,   utilities,  office  furniture  and
              equipment and machinery; and

       (x)    other miscellaneous expenses of WPCC which are not expenses of the
              Advisor under Section 3(b) hereof.


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     (b)  Without  regard to the  compensation  received  pursuant  to Section 4
hereof, the Advisor shall bear the following expenses:

          (i)   employment  expenses of the  personnel  employed by the Advisor,
                including without limitation salaries,  wages, payroll taxes and
                the cost of employee benefit plans; and

          (ii)  rent,  telephone  equipment,  utilities,  office  furniture  and
                equipment and machinery and other office expenses of the Advisor
                incurred  in  connection  with  the  maintenance  of any  office
                facility of the Advisor.

     (c) WPCC shall reimburse the Advisor within 30 days of a written request by
the Advisor for any Operating Expenses paid or incurred by the Advisor on behalf
of WPCC.

     4. FEES.

     (a) An annual  advisory  fee of  $150,000  shall be  payable by WPCC to the
Advisor for Services rendered by the Advisor  hereunder.  Payment by WPCC is due
and payable monthly upon receipt of an invoice from the Advisor.

     (b) The  Advisor may revise the rate set forth in  Paragraph  4(a) above to
reflect  changes in the actual costs  incurred by the Advisor in  providing  the
Services to WPCC.

     5. PERFORMANCE OF SERVICES; CHANGES.

     (a) In  performing  Services  under  this  Agreement,  the  scope  of  work
undertaken  by  the  Advisor  and  the  manner  of  its  performance   shall  be
substantially  the  same  as for  similar  work  performed  by the  Advisor  for
transactions on its own behalf, with such modifications as may be appropriate in
order to accomplish the purposes of this Agreement.

     (b) The Advisor shall give WPCC reasonable  notice of all changes affecting
WPCC's activities as these changes pertain to the Services. If a change referred
to in  Paragraph  5(a) above  (including  a revision of the annual  advisory fee
pursuant to Section 4(b) hereof) is not  acceptable to WPCC,  WPCC may terminate
this  Agreement  upon thirty (30) days'  notice,  provided  such notice is given
within ten (10) days after WPCC has received notice of the change.

     6. MAINTENANCE OF RECORDS; EXAMINATIONS.

     The Advisor shall at all times, establish and maintain appropriate books of
account,  records and  accounting  practices  related to the Services  performed
hereunder and permit such  examinations as may be required by relevant state and


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federal  agencies.  Such books and records shall be accessible for inspection by
the Board of Directors of WPCC and  representatives  of WPCC at all times. It is
understood  and  agreed  that the  performance  of the  Services  is or might be
subject to regulation and examination by authorized representatives of state and
federal agencies, including but not limited to, the Office of Thrift Supervision
and the  Federal  Deposit  Insurance  Corporation.  Each  party is and  shall be
authorized  to  submit  or  furnish  to  any  such  regulatory  agency  reports,
information,  assurances  and other  data as may be  required  by or  reasonably
requested  of it under  applicable  laws  and  regulations,  including,  without
limitation,   any  appropriate   notifications   concerning  the  initiation  or
termination of this Agreement or any of the Services provided to WPCC.

     7. REIT QUALIFICATION AND COMPLIANCE.

     The Advisor shall consult and work with WPCC's legal counsel in maintaining
WPCC's  qualification  as a REIT.  Notwithstanding  any other provisions of this
Agreement to the contrary,  the Advisor shall refrain from any action which,  in
its reasonable judgment or in the judgment of the Board of Directors of WPCC (of
which the Advisor has  received  written  notice),  would  adversely  affect the
qualification  of  WPCC  as a REIT or  which  would  violate  any  law,  rule or
regulation of any governmental  body or agency having  jurisdiction over WPCC or
its  securities,  or which would  otherwise  not be permitted by the amended and
restated  certificate  of  incorporation  or by-laws of WPCC.  Furthermore,  the
Advisor  shall take any action  which,  in its  judgment or the  judgment of the
Board of Directors of WPCC (of which the Advisor has received  written  notice),
may be necessary to maintain the  qualification of WPCC as a REIT or prevent the
violation of any law or  regulation  of any  governmental  body or agency having
jurisdiction over WPCC or its securities.

     8. SUBCONTRACTING.

     The Advisor may at any time subcontract all or a portion of its obligations
under this Agreement to one or more  affiliates of the Advisor that are involved
in the business of managing real estate  mortgage  assets without the consent of
WPCC. If no affiliate of the Advisor is engaged in the business of managing real
estate mortgage assets,  the Advisor may, with the approval of a majority of the
Board of  Directors  of WPCC,  subcontract  all or a portion of its  obligations
under this Agreement to unrelated third parties.  Notwithstanding the foregoing,
the Advisor will not, in connection with  subcontracting  any of its obligations
under  this  Agreement,  be  discharged  or  relieved  in any  respect  from its
obligations under this Agreement.

     9. OTHER ACTIVITIES OF THE ADVISOR.

     (a) Nothing herein contained shall prevent the Advisor, an affiliate of the
Advisor or an officer,  director,  employee or  stockholder  of the Advisor from
engaging


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in any  activity,  including  without  limitation  originating,  purchasing  and
managing  real estate  mortgage  assets,  rendering of services  and  investment
advice with respect to real estate investment  opportunities to any other person
(including   other  REITs)  and  managing  other   investments   (including  the
investments of the Advisor and its affiliates).

     (b) Officers, directors, employees,  stockholders and agents of the Advisor
or of any affiliate of the Advisor may serve as officers,  directors,  employees
or agents of WPCC, but shall receive no compensation  (other than  reimbursement
for expenses) from WPCC for such service.

     10. LIMITATIONS OF LIABILITY.

     The Advisor shall use its best efforts to provide  competent  personnel and
reliable  equipment for the purpose of  performing  Services for WPCC under this
Agreement.  The  liability  of the  Advisor  to  WPCC  for any  loss  due to the
Advisor's  performing  or failing to perform  the  Services  shall be limited to
those  losses  sustained  by WPCC  which are a direct  result  of the  Advisor's
negligence  or willful  misconduct.  Because of the nature of the Services to be
performed  hereunder  and  because  of  the   impracticability,   difficulty  or
impossibility of ascertaining  and measuring the Advisor's  liability to WPCC or
any third  party  for any loss or  damage  by reason of any error  caused by the
Advisor's  negligence  or  otherwise,  the  parties  hereby  agree that under no
circumstances  shall the  Advisor  be liable  for any  consequential  or special
damages and in no event shall the Advisor's total combined liability to WPCC for
all claims  arising under or in connection  with this Agreement be more than the
total  amount of all fees  payable by WPCC to the Advisor  under this  Agreement
during the year  immediately  preceding the year in which the first claim giving
rise to any such  liability  arises.  For  purposes of this Section 10, a "year"
shall be  deemed to begin on  October  20th and run  until  October  19th of the
ensuing calendar year. If the Advisor carries insurance against the type of loss
incurred,  WPCC  agrees  to  cooperate  in  furnishing  proof  of loss in a form
satisfactory  to the Advisor's  insurance  company and to assist the Advisor and
its insurance company in settlement of this claim.

     11. FORCE MAJEURE.

     Neither party shall be responsible for any resulting loss if fulfillment of
any term or provision of this Agreement is delayed or prevented by fire,  flood,
earthquake,  act of God, labor difficulties or by any other cause not within the
control of the party whose performance is delayed or prevented. If the foregoing
shall occur and such  situations  shall  continue to prevent  performance  for a
continuous  period of sixty (60) days,  then  either  party may notify the other
party of its  intention to terminate  this  Agreement and this  Agreement  shall
terminate upon receipt of such notice.


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     12. DEFAULT; REMEDIES.

     (a) The  occurrence  of any of the  following  shall be an event of default
("Event of Default") hereunder:

          (i)   the  failure  of WPCC to pay any fee or  charge  within  30 days
                after  its  receipt  of  an  invoice  or  written   request  for
                reimbursement from the Advisor for fees or expenses reimbursable
                hereunder;

          (ii)  the  filing of a petition  in  bankruptcy  by or against  either
                party or the  appointment  of a receiver  for either party which
                petition or  appointment  is not  discharged  within thirty (30)
                days; or

          (iii) a  material  breach  by either  party of any of its  obligations
                hereunder.

     (b) In the event of any Event of  Default,  the  non-breaching  party shall
provide a written  notice of such Event of Default  and a demand that such Event
of Default be cured.  In the event that the breaching  party fails in good faith
to cure such Event of Default within fifteen (15) days following receipt of such
notice and demand,  the  non-defaulting  party may terminate  this  Agreement by
notice to the defaulting party.

     (c) In the event of a termination  by either party pursuant to this Section
12(b),  WPCC shall  nonetheless  remain liable for the payment to the Advisor of
all reasonable outstanding fees and charges as of the date of such termination.

     13. INDEPENDENT CONTRACTOR.

     In  performing  the  Services,  the  Advisor  shall  be  deemed  to have an
independent  contractual  relationship with WPCC and shall not be deemed to have
any contractual or other  relationship with WPCC's  mortgagors.  Nothing in this
Agreement  shall be deemed to create a joint venture or partnership  between the
parties.  In no event shall any of WPCC's mortgagors be considered a third party
beneficiary of this Agreement.  To the extent that third parties may make claims
against the Advisor arising out of the Services provided hereunder,  WPCC agrees
to indemnify and hold harmless the Advisor from and against all loss, liability,
claim, action, demand, or suits, including attorney's fees arising therefrom.

     14. RELATIONSHIP OF PARTIES; ASSIGNMENT.

     Each of the parties hereto hereby  acknowledges  that it is an affiliate of
the other  party  hereto.  WPCC shall not assign this  Agreement  nor any of its
rights or  obligations  hereunder  without  the  prior  written  consent  of the
Advisor.  The  Advisor  may  assign  this  Agreement  and any of its  rights and
obligations (including,


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without  limitation,  its  obligation  to provide  Services) to any affiliate of
WPCC.  In the  event  WPCC is no  longer  an  affiliate  of the  Advisor  or its
successors or assigns, this Agreement shall automatically terminate.

     15. SEVERABILITY.

     Whenever possible,  each provision of the Agreement shall be interpreted in
such  manner as to be  effective  and valid  under  applicable  law,  but if any
provision  of this  Agreement  is  held to be  prohibited  by or  invalid  under
applicable  law,  such  provision  will be in effect  only to the extent of such
prohibition or invalidity,  without invalidating the remainder of the provisions
of this Agreement.

     16. CONFIDENTIALITY.

     The  Advisor  shall  regard  and  preserve  as  confidential  all data of a
proprietary  and/or  confidential  nature  related to the business of WPCC.  The
Advisor will take the same precautions to preserve such confidential information
as it takes with respect to the Advisor's own confidential information.

     17. NOTICES.

     All notices to be sent under this Agreement  shall be mailed by first class
mail, postage prepaid and addressed as follows:

                  If to the Advisor:       Peter K.  Mulligan
                                           Executive Vice President
                                           Webster Bank
                                           Webster Plaza
                                           145 Bank Street
                                           Waterbury, CT 06702

                  If to WPCC:              Gregory S.  Madar
                                           Vice President and Secretary
                                           Webster Preferred Capital Corporation
                                           145 Bank Street
                                           Waterbury, CT 06702

Either  party may give  written  notice to the other to change  the place of the
mailing of such notices.

     18. ENTIRE AGREEMENT.

     This Agreement  constitutes the entire agreement of the parties hereto.  It
shall supersede any and all other previous writings and  communications  between
the parties.


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     19. AMENDMENT.

     No  modification  or amendment of this Agreement shall be valid unless such
modification or amendment is in writing and executed by both parties.

     20. GOVERNING LAW.

     This  Agreement  shall be  governed  by,  and  construed  and  enforced  in
accordance with, the laws of the State of Connecticut.

     21. HEADINGS.

     The section headings herein have been inserted for convenience of reference
only and shall not be construed to affect the meaning, construction or effect of
this Agreement.

     IN WITNESS  WHEREOF,  the parties  hereto have caused this  Agreement to be
executed by their authorized representatives as of the date first written above.



                                             WEBSTER BANK

                                             By: /s/ Peter K. Mulligan
                                             -----------------------------------
                                             Name: Peter K. Mulligan
                                             Title: Executive Vice President

                                             WEBSTER PREFERRED CAPITAL
                                             CORPORATION

                                             By: /s/ Gregory S. Madar
                                             -----------------------------------
                                             Name: Gregory S. Madar
                                             Title: Vice President and Secretary


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